10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

__________________________

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2015
	OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period _________ to _________
Commission File Number: 0-16120
SECURITY FEDERAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
South Carolina		57-08580504
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
238 Richland Avenue Northwest, Aiken, South Carolina		29801
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number, including area code:		(803) 641-3000
Securities registered pursuant to Section 12(b) of the Act:		None
Securities registered pursuant to Section 12(g) of the Act:		Common Stock, par value $0.01 per share
		(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES   NO    X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES   NO    X    

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes     X       No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.       X  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer Accelerated filer  Non-accelerated filer  Smaller reporting company   X   

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   NO    X   

As of March 18, 2016, there were issued and outstanding 2,945,474 shares of the registrant's Common Stock, which are traded on the over-the-counter market through the OTC "Electronic Bulletin Board" under the symbol "SFDL."  The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the bid and asked price of such stock as of June 30, 2015, was $34.6 million.  (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Registrant's Annual Report to Stockholders for the Fiscal Year Ended December 31, 2015.  (Part II)

2. Portions of the Registrant's Proxy Statement for the 2016 Annual Meeting of Stockholders.  (Part III)

Forward-Looking Statements

This Form 10-K, including information included or incorporated by reference, contents, and future filings by Security Federal Corporation ("Company") on Form 10-Q, and Form 8-K, and future oral and written statements by the Company and its management may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance and operations or financial condition, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management's expectations and may, therefore, involve risk and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors, including, but not limited to:

• the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be affected by deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves;

• changes in general economic conditions, either nationally or in our market areas;

• changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;

• fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas;

• secondary market conditions for loans and our ability to sell loans in the secondary market;

• results of examinations of the Company by the Board of Governors of the Federal Reserve System and our bank subsidiary by the Federal Deposit Insurance Corporation and the South Carolina State Board of Financial Institutions, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings;

• legislative or regulatory changes that adversely affect our business, or increase capital requirements, including the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act; changes in regulatory policies and principles, or the interpretation of regulatory capital requirements or other rules, including as a result of Basel III; and any changes in rules affecting our ability to comply with the requirements of the U. S. Department of Treasury Community Development Capital Initiative;

• our ability to attract and retain deposits;

• increases in premiums for deposit insurance;

• our ability to control operating costs and expenses;

• our ability to implement our business strategies;

• the use of estimates in determining the fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;

• difficulties in reducing risk associated with the loans on our balance sheet;

• staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges;

• computer systems on which we depend could fail or experience a security breach;

• our ability to retain key members of our senior management team;

• costs and effects of litigation, including settlements and judgments;

• our ability to manage loan delinquency rates;

• increased competitive pressures among financial services companies;

• changes in consumer spending, borrowing and savings habits;

• the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;

i

• our ability to pay dividends on our common stock and preferred stock;

• adverse changes in the securities markets;

• inability of key third-party providers to perform their obligations to us;

• changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board ("FASB"), including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; and

• other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere in this document.

These developments could have an adverse impact on our financial position and our results of operations.

Any of the forward-looking statements that we make may turn out to be wrong because of the inaccurate assumptions we might make because of the factors set forth above or because of other factors we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed in any forward-looking statements made by or on our behalf. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We undertake no responsibility to update or revise any of these forward-looking statements.

As used throughout this report, the terms "we," "our, " or "us" refer to Security Federal Corporation and our consolidated subsidiary, Security Federal Bank.

Available Information

The Company provides a link on its investor information page at www.securityfederalbank.com to the Securities and Exchange Commission's  ("SEC") website (www.sec.gov) for purposes of providing copies of its annual report to shareholders, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and press releases.  These filings are available free of charge and also can be obtained by calling the SEC at 1-800-SEC-0330.

ii

PART I

Item 1.  Business

Security Federal Corporation

Security Federal Corporation (the "Company") was incorporated under the laws of the State of Delaware in July 1987 for the purpose of becoming the savings and loan holding company for Security Federal Bank ("Security Federal" or the "Bank") upon the Bank's conversion from mutual to the stock form (the "Conversion").  Effective August 17, 1998, the Company changed its state of incorporation from Delaware to South Carolina.  On December 28, 2011, the Company reorganized into a bank holding company in connection with the Bank's conversion from a federally chartered stock savings bank to a South Carolina chartered commercial bank. As a result of the reorganization, the Board of Governors of the Federal Reserve System ("Federal Reserve") became the Company's primary federal regulator. On January 17, 2013, the Board of Directors of the Company determined to change the Company's fiscal year end from March 31 to December 31. As a result of this change, the Company filed a Transition Report on Form 10-K for the nine-month transition period from April 1, 2012 to December 31, 2012.

As a South Carolina corporation, the Company is authorized to engage in any activity permitted by South Carolina General Corporation Law.  The Company is a one bank holding company.  Through the bank holding company structure, it is possible to expand the size and scope of the financial services offered beyond those currently offered by the Bank.  The holding company structure also provides the Company with greater flexibility than the Bank would have to diversify its business activities, through existing or newly formed subsidiaries, or through acquisitions or mergers of financial institutions as well as other companies.  There are no current arrangements, understandings or agreements regarding any such acquisition.  Future activities of the Company, other than the continuing operations of Security Federal, will be funded through dividends from Security Federal and through borrowings from third parties.  See "Regulation - Regulation of the Company - Dividends" and "Taxation." Activities of the Company may also be funded through sales of additional securities or income generated by other activities of the Company.  At this time, there are no plans regarding sales of additional securities or other activities.

At December 31, 2015, the Company had assets of $799.7 million, deposits of $652.1 million and shareholders' equity of $91.0 million.

The executive office of the Company is located at 238 Richland Avenue Northwest, Aiken, South Carolina 29801, and its telephone number is (803) 641-3000.

Security Federal Bank

General.  Security Federal is a South Carolina chartered commercial bank headquartered in Aiken, South Carolina.  Security Federal, with 14 branch offices in Aiken, Richland and Lexington counties, South Carolina and Columbia County, Georgia, was originally chartered under the name Aiken Building and Loan Association on March 27, 1922.  It received its federal charter and changed its name to Security Federal Savings and Loan Association of Aiken on March 7, 1962, and later changed its name to Security Federal Savings Bank of South Carolina, on November 11, 1986.  Effective April 8, 1996, the Bank changed its name to Security Federal Bank.  The Bank converted from the mutual to the stock form of organization on October 30, 1987.  As mentioned above, effective December 28, 2011, Security Federal converted from a federally chartered stock savings bank to a South Carolina chartered commercial bank. As a result of the conversion to a South Carolina commercial bank, the Bank is regulated by the South Carolina State Board of Financial Institutions ("State Board") and the Federal Deposit Insurance Corporation ("FDIC").

The principal business of Security Federal is accepting deposits from the general public and originating commercial real estate loans, commercial business loans, consumer loans, as well as mortgage loans to buy or refinance one-to-four family residential real estate.  The Bank also originates construction loans on single-family residences,  multi-family dwellings and projects, and commercial real estate, as well as loans for the acquisition, development and construction of residential subdivisions and commercial projects. In addition, the Bank operates Security Federal Trust and Investments, as a division of the Bank that offers trust, financial planning and financial management services.

Security Federal Bank has a wholly owned subsidiary, Security Federal Insurance, which is an insurance agency subsidiary that offers auto, business, and home insurance. Security Federal Insurance also has a wholly owned subsidiary, Collier Jennings Financial Corporation, which has three wholly owned 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 insurance premium finance subsidiary and also has an ownership interest in four other insurance premium finance subsidiaries.

1

Security Federal's income is derived primarily from interest and fees earned in connection with its lending activities, and its principal expenses are interest paid on savings deposits and borrowings and operating expenses.

Corporate Overview

Community Development Capital Initiative ("CDCI").  On September 29, 2010, the Company entered into a Letter Agreement with the U.S. Department of the Treasury ("Treasury") in connection with its participation in the CDCI which was established by the Treasury pursuant to the Troubled Asset Relief Program ("TARP").  The CDCI was established by the Treasury to invest lower cost capital in Community Development Financial Institutions ("CDFI"), supporting their efforts to provide credit to small businesses and other qualified customers.

Pursuant to the CDCI, the Company entered into an Exchange Agreement with the Treasury and exchanged the 18,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A ("Series A Preferred Stock"), previously sold to the Treasury on December 19, 2008 pursuant to the TARP Capital Purchase Program ("CPP"), for 18,000 shares of newly designated Fixed Rate Cumulative Perpetual Preferred Stock, Series B ("Series B Preferred Stock").

In addition to, and in connection with the Company's participation in the CDCI, on September 29, 2010, the Company entered into a Letter Agreement with the Treasury (including the Securities Purchase Agreement - Standard Terms, the "Purchase Agreement"), pursuant to which the Company sold an additional 4,000 shares of Series B Preferred Stock to the Treasury at a price of $4.0 million.  As a result of its participation in the CDCI and the transactions under the Exchange Agreement and the Purchase Agreement, the Treasury now holds 22,000 shares of the Company's Series B Preferred Stock, with an aggregate liquidation preference amount of $22.0 million.

The additional capital received by the Company from Treasury pursuant to the Purchase Agreement was contingent upon the Company's completion of a separate stock offering of the same amount, as required by the Company's prior federal regulator, the Office of Thrift Supervision ("OTS").  In satisfaction of this requirement, on September 29, 2010, the Company sold 400,000 shares of its common stock to certain accredited investors in a private placement at a price of $10.00 per share, for gross proceeds of $4.0 million.

On July 31, 2013, the Company repurchased its outstanding warrant at a fair market value of $50,000 from the Treasury. As a result of the transaction, the warrant was canceled which reduced the warrants outstanding by $400,000 and increased additional paid in capital by $350,000. For additional information regarding the CDCI transaction and the TARP CPP transaction, see Notes 16 and 20 of the Notes to Consolidated Financial Statements contained in the 2015 Annual Report to Stockholders ("Annual Report").

Selected Consolidated Financial Information.  This information is incorporated by reference to pages 7 and 8 of the Annual Report.

Yields Earned and Rates Paid.  This information is incorporated by reference to page 21 of the Annual Report.

Rate/Volume Analysis.  This information is incorporated by reference to page 20 of the Annual Report.

Lending Activities

General.  Security Federal's principal lending activities are making loans on commercial real estate and one-to-four family residential real estate. The Bank originates fixed rate residential real estate loans for sale in the secondary market and adjustable rate mortgage loans ("ARMS") to be held in its portfolio.  The Bank also originates construction loans on single family residences, multi-family dwellings and commercial real estate, and loans for the acquisition, development and construction of residential subdivisions and commercial projects.   To a lesser extent, the Bank originates consumer loans and commercial business loans.

The loan-to-value ratio, maturity and other provisions of loans made by the Bank reflect its policy of making the maximum loan permissible consistent with applicable regulations, established lending policies and market conditions.  The Bank requires title insurance (or acceptable legal opinions on smaller loans secured by real estate) and fire insurance, and flood insurance where applicable, on loans secured by improved real estate.

2

Loan Portfolio Composition.  The following table sets forth information concerning the composition of the Bank's loan portfolio, including loans held for sale, in dollar amounts and in percentages by type of loan, and presents a reconciliation of total loans receivable before net items.

	At December 31,																	At March 31,
	2015				2014				2013					2012				2012				2011
	Amount		Percent		Amount		Percent		Amount			Percent		Amount		Percent		Amount		Percent		Amount			Percent
	(Dollars in Thousands)
TYPE OF LOAN:
Real estate loans:
Residential real estate	$	70,762	20.7	%	$	75,099	21.5	%	$	77,169		20.7	%	$	88,895	21.6	%	$	90,998	20.4	%	$	99,219		19.8	%
Owner occupied residential construction	8,074		2.4		4,049		1.2		7,069			1.9		6,553		1.6		9,482		2.1		16,975			3.4
Total residential real estate loans	78,836		23.1		79,148		22.7		84,238			22.6		95,448		23.2		100,480		22.5		116,194			23.2
Commercial loans:
Commercial business	12,514		3.7		10,564		3.0		7,775			2.1		8,064		2.0		9,553		2.1		13,530			2.7
Commercial real estate	187,934		55.0		196,107		56.1		220,311			59.1		241,268		58.8		263,936		59.3		296,901			59.2
Multi-family	12,149		3.6		13,424		3.8		8,089			2.2		9,656		2.3		12,381		2.8		10,055			2.0
Total commercial loans	212,597		62.2		220,095		62.9		236,175			63.4		258,988		63.1		285,870		64.2		320,486			63.9
Consumer loans:
Deposit account	487		0.1		627		0.2		656			0.2		942		0.2		926		0.2		869			0.2
Home equity lines	24,163		7.1		24,157		6.9		25,156			6.7		26,330		6.4		26,996		6.1		28,776			5.7
Consumer first and second mortgages	6,959		2.0		7,905		2.3		9,385			2.5		11,393		2.8		11,973		2.7		13,741			2.7
Premium finance	3,409		1.0		3,260		0.9		2,626			0.7		2,644		0.6		2,916		0.7		2,947			0.6
Other	15,362		4.5		14,442		4.1		14,383			3.9		15,286		3.7		15,874		3.6		18,530			3.7
Total consumer loans	50,380		14.7		50,391		14.4		52,206			14.0		56,595		13.7		58,685		13.3		64,863			12.9
Total loans	341,813		100.0	%	349,634		100.0	%	372,619			100.0	%	411,031		100.0	%	445,035		100.0	%	501,543			100.0	%
Less:
Loans in process	2,903				1,379				3,465					2,002				1,887				4,580
Deferred fees and discount	62				24				(5		)			5				22				(10		)
Allowance for loan losses	8,275				8,357				10,242					11,318				14,615				12,502
Total loans receivable	$	330,573			$	339,874			$	358,917				$	397,706			$	428,511			$	484,471

3

The following table sets forth information concerning the composition of the Bank's loan portfolio, including loans held for sale, in dollar amounts and in percentages by type of loan, and presents a reconciliation of total loans receivable before net items.

	At December 31,																	At March 31,
	2015				2014				2013					2012				2012				2011
	Amount		Percent		Amount		Percent		Amount			Percent		Amount		Percent		Amount		Percent		Amount			Percent
	(Dollars in Thousands)
TYPE OF LOAN:
Fixed rate loans
Residential real estate	$	14,158	4.1%		$	12,832	3.7%		$	11,061		3.0	%	$	15,479	3.8	%	$	13,511	3.0	%	$	15,435		3.1	%
Commercial business and commercial real estate	180,285		52.7		185,862		53.2		201,048			54.0		208,604		50.7		226,407		50.9		251,766			50.2
Consumer	22,286		6.5		21,983		6.2		22,482			6.0		24,503		6.0		25,704		5.8		28,786			5.7
Total fixed rate loans	216,729		63.4		220,677		63.1		234,591			63.0		248,586		60.5		265,622		59.7		295,987			59.0
Adjustable rate loans
Residential real estate	64,678		18.9		66,316		19.0		73,177			19.6		79,969		19.5		86,969		19.5		100,759			20.1
Commercial business and commercial real estate	32,312		9.5		34,233		9.8		35,127			9.4		50,384		12.2		59,463		13.4		68,720			13.7
Consumer	28,094		8.2		28,408		8.1		29,724			8.0		32,092		7.8		32,981		7.4		36,077			7.2
Total adjustable rate loans	125,084		36.6		128,957		36.9		138,028			37.0		162,445		39.5		179,413		40.3		205,556			41.0
Total loans	341,813		100.0	%	349,634		100.0	%	372,619			100.0	%	411,031		100.0	%	445,035		100.0	%	501,543			100.0	%
Less
Loans in process	2,903				1,379				3,465					2,002				1,887				4,580
Deferred fees and discounts	62				24				(5		)			5				22				(10		)
Allowance for loan losses	8,275				8,357				10,242					11,318				14,615				12,502
Total loans receivable	$	330,573			$	339,874			$	358,917				$	397,706			$	428,511			$	484,471

The total amount of loans due after December 31, 2016, which have predetermined or fixed interest rates is $137.9 million, while the total amount of loans due after that date which have floating or adjustable interest rates is $108.8 million.

4

The following schedule illustrates the maturities of Security Federal's loan portfolio, including loans held for sale, at December 31, 2015.  Mortgages which have adjustable or renegotiable interest rates are shown as maturing in the period when the contract is due.  This schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.

	Residential Real Estate		Owner Occupied Residential Real Estate Construction Loans		Consumer		Commercial Construction and Acquisition and Development Loans		Commercial Business and Commercial Real Estate		Total
	(In Thousands)
Six months or less (1)	$	3,606	$	4,477	$	8,797	$	13,396	$	18,927	$	49,203
Over six months to one year	220		3,378		1,387		9,631		31,274		45,890
Over one year to three years	246		—		5,484		3,973		55,224		64,927
Over three to five years	296		—		5,689		1,059		53,837		60,881
Over five to ten years	1,680		—		7,728		—		13,728		23,136
Over ten years	64,933		—		21,295		—		11,548		97,776
Total	$	70,981	$	7,855	$	50,380	$	28,059	$	184,538	$	341,813

___________

(1) Includes demand loans, loans having no stated maturity, overdraft loans and equity line of credit loans.

The commercial construction and acquisition and development ("A&D") loans category includes all loans made to builders to finance the A&D of residential neighborhoods and also any construction loans made to builders to finance the construction of individual one- to four-family residences. Construction loans made to owners to finance the construction of a residence are included in the owner occupied residential real estate construction loan category.

Loan Originations/ Renewals, Purchases and Sales.  The following table shows the loan origination including renewals of previously funded loans, purchase, sale and repayment activities of the Bank for the periods indicated.

	Years Ended December 31,									Nine Months Ended December 31,			Years Ended March 31,
	2015			2014			2013			2012			2012			2011
	(In Thousands)
Originated/ Renewed:
Adjustable rate - residential real estate	$	14,298		$	11,758		$	13,021		$	6,986		$	17,051		$	26,539
Fixed rate - residential real estate (1)	24,181			23,617			28,892			24,136			37,862			74,776
Consumer	11,540			10,635			10,840			7,315			12,134			12,381
Commercial business and commercial real estate	130,241			116,169			172,694			113,629			192,809			200,459
Total consumer/commercial business real estate	141,781			126,804			183,534			120,944			204,943			212,840
Total loans originated/ renewed	180,260			162,179			225,447			152,066			259,856			314,155
Less:
Sold:
Fixed rate - residential real estate	23,583			22,986			32,272			22,037			40,356			73,971
Adjustable rate- residential real estate	—			—			—			725			—			—
Fixed rate - commercial real estate	—			—			—			996			—			—
Transfers to other real estate owned	4,363			1,638			3,861			2,456			4,277			15,582
Principal repayments	160,135			160,540			227,726			159,856			271,730			309,537
Increase (decrease) in other items, net	1,481			(3,942		)	377			(3,199		)	(547		)	(1,007		)
Net increase (decrease)	$	(9,302	)	$	(19,043	)	$	(38,789	)	$	(30,805	)	$	(55,960	)	$	(83,928	)

(1) Includes newly originated fixed rate loans held for sale and construction/permanent loans converted to fixed rate loans and sold.

5

In addition to interest earned on loans, the Bank receives loan origination fees or "points" for originating loans.  Loan points are a percentage of the principal amount of the mortgage loan which are charged to the borrower for the creation of the loan.  The Bank's loan origination fees are generally 1% on conventional residential mortgages, and 0.25% to 1% on commercial real estate loans and commercial business loans.  The total fee income (including amounts amortized to income as yield adjustments) for the year ended December 31, 2015 was $645,000.

Loan origination and commitment fees are volatile sources of income.  These fees vary with the volume and type of loans and commitments made and purchased and with competitive conditions in mortgage markets, which in turn are governed by the demand for and availability of money.

The following table shows deferred mortgage loan origination fees recognized as income by the Bank expressed as a percentage of the dollar amount of total mortgage loans originated (and retained in the Bank's portfolio) and purchased during the periods indicated and the dollar amount of deferred loan origination fees at the end of each respective period.

	At or For the Year Ended December 31,									At or For the Nine Months Ended December 31,
	2015			2014			2013			2012
				(Dollars in Thousands)
Net deferred mortgage loan origination fees earned during the    period (1)	$	23		$	23		$	27		$	37
Mortgage loan origination fees earned as a percentage of total    portfolio mortgage loans originated during the period	0.2		%	0.2		%	0.2		%	0.5		%
Net deferred mortgage loan origination fees in loan portfolio at end of period	$	18		$	23		$	30		$	33

___________

(1) Includes amounts amortized to interest income as yield adjustments; does not include fees earned on loans sold.

The Bank also receives other fees and charges related to existing loans, conversion fees, assumption fees, late charges and other fees collected in connection with a change in borrower or other loan modifications.

Security Federal currently sells substantially all conforming fixed rate loans with terms of 15 years or greater in the secondary mortgage market.  These loans are sold in order to provide a source of funds and as one of the strategies available to close the gap between the maturities of the Bank's interest-earning assets and interest-bearing liabilities.  Currently, most fixed rate, long-term mortgage loans are being originated based on Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac") underwriting standards.

Secondary market sales are made to other banks or institutional investors.  Generally all loans sold to investors are without recourse.  For the past several years, substantially all loans have been sold on a servicing released basis. During the year ended December 31, 2015, Security Federal sold $24.2 million in fixed rate residential loans on a servicing released basis in the secondary market.  Loans closed but not yet settled with banks or other investors, are carried in the Bank's "loans held for sale" portfolio.  At December 31, 2015, the Bank had $2.5 million of loans held for sale.  These loans are fixed rate residential loans that have been originated in the Bank's name and have closed.  Virtually all of these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with the Bank's customers.  Therefore, these loans present very little market risk for the Bank.  The Bank usually delivers loans to, and receives funding from, the investor within 30 days.  Security Federal originates all of its loans held for sale on a "best efforts" basis which means that the Bank suffers no penalty if it is unable to deliver a loan to a potential investor.

Loan Solicitation and Processing.  The Bank actively solicits mortgage loan applications from existing customers, real estate agents, builders, real estate developers and others.  The Bank also receives mortgage loan applications as a result of customer referrals and from walk-in customers.

Detailed loan applications are obtained to determine the borrower's creditworthiness and ability to repay.  The more significant items on loan applications are verified through the use of credit reports, financial statements and confirmations.  After analysis of the loan application and property or collateral involved, including an appraisal of the property (residential appraisals

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are obtained through independent fee appraisers), a lending decision is made in accordance with the underwriting guidelines of the Bank.  These guidelines are generally consistent with Freddie Mac and Fannie Mae guidelines for residential real estate loans.  With respect to commercial real estate loans, the Bank also reviews the capital adequacy of the business, the income potential of the property, the ability of the borrower to repay the loan and honor its other obligations, and general economic and industry conditions.

Upon receipt of a loan application and all required related information from a prospective borrower, the loan application is submitted for approval or rejection.  The residential mortgage loan underwriters approve loans which meet Freddie Mac and Fannie Mae underwriting requirements.  The Chairman of the Company, the Chief Executive Officer of the Company and the Bank, the President of the Bank, the Executive Vice President/Business Development, the Senior Vice President/Chief Lending Officer and Senior Vice President/Mortgage Lending individually have the authority to approve loans of $500,000 or less, except as set forth above for conforming conventionally underwritten, single family mortgage loans, which are approved by the underwriters.   Loans in excess of $500,000 and up to $1.0 million require the approval of any three of the following: Chairman of the Company, the Chief Executive Officer of the Company and the Bank, the President of the Bank, the President of the Company, the Executive Vice President/Business Development, the Senior Vice President/Chief Lending Officer, the Vice Chairman of the Executive Committee or the Secretary of the Executive Committee.  Any loan in excess of $1.0 million must be approved by the Bank's Executive Committee, which operates as the Bank's Loan Committee.  The loan approval limits discussed above are the aggregate of all loans to any one borrower or entity, not including loans that are secured by the borrower's primary residence, and are conventionally underwritten.

The general policy of Security Federal is to issue loan commitments to qualified borrowers for a specified term. These commitments are generally for a period of 45 days or less.  With management approval, commitments may be extended for up to an additional 45 days.  As of December 31, 2015,  the Bank had no outstanding commitments on mortgage loans not yet closed compared to $571,000 at December 31, 2014. Security Federal had outstanding commitments available on all lines of credit (including letters of credit, commercial, undisbursed loans in process, home equity, VISA, and other consumer loans) totaling $51.2 million as of December 31, 2015.  See Note 18 of the Notes to Consolidated Financial Statements contained in the Annual Report.

Permanent Residential Mortgage Lending.  Permanent residential real estate mortgage loans constituted 20.7% of the Bank's total outstanding loan portfolio at December 31, 2015.

Security Federal offers a variety of ARMs which offer adjustable rates of interest, payments, loan balances or terms to maturity which vary according to specified indices.  The Bank's ARMs generally have a loan term of 15 to 30 years with initial rate adjustments every one, three, five or seven years during the term of the loan.  After the initial rate adjustment, the loan rate then adjusts annually.  Most of the Bank's ARMs contain a 200 basis point limit as to the maximum amount of change in the interest rate at any adjustment period and a 500 or 600 basis point limit over the life of the loan. The Bank generally originates ARMs to retain in its portfolio. These  loans are generally made consistent with Freddie Mac and Fannie Mae guidelines.  AtDecember 31, 2015, residential ARMs totaled $64.7 million, or 18.9% of the Bank's loan portfolio.  For the year ended December 31, 2015, the Bank originated $38.5 million in residential real estate loans, 37.2% of which had adjustable rates of interest. At December 31, 2015, the Bank also held approximately $14.2 million in longer term fixed rate residential mortgage loans.  These loans were 4.1% of the entire loan portfolio at December 31, 2015. Currently, the Bank sells the majority of its longer term fixed rate mortgage loans at origination with a few exceptions.

There are unquantifiable risks resulting from possible increased costs to the borrower as a result of periodic repricing.  Despite the benefits of ARMs to the Bank's asset/liability management program, these loans also pose potential additional risks, primarily because as interest rates rise, the underlying payment by the borrower rises, increasing the potential for default.  At the same time, marketability of the underlying property may be adversely affected by higher interest rates.

When making a one- to four-family residential mortgage loan, the Bank evaluates both the borrower's creditworthiness and his or her general ability to make principal and interest payments, and the value of the property that will secure the loan.  The Bank generally makes loans on one- to four-family residential properties in amounts of 95% or less of the appraised value of the collateral.  Where loans are made in amounts which exceed 80% of the appraised value of the underlying real estate, the Bank's general policy is to require private mortgage insurance on the portion of the loan in excess of 80% of the appraised value.  In general, the Bank restricts its residential lending to South Carolina and the nearby Augusta, Georgia market.

The Bank also provides construction financing for single family dwellings to owner-occupants.  Construction loans are generally made for periods of six months to one year with either adjustable or fixed rates.  At December 31, 2015, residential construction loans on one- to four-family dwellings to owner-occupants totaled $8.1 million, or 2.4%, of the Bank's loan portfolio. On loans of this type, the Bank seeks to evaluate the financial condition and prior performance of the builder, as well as the

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borrower's creditworthiness and his or her general ability to make principal and interest payments, and the value of the property that will secure the loan.  On construction loans offered to individuals (non-builders), the Bank offers a construction/permanent loan.  The one year construction portion of the loan has a fixed rate ranging currently from 2.75% to 6.25% depending on which ARM program the borrower has chosen for the permanent portion of the loan after the construction period.  The borrower pays interest on the loan during the construction phase.  After construction, the loan then automatically converts, depending on the borrower's upfront selection, to a one year ARM, a three year/one year ARM, or a five year/one year ARM loan in which the borrower will pay principal and interest.  The borrower also has the option, after the construction period only, to convert the loan to a fixed rate residential mortgage loan which the Bank then sells on the secondary market immediately on a servicing released basis.

Commercial Real Estate, Commercial Business and Multi-Family Loans.  The commercial business loans originated by the Bank are primarily secured by business equipment, furniture and fixtures, inventory and receivables, or are unsecured. At December 31, 2015, the Bank had $12.5 million, or 3.7%, of the Bank's total loan portfolio, in commercial business loans.  A total of $2.1 million, or 16.4% of these loans were unsecured at December 31, 2015.

The commercial real estate loans originated by the Bank are primarily secured by non-residential commercial properties, churches, hotels, residential developments, single family construction loans to builders for speculative or pre-sold homes, lot loans to builders, income property developments, and undeveloped land.  At December 31, 2015, the Bank had $200.1 million, or 58.5%,of the Bank's total loan portfolio, in commercial real estate loans and multi-family loans. Included in these loans at December 31, 2015 was $8.6 million in A&D loans with terms of typically two to three years. Also included in commercial real estate loans was $17.3 million in loans for the construction of single family dwellings to builders with a term of typically one year.

The multi-family loans originated by the Bank are primarily secured by commercial residential properties including apartment complexes, condominiums or townhouses, and loans for acquisition and development of, or improvements to multi-family residential properties. At December 31, 2015, the Bank had $12.1 million, or 3.6%, of the Bank's total loan portfolio, in multi-family loans.

The following table summarizes the Bank's commercial real estate, multi-family, and commercial business loans by geographic market area at December 31, 2015.

	Aiken County Area		Midlands Area, SC		Metro Augusta, GA		Other		Total
	(In Thousands)
Commercial real estate	$	77,787	$	42,661	$	42,454	$	25,032	$	187,934
Multi-family	4,224		4,861		1,825		1,239		12,149
Commercial business	7,886		2,542		1,646		440		12,514
Total	$	89,897	$	50,064	$	45,925	$	26,711	$	212,597

Loans secured by commercial real estate are typically written for amortization terms of 10 to 20 years.  Commercial loans not secured by real estate are typically based on terms of three to 60 months.  Both commercial real estate loans and commercial business loans not secured by real estate can be originated on adjustable or fixed rate terms.  Adjustable rates are tied to the prime rate as quoted in The Wall Street Journal and typically adjust on a daily basis.  Since 2009, the Bank has instituted floors of typically 4% to 6% (currently 4%) on newly originated adjustable rate commercial business and commercial real estate loans.  If ceilings are used, the loan will typically require a balloon payment in 60 months or less.  Fixed rate loans on commercial real estate usually require a balloon payment in 36 to 60 months.  Fixed rate loans on non-real estate collateral are generally amortizing in five years or less.

Commercial real estate lending entails significant additional credit risk when compared to residential lending. Commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers.  Because payments on loans secured by commercial properties often depend upon the successful operation and management of the properties, repayment of these loans may be affected by adverse conditions in the real estate market or the economy.  In order to minimize the risks associated with this type of loan, the Bank generally limits the maximum loan-to-value ratio for commercial real estate to 65% to 80%, based on appraisals of the property at the time of the loan by appraisers designated by the Bank, and strictly scrutinizes the credit history, financial condition and cash flow of the borrower, the quality of the collateral and the expertise of management of the property securing the loan. Although the creditworthiness of the business and its principals is of primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount. A&D loans secured by improved lots generally involve greater risks than residential mortgage lending because these loans are more

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difficult to evaluate. If the estimate of value proves to be inaccurate, in the event of default and foreclosure, we may be confronted with a property, the value of which is insufficient to assure full payment.

Commercial business lending generally involves greater risk than residential mortgage lending and involves risks that are different from those associated with lending that is secured by real estate. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan-to-collateral values, and liquidation of the underlying real estate collateral is viewed as the primary source of repayment in the event of borrower default. Although commercial business loans often have equipment, inventory, accounts receivable or other business assets as collateral, the liquidation of collateral in the event of a borrower default is often not a sufficient source of repayment because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use, among other conditions. Accordingly, the repayment of a commercial business loan depends primarily on the creditworthiness of the borrower (and any guarantors), while liquidation of collateral is a secondary and often insufficient source of repayment. The Bank seeks to minimize these risks by strictly scrutinizing the borrower's current financial condition, ability to pay, past earnings and payment history.  In addition, the current financial condition and payment history of all principals are reviewed.  Typically, the Bank requires the principal or owners of a business to guarantee all loans made to their business by the Bank.  Although the creditworthiness of the business and its principals is of primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

Federal law restricts the Bank's permissible lending limits to one borrower to the greater of $500,000 or 15% of unimpaired capital and surplus.  At December 31, 2015, the Bank's legal lending limit under this restriction was $14.4 million.  At that date, the Bank's largest loan relationship to a single borrower was $6.5 million.  South Carolina law restricts the Bank's permissible lending limits to one borrower to 10% of unimpaired capital unless prior approval is granted by a two-thirds vote of the Board of Directors, in which case the limit is increased to 15% of unimpaired capital.  The Bank's lending limit at 10% of unimpaired capitalwas $9.6 million at December 31, 2015.

Consumer Loans.  The Bank originates consumer loans for any personal, family or household purpose, including the financing of home improvements, loans to individuals for residential lots for a future home, automobiles, boats, mobile homes, recreational vehicles and education.  The Bank also makes consumer first and second mortgage loans secured by residences.  These loans typically do not qualify for sale in the secondary market, but are generally not considered sub-prime lending. In addition, the Bank offers home equity lines of credit.  Home equity loans are secured by mortgage liens on the borrower's principal or second residence. Home equity lines are open end lines of credit where the borrowers pay a minimum of interest only monthly on drawn lines.  The terms are for a maximum period of 20 years and the rate is a variable rate tied to prime and floats monthly.  Margins range from zero to one percent.  In 2012, the Bank instituted floors, which currently range from 3.25% to 4.25%, on new originations and a maximum loan-to-value ratio of 80% for first mortgages originated by Security Federal and 60% for first mortgages originated by other lenders. Previously, the maximum loan-to-value ratio was 90%, but was decreased because of the current economic environment.  At December 31, 2015, the Bank had $24.2 million of home equity lines of credit outstanding and $20.7 million of additional commitments of home equity lines of credit.  The Bank also makes secured and unsecured lines of credit available.  Although consumer loans involve a higher level of risk than one- to four-family residential mortgage loans, they generally provide higher yields and have shorter terms to maturity than one- to four-family residential mortgage loans.  At December 31, 2015, the Bank had total consumer loans of $50.4 million, or 14.7% of the Bank's loan portfolio.

The Bank's underwriting standards for consumer loans include a determination of the applicant's payment history on other debts and an assessment of ability to meet existing obligations and payments on the proposed loan.  The stability of the applicant's monthly income is determined by verification of gross monthly income from primary employment, and from any verifiable secondary income.  Although creditworthiness of the applicant is of primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.

The Bank also has a credit card program.  As of December 31, 2015, the Bank had issued 3,522 Visa credit cards withtotal approved credit lines of $7.0 million, of which $2.3 million was outstanding on that date.

Loan Delinquencies and Defaults

General.  The Bank's collection procedures provide that when a real estate loan is approximately 20 days past due, the borrower is contacted by mail and payment is requested.  If the delinquency continues for another 10 days, subsequent efforts are made to contact the delinquent borrower and establish a program to bring the loan current.  In certain instances, the Bank may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize his financial affairs.  If the loan continues in a delinquent status for 60 days or more, the Bank generally initiates foreclosure proceedings after the customer has been notified by certified mail.  The Bank institutes the same collection procedure for its commercial real estate loans.  

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Delinquent Loans.  The following table sets forth information concerning delinquent loans at December 31, 2015.  The amounts presented represent the total remaining principal balances of the delinquent loans (before specific reserves for losses), rather than the actual payment amounts which are overdue.

	Real Estate						Non-Real Estate
	Residential			Commercial			Consumer			Commercial Business
	Number	Amount		Number	Amount		Number	Amount		Number	Amount		Total
Loans delinquent for:	(Dollars in Thousands)
30 - 59 days	—	$	—	22	$	3,309	48	$	711	4	$	101	$	4,121
60 - 89 days	6	1,144		8	930		8	282		—	—		2,356
90 days and over	24	3,307		17	2,973		13	576		2	178		7,034
Total delinquent loans	30	$	4,451	47	$	7,212	69	$	1,569	6	$	279	$	13,511

Classified Assets.  Federal regulations provide for the classification of loans and other assets such as debt and equity securities considered to be of lesser quality as "substandard," "doubtful" or "loss" assets.  The regulations require commercial banks to classify their own assets and to establish prudent general allowances for loan losses for assets classified "substandard" or "doubtful."  For the portion of assets classified as "loss," an institution is required to either establish specific allowances of 100% of the amount classified or charge off such amount.  In addition, the State Board and/or FDIC may require the establishment of a general allowance for losses based on assets classified as "substandard" and "doubtful" or based on the general quality of the asset portfolio of a Bank.  See "Regulation - Regulation of the Bank."

The Company uses a risk based approach based on the following credit quality measures consistent with regulatory guidelines 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 60 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.

At December 31, 2015, $18.4 million of the Bank's total loan balance were classified "substandard" compared to $24.3 million at December 31, 2014. At December 31, 2015, $18.1 million were designated as "special mention" compared to $36.1 million at December 31, 2014. At December 31, 2015, $49.1 million were designated as “caution” compared to $34.9 million at December 31, 2014. The Bank had no loans classified as "doubtful" or "loss" at December 31, 2015 and 2014. According to generally accepted accounting principles, the Bank is required to account for certain loan modifications or restructuring as a “troubled debt restructuring” ("TDRs"). In general, the modification or restructuring of a debt is considered a TDR if the Bank, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that would not otherwise be considered. As of December 31, 2015, there were $6.7 million of TDRs compared to $9.6 million at December 31, 2014.  The Bank's classification of assets is consistent with FDIC regulatory classifications.

Non-performing Assets.  Loans are placed on non-accrual status when the collection of principal and/or interest becomes doubtful.  In addition, all loans are placed on non-accrual status when the loan becomes 90 days or more contractually delinquent.  All consumer loans more than 90 days delinquent are charged against the consumer loan allowance for loan losses unless there is adequate collateral which is in the process of being repossessed or foreclosed on.  At December 31, 2015, the Bankhad $6.7 million in TDRs which involved the Bank restructuring the borrower's interest rate or principal on a loan or making other concessions on loans at a rate materially less than the market rate.  Other loans of concern are those loans (not delinquent more than 60 days) that management has determined need to be closely monitored as the potential exists for increased risk on these loans in the future.  Non-performing loans are reviewed monthly on a loan by loan basis.  Charge-offs, whether partial or in full, associated with these loans will vary based on estimates of recovery for each loan.

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The following table sets forth the amounts and categories of risk elements in the Bank's loan portfolio.

	At December 31,												At March 31,
	2015			2014			2013			2012			2012			2011
				(Dollars in Thousands)
Loans Delinquent 60 to 89 Days:
Residential Real Estate	$	1,144		$	1,087		$	1,363		$	1,795		$	742		$	—
Consumer	282			91			235			212			352			197
Commercial Business	—			100			—			36			209			133
Commercial Real Estate	930			1,095			2,047			4,852			4,684			2,709
Total	$	2,356		$	2,373		$	3,645		$	6,895		$	5,987		$	3,039
Total as a percentage of total assets	0.29		%	0.29		%	0.43		%	0.77		%	0.65		%	0.33		%
Non-Accruing Loans :
Residential Real Estate	$	3,307		$	3,061		$	4,608		$	3,758		$	3,639		$	1,810
Consumer	576			574			398			646			620			1,194
Commercial Business	178			247			33			87			21			172
Commercial Real Estate	2,973			9,860			4,973			13,913			18,378			9,337
Total	$	7,034		$	13,742		$	10,012		$	18,404		$	22,658		$	12,513
Total as a percentage of total assets	0.88		%	1.66		%	1.18		%	2.07		%	2.45		%	1.34		%
Troubled debt restructurings  (1)	$	6,714		$	9,630		$	12,394		$	15,941		$	18,029		$	12,197
OREO	$	4,361		$	3,230		$	3,947		$	6,754		$	14,160		$	14,434
Allowance for loan losses	$	8,275		$	8,357		$	10,242		$	11,318		$	14,615		$	12,502

(1) Includes six loans with a balance of $877,000 at December 31, 2015 that are also included in the Non-Accruing Loans section of this table.

Non-performing loans decreased $6.7 million to $7.0 million at December 31, 2015 from $13.7 million at December 31, 2014 primarily due to a decrease in non-performing commercial real estate loans, which decreased $6.9 million to $3.0 million at December 31, 2015 from $9.9 million at December 31, 2014. The balance in non-performing commercial real estate loans at December 31, 2015 consisted of 17 loans to 14 borrowers with an average loan balance of $175,000 compared to 46 loans to 28 borrowers with an average loan balance of $214,000 at December 31, 2014.

Of the non-performing commercial real estate category, $1.6 million consisted of 11 loans secured by commercial buildings or first mortgages on principal residences throughout the Bank's market area to nine different borrowers; $314,000 consisted of one loan related to the acquisition and development of a subdivision; $219,000 consisted of one loan secured by builder lots; $160,000 consisted of two loans secured by raw land to two separate borrowers; and $642,000 consisted of two loans secured by a church building to one borrower. At December 31, 2015, our largest non-performing commercial real estate loan was $530,000 and was secured by a church building.

Non-performing residential real estate loans increased $245,000 to $3.3 million at December 31, 2015 from $3.1 million at December 31, 2014. The balance in non-performing residential real estate loans at December 31, 2015 consisted of 24 loans to 24 different borrowers with an average loan balance of $138,000, the largest of which was $386,000. The balance in non-performing residential real estate loans at December 31, 2014 consisted of 27 loans to 27 different borrowers with an average loan balance of $113,000, the largest of which was $415,000.

Also included in non-accruing loans at December 31, 2015 were 13 consumer loans totaling $576,000 and two commercial business loans totaling $178,000.  Of the 13 consumer loans on non-accrual status at December 31, 2015, the largest had a balance of $188,000.  

At December 31, 2015, there were no accruing loans equal to or more than 90 days delinquent. For the year ended December 31, 2015, the interest income not recognized and would have been recognized with respect to non-accruing loans, had such loans been current in accordance with their original terms and with respect to TDRs, had such loans been current in accordance with their original terms, totaled $679,000 compared to $920,000 for the year ended December 31, 2014.  For the year ended December 31, 2015 actual interest recorded on these loans amounted to $296,000 compared to $327,000 for the year ended December 31, 2014.

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Troubled Debt Restructurings. The Bank identifies and reviews all loans to be restructured based on an assessment of the borrower's credit status. This assessment is a continuous process that involves a review of the financial statements and prospects for repayment, payment delinquency, non-accrual status, and risk rating.

Not all loan modifications are TDRs. The Bank designates a loan modification as a TDR when the following two conditions are present: the borrower is experiencing financial difficulty, and because of this difficulty, the Bank grants a concession it would not otherwise consider. Typically these concessions involve a change in the interest rate, maturity date or payment amount or some combination of each. These concessions rarely result in the forgiveness of principal or interest. TDRs are considered impaired and initially reported as non-performing loans on non-accrual status. Non-performing TDRs may be returned to accrual status when payment in full of all amounts due under the restructured terms is anticipated and the borrower has demonstrated a sustained payment history which is typically six months.

During the year ended December 31, 2015, the Bank modified seven loans that were considered to be TDRs. The Bank had 16 loans totaling $6.7 million at December 31, 2015 which were TDRs compared to 18 loans totaling $9.6 million at December 31, 2014. The 16 TDRs included one consumer loan secured by a first mortgage on a residential dwelling and two automobiles totaling $63,000, and one unsecured consumer loan totaling $26,000. All of the remaining 14 TDRs consisted of commercial real estate loans to 10 separate borrowers.  

Six of the TDRs to four borrowers totaling $1.2 million were in default at December 31, 2015. All of the remaining TDRs were current at December 31, 2015. The Bank considers any loan 30 days or more past due to be in default.

Potential Problem Loans. Potential problem loans include substandard loans that are not already included as non-accrual loans or TDRs and special mention loans where management has become aware of information regarding possible credit issues for borrowers that could potentially cause doubt about their ability to comply with current repayment terms. At December 31, 2015 and 2014, the Bank had identified $29.5 million and $46.7 million, respectively, of potential problem loans through its internal loan review procedures.

Repossessed Assets.  OREO had a balance of $4.4 million at December 31, 2015 and consisted of the following real estate properties: seven single-family residences and 29 lots within residential subdivisions located throughout our market area in South Carolina and Georgia; eight lots within a subdivision and THE adjacent 22.96 acres of land in Aiken, South Carolina; nine parcels of commercial land; two commercial buildings in Aiken, South Carolina; and 34.8 acres of land in Bluffton, South Carolina.

Provision for Losses on Loans.  Security Federal recognizes that it will experience credit losses during the course of making loans and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a secured loan, the quality of the underlying security for the loan.  The Bank seeks to establish and maintain sufficient reserves for estimated losses on specifically identified loans and real estate where such losses can be estimated.  Additionally, general reserves for estimated possible losses are established on specified portions of the Bank's portfolio such as consumer loans and higher risk residential construction mortgage loans based on management's estimate of the potential loss for loans which normally can be classified as higher risk.  Specific and general reserves are based on, among other criteria: (1) the risk characteristics of the loan portfolio, (2) current economic conditions on a local as well as a statewide basis, (3) actual losses experienced historically and (4) the level of reserves for possible losses in the future.  

At December 31, 2015, the allowance for loan losses or reserve was $8.3 million.  In determining the adequacy of the reserve for loan losses, management reviews past experience of loan charge-offs, the level of past due and non-accrual loans, the size and mix of the portfolio, general economic conditions in the market area, and individual loans to identify potential credit problems.  Commercial business, commercial real estate and consumer loans were $263.0 million, or 76.9% of the Bank's total loan portfolio at December 31, 2015.  Although these types of loans carry a higher level of credit risk than conventional residential mortgage loans, the level of reserves reflects management's continuing evaluation of this risk based on the Bank's past loss experience.  At December 31, 2015, the Bank's ratio of loans delinquent more than 60 days to total assets was 1.17%.  The reserve is management's best estimate for offsetting risk for our estimated possible losses. There can be no guarantee that the estimate is adequate or accurate.  

Management believes that reserves for loan losses are at a level adequate to provide for inherent loan losses.  Although management believes that it has considered all relevant factors in its estimation of future losses, future adjustments to reserves may be necessary if conditions change substantially from the assumptions used in making the original estimations.  Regulators will from time to time evaluate the allowance for loan losses which is subject to adjustment based upon the information available to the regulators at the time of their examinations.

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The following table sets forth an analysis of the Bank's allowance for loan losses during the dates indicated.

	For the Years Ended December 31,									For the Nine Months Ended December 31,			For the Years Ended March 31,
	2015			2014			2013			2012			2012			2011
	(Dollars in Thousands)
Balance at beginning of period	$	8,358		$	10,242		$	11,318		$	14,615		$	12,502		$	12,307
Provision for loan losses	—			450			2,645			1,975			8,650			7,800
Charge-offs:
Residential real estate	217			359			1,118			647			564			1,010
Commercial business and commercial real estate	773			2,383			3,884			6,488			4,830			6,524
Consumer	527			372			207			287			1,250			583
Total charge-offs	1,517			3,114			5,209			7,422			6,644			8,117
Recoveries:
Residential real estate	94			136			273			57			—			125
Commercial business and commercial real estate	1,186			585			1,156			2,075			51			318
Consumer	154			59			59			18			56			68
Total recoveries	1,434			780			1,488			2,150			107			511
Balance at end of period	$	8,275		$	8,358		$	10,242		$	11,318		$	14,615		$	12,502
Ratio of net charge-offs during the period to average loans outstanding during the period (1)	0.02		%	0.66		%	0.99		%	1.72		%	1.43		%	1.42		%

(1) Annualized for the nine month period ended December 31, 2012

13

The distribution of the Bank's allowance for loan losses at the dates indicated is summarized in the following table.  The entire allowance is available to absorb losses from all loan categories.

	At December 31,																At March 31,
	2015				2014				2013				2012				2012				2011
	Amount		% of Total Loans		Amount		% of Total Loans		Amount		% of Total Loans		Amount		% of Total Loans		Amount		% of Total Loans		Amount		% of Total Loans
	(Dollars in Thousands)
Residential	$	1,323	16.0	%	$	1,392	22.2	%	$	1,706	22.6	%	$	1,522	23.2	%	$	1,929	22.6	%	$	1,703	23.2	%
Consumer	1,063		12.8		887		14.5		848		14.0		1,001		13.7		1,498		13.2		1,122		12.9
Commercial Business	774		9.4		159		3.0		426		2.1		619		2.0		645		2.1		924		2.7
Commercial Real Estate	5,115		61.8		5,920		60.3		7,261		61.3		8,176		61.1		10,543		62.1		8,753		61.2
Total	$	8,275	100.0	%	$	8,358	100.0	%	$	10,241	100.0	%	$	11,318	100.0	%	$	14,615	100.0	%	$	12,502	100.0	%

14

Subsidiaries

At December 31, 2015, Security Federal's net investment in its subsidiaries (including loans to subsidiaries) totaled $5.0 million.  In addition to investments in subsidiaries, federal institutions are permitted to invest an unlimited amount in operating subsidiaries engaged solely in activities which a commercial bank may engage in directly.

Security Federal Insurance, Inc. ("SFINS").  SFINS, a wholly owned subsidiary of the Bank, was formed during the year ended March 31, 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, and  home insurance, and premium finance.   The operations of SFINS are included in the Company's Consolidated Financial Statements.

Collier Jennings Financial Corporation.  Collier Jennings Financial Corporation is a subsidiary of SFINS, a subsidiary of the Bank, which is described above.  The Company acquired the insurance and insurance premium finance businesses of Collier Jennings Financial Corporation and its subsidiaries, Security Federal Auto Insurance, Inc., The Auto Insurance Store, Inc., and Security Federal Premium Pay Plans, Inc. (the "Collier-Jennings Companies"), effective June 30, 2006.

Investment Activities

Investment securities.  The Bank has authority to invest in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, certificates of deposit at insured institutions, mutual funds, bankers' acceptances and federal funds.  The Bank may also invest a portion of its assets in certain commercial paper and corporate debt securities.  See "Regulation - Regulation of the Bank."

As a member of the Federal Home Loan Bank ("FHLB") System, Security Federal must maintain minimum levels of investments that are liquid assets as defined in Federal regulations.  See "Regulation - Regulation of the Bank - Federal Home Loan Bank System."  Liquidity may increase or decrease depending upon the availability of funds and comparative yields on investments in relation to the return on loans.

Historically, the Bank has maintained its liquid assets at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt and potential deposit outflows.  Management regularly reviews and updates cash flow projections to assure that adequate liquidity is provided.

15

The following table sets forth the composition of the Company's portfolio of securities and other investments, excluding mortgage-backed securities.

	At December 31,
	2015		2014		2013		2012
	(In Thousands)
Interest bearing deposit at FHLB	$	490	$	2,252	$	321	$	226
Certificates of deposits at a financial institutions	3,445		2,095		2,100		1,729
Total other investments	$	3,935	$	4,347	$	2,421	$	1,955
Investment Securities:
Available for Sale:
FHLB securities	$	1,932	$	13,247	$	12,671	$	6,165
Federal Farm Credit Bank securities	1,988		5,668		5,366		—
Fannie Mae bonds	1,004		1,004		1,975		—
Small Business Administration bonds	111,417		108,127		100,824		96,462
Tax exempt municipal bonds	76,066		62,495		61,315		37,482
Equity securities	310		307		256		75
Total securities available for sale	192,717		190,848		182,407		140,184
Held to Maturity:
FHLB securities	—		—		—		7,996
Federal Farm Credit Bank securities	—		—		—		6,796
Fannie Mae bonds	—		—		—		2,022
Freddie Mac bonds	—		—		—		1,998
Small Business Administration bonds	—		—		—		5,866
Equity securities	—		—		—		155
Total securities held to maturity	—		—		—		24,833
Total securities (1)	192,717		190,848		182,407		165,017
FHLB stock	2,215		3,145		5,017		6,179
Total securities and FHLB stock (1)	$	194,932	$	193,993	$	187,424	$	171,196

___________

(1)      Does not include mortgage-backed securities.

At December 31, 2015, the Company did not have any investment securities (exclusive of obligations of the U.S. Government and federal agencies) issued by any one entity with a total book value in excess of 10% of its shareholders' equity.SBA bonds are backed by the full faith and credit of the U.S. government and carry a zero percent risk base when calculating risk based assets for regulatory capital purposes.

FHLB securities, Federal Farm Credit Bank securities, Fannie Mae bonds and Freddie Mac bonds are all securities that are issued by government sponsored enterprises ("GSEs").  GSE securities are not backed by the full faith and credit of the United States government.

16

The following table sets forth the maturities or repricing of investment securities, not including mortgage-backed securities, and FHLB stock at December 31, 2015, and the weighted average yields of such securities and FHLB stock (calculated on the basis of the cost and effective yields weighted for the scheduled maturity of each security).  Tax equivalent yields on taxexempt municipal bonds are calculated using a 34% tax rate.  Callable securities are shown at their likely call dates based oncurrent interest rates.  The table was prepared using amortized cost.  Small Business Administration securities are based on maturity dates without the effect of scheduled payments or anticipated prepayments.

	Maturing or Repricing																December 31, 2015
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years				Balance Outstanding
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)
U.S. Government sponsored enterprises	$	2,000	2.25	%	$	998	1.78	%	$	2,000	2.40	%	$	—	—	%	$	4,998	2.20	%
Small Business Administration bonds	82,039		1.57		2,331		0.75		19,399		2.37		6,426		2.62		110,195		1.76
Tax exempt municipal bonds	—		—		1,831		3.44		65,304		2.99		6,365		4.00		73,500		3.09
FHLB stock (1)	2,215		4.63		—		—		—		—		—		—		2,215		4.63
Other equity securities	250		1.65		—		—		—		—		—		—		250		1.65
Total (2)	$	86,504	1.67	%	$	5,160	1.90	%	$	86,703	2.83	%	$	12,791	3.31	%	$	191,158	2.31	%

___________

(1)   FHLB stock has no stated maturity date.

(2)   Excludes mortgage-backed securities with a total amortized cost of $210.1 million and a yield of 2.35%.

For information regarding the market value of the Bank's securities portfolios, see Notes 2 and 3 of the Notes to Consolidated Financial Statements contained in the Annual Report.

Mortgage-backed Securities.  Security Federal has a portfolio of mortgage-backed securities in its portfolio. Mortgage-backed securities can serve as collateral for borrowings and, through repayments, as a source of liquidity.  Under the Bank's risk-based capital requirement, mortgage-backed securities have a risk weight of 20% (or 0% in the case of Government National Mortgage Association ("Ginnie Mae") securities) compared to the 50% risk weight carried by residential loans.  

The following table sets forth the composition of the mortgage-backed securities available for sale portfolio at fair value and the held to maturity portfolio at amortized cost at the dates indicated.

	At December 31,
	2015		2014		2013		2012
	(In Thousands)
Available for sale:
Freddie Mac	$	29,973	$	41,348	$	40,721	$	28,560
Fannie Mae	30,518		36,882		34,339		45,002
Ginnie Mae	118,539		160,623		173,537		141,170
Private Label	3,767		—		—		—
Total	$	182,797	$	238,853	$	248,597	$	214,732
Held to maturity:
Freddie Mac	$	7,604	—		—		$	4,060
Fannie Mae	1,761		—		—		—
Ginnie Mae	20,508		—		—		47,179
Total	$	29,873	$	—	$	—	$	51,239

At December 31, 2015, the Company did not have any mortgage-backed securities (exclusive of obligations of agencies of the U.S. Government) issued by any one entity with a total book value in excess of 10% of shareholders equity.

17

Freddie Mac and Fannie Mae mortgage-backed securities are GSE issued securities.  GSE securities are not backed by the full faith and credit of the United States government.  The private label CMO securities are issued by non-governmental real estate mortgage investment conduits, which are also not backed by the full faith and credit of the United States government.  Ginnie Mae mortgage-backed securities are backed by the full faith and credit of the United States government.

For information regarding the market values of Security Federal's mortgage-backed securities portfolio, see Notes 2 and 3 of the Notes to Consolidated Financial Statements contained in the Annual Report.

The following table sets forth the final maturities or initial repricings, whichever occurs first, and the weighted average yields of the mortgage-backed securities at December 31, 2015.  Not considered in the preparation of the table below is the effect of scheduled payments or anticipated prepayments.  The table is prepared using amortized cost.

	The Earliest of Maturing or Repricing																At December 31, 2015
	Less Than 1 Year				1 to 5 Years				5 to 10 Years				Over Ten Years				Balance Outstanding
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)
Fannie Mae	$	14,158	1.46	%	$	1,598	3.15	%	$	5,444	2.96	%	$	10,496	3.23	%	$	31,696	2.39	%
Freddie Mac	3,678		1.15		277		4.74		12,417		2.66		20,876		3.04		37,248		2.74
Ginnie Mae	54,705		1.30		4,916		1.82		2,820		4.31		74,875		2.90		137,316		2.25
Private Label	3,810		1.87		—		—		—		—		—		—		3,810		1.87
Total	$	76,351	1.35	%	$	6,791	2.25	%	$	20,681	2.96	%	$	106,247	2.96	%	$	210,070	2.35	%

Sources of Funds

Deposit accounts have traditionally been a principal source of the Bank's funds for use in lending and for other general business purposes.  In addition to deposits, the Bank derives funds from loan repayments, cash flows generated from operations (including interest credited to deposit accounts), FHLB of Atlanta advances, borrowings from the Federal Reserve Bank of Atlanta ("Federal Reserve"), the sale of securities under agreements to repurchase, and loan sales.  See "- Borrowings" below and  Note10 of  the Notes to Consolidated Financial Statements contained in the Annual Report.  Scheduled loan payments are a relatively stable source of funds while deposit inflows and outflows and the related cost of such funds have varied widely.  FHLB of Atlanta advances,  borrowings from the Federal Reserve Bank and the sale of securities under agreements to repurchase may be used on a short-term basis to compensate for seasonal reductions in deposits or deposit inflows at less than projected levels and may be used on a longer term basis in support of expanded lending activities.  The availability of funds from loan sales is influenced by general interest rates.  See "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Annual Report.

Deposits.  The Bank attracts both short-term and long-term deposits from the general public by offering a wide assortment of account types and rates. The Bank offers regular savings accounts, checking accounts, various money market accounts, fixed interest rate certificates with varying maturities, negotiated rate $100,000 or above jumbo certificates of deposit ("Jumbo CDs") and individual retirement accounts.

At December 31, 2015, the Bank had $42.5 million in brokered deposits.   The Bank believes that, based on its experience over the past several years, its savings and transaction accounts are stable sources of deposits.

18

The following table sets forth the dollar amount of savings deposits in the various types of deposit programs at the dates indicated.

	At December 31,
	2015				2014				2013				2012
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
	(Dollars in Thousands)
Interest Rate Range for 2015:
Savings accounts 0% - 0.10%	$	31,192	4.8	%	$	28,623	4.3	%	$	24,485	3.7	%	$	22,411	3.3	%
NOW and other transaction accounts 0% - 0.20%	155,766		23.9		143,422		21.7		136,697		20.8		126,741		18.7
Money market funds 0.10% - 0.17%	229,017		35.1		234,819		35.6		240,631		36.5		234,383		34.7
Total non-certificates	$	415,975	63.8	%	$	406,864	61.6	%	$	401,813	61.0	%	$	383,535	56.7	%
Certificates:
0.00-1.99%	$	227,235	34.8	%	$	227,473	34.5	%	$	226,750	34.4	%	$	255,423	37.8	%
2.00-2.99%	8,887		1.4		25,605		3.9		28,849		4.4		32,975		4.9
3.00-3.99%	—		—		173		—		1,285		0.2		2,381		0.3
4.00-4.99%	—		—		—		—		—		—		1,523		0.2
5.00-5.99%	—		—		—		—		—		—		502		0.1
Total certificates	236,122		36.2	%	253,251		38.4	%	256,884		39.0	%	292,804		43.3	%
Total deposits	$	652,097	100.0	%	$	660,115	100.0	%	$	658,697	100.0	%	$	676,339	100.0	%

The Bank relies upon locally obtained Jumbo CDs to maintain its deposit levels.  At December 31, 2015, Jumbo CDs constituted $132.0 million or 20.2% of the Bank's total deposits.  At December 31, 2015, the Bank held $24.5 million in publicfunds which consisted of $11.4 million in certificates of deposit and $13.1 million in demand deposit accounts.

The following table sets forth the deposit flows at the Bank during the periods indicated.

	Year Ended December 31,									Nine Months Ended December 31,
	2015			2014			2013			2012
	(In Thousands)
Opening balance	$	660,115		$	658,697		$	676,339		$	696,201
Net deposits	(8,018		)	1,418			(17,642		)	(19,862		)
Ending balance	652,097			660,115			658,697			676,339
Net increase (decrease)	$	(8,018	)	$	1,418		$	(17,642	)	$	(19,862	)
Percent increase (decrease)	(1.21		)%	0.22		%	(2.61		)%	(2.85		)%

19

The following table shows rate and maturity information for the Bank's certificates of deposit as of December 31, 2015.

	0- 1.99%		2.00- 2.99%		Total
Certificate accounts maturing in quarter ending:	(In Thousands)
March 31, 2016	$	45,052	$	4,242	$	49,294
June 30, 2016	33,927		2,738		36,665
September 30, 2016	29,131		1,577		30,708
December 31, 2016	24,719		—		24,719
March 31, 2017	21,166		—		21,166
June 30, 2017	15,983		—		15,983
September 30, 2017	8,857		—		8,857
December 31, 2017	10,017		—		10,017
March 31, 2018	7,283		—		7,283
June 30, 2018	7,084		—		7,084
September 30, 2018	3,085		—		3,085
December 31, 2018	5,688		—		5,688
Thereafter	15,243		330		15,573
Total	$	227,235	$	8,887	$	236,122

The following table indicates the amount of the Bank's deposits of $100,000 or more by time remaining until maturity at December 31, 2015.

	Certificates of Deposit		Savings, NOW and Money Market Accounts
	(In Thousands)
Maturity Period
Three months or less	$	24,356	$	234,464
Over three through six months	19,795		—
Over six through twelve months	29,449		—
Over twelve months	58,412		—
Total	$	132,012	$	234,464

Borrowings

As a member of the FHLB of Atlanta, the Bank is required to own capital stock in the FHLB of Atlanta and is authorized to apply for advances from the FHLB of Atlanta.  Each FHLB credit program has its own interest rate, which may be fixed or variable, and range of maturities.  The FHLB of Atlanta may prescribe the acceptable uses to which these advances may be put,as well as limitations on the size of the advances and repayment provisions.  At December 31, 2015, the Bank had $34.6 millionin outstanding advances from the FHLB of Atlanta.   See Note 10 of  the Notes to Consolidated Financial Statements contained in the Annual Report for information regarding the maturities and rate structure of the Bank's FHLB advances.  Federal law contains certain collateral requirements for FHLB advances.  See "Regulation - Regulation of the Bank - Federal Home Loan Bank System."

At December 31, 2015, the Company had $5.2 million in junior subordinated debentures.  The debentures accrue and pay distributions quarterly at a floating rate of three-month LIBOR plus 170 points which was equal to 2.21% at December 31, 2015.  The debentures were callable by the Company in September 2011, and quarterly thereafter, with a final maturity date of December 15, 2036.  See Note 11 of the Notes to Consolidated Financial Statements contained in the Annual Report for more information.

20

On December 1, 2009, the Company issued $6.1 million in convertible senior debentures. The debentures will mature on December 1, 2029 and accrue interest at the rate of 8.0% per annum until maturity or earlier redemption or repayment. Interest on the debentures is payable on June 1 and December 1 of each year, commencing June 1, 2010. The debentures are convertible into the Company's common stock at a conversion price of $20 per share at the option of the holder at any time prior to maturity. The convertible senior debentures are redeemable, in whole or in part, at the option of the Company at any time on or after December 1, 2019, at a price equal to 100% of the principal amount of the debentures to be purchased plus any accrued and unpaid interest to, but excluding, the date of redemption. See Note 12 of the Notes to Consolidated Financial Statements contained in the Annual Report for more information.

The following table sets forth the maximum month-end balance and average balance of FHLB advances, other borrowings and junior subordinated debentures for the periods indicated.

	Years Ended December 31,						Nine Months Ended December 31,
	2015		2014		2013		2012
	(In Thousands)
Maximum Balance:
FHLB advances	$	47,300	$	90,300	$	103,156	$	113,168
Other borrowings	10,340		10,781		9,873		10,226
Junior subordinated debentures	5,155		5,155		5,155		5,155
Senior convertible debentures	6,084		6,084		6,084		6,084
Average Balance:
FHLB advances	$	37,484	$	70,739	$	92,718	$	110,380
Other borrowings	8,560		9,450		9,270		9,669
Junior subordinated debentures	5,155		5,155		5,155		5,155
Senior convertible debentures	6,084		6,084		6,084		6,084

At December 31, 2015, the Bank had $6.4 million in retail repurchase agreements with an average rate of 0.15%.  These repurchase agreements are included in "Other Borrowings" in the Consolidated Financial Statements included in the Annual Report and in the table above.

21

The following table sets forth information as to the Bank's borrowings and the weighted average interest rates thereon at the dates indicated.

	At December 31,
	2015			2014			2013			2012
	(Dollars in Thousands)
Balance:
FHLB advances	$	34,640		$	52,900		$	87,740		$	105,257
Other borrowings	6,412			8,523			8,003			9,317
Junior subordinated debentures	5,155			5,155			5,155			5,155
Senior convertible debentures	6,084			6,084			6,084			6,084
Weighted Average Interest Rate at Fiscal Year End:
FHLB advances	3.87		%	3.87		%	3.23		%	3.72		%
Other borrowings	0.15			0.15			0.15			0.20
Junior subordinated debentures	2.21			1.94			1.94			2.01
Senior convertible debentures	8.00			8.00			8.00			8.00
During Fiscal Year:
FHLB advances	3.52		%	3.71		%	3.79		%	3.97		%
Other borrowings	0.15			0.18			0.20			0.25
Junior subordinated debentures	2.02			1.96			2.00			2.17
Senior convertible debentures	8.00			8.00			8.00			8.00

Competition

The Bank serves the counties of Aiken, Richland, and Lexington, South Carolina, and Columbia County, Georgia through its 14 full service branch offices located in Aiken, Ballentine, Clearwater, Columbia, Graniteville, Langley, Lexington, North Augusta, Wagener, and West Columbia, South Carolina, and a branch office in Columbia County, Evans, Georgia. The newest branch in Ballentine, South Carolina opened in December 2015.

Security Federal faces strong competition both in originating loans and in attracting deposits.  Competition in originating loans comes primarily from other commercial banks, federal savings institutions, mortgage bankers and credit unions who also make loans in the Bank's market area.  The Bank competes for loans principally on the basis of the interest rates and loan fees it charges, the types of loans it makes and the quality of services it provides to borrowers.

The Bank faces substantial competition in attracting deposits from federal savings institutions, commercial banks, money market and mutual funds, credit unions and other investment vehicles.  The ability of the Bank to attract and retain deposits depends on its ability to provide an investment opportunity that satisfies the requirements of investors as to rate of return, liquidity, risk and other factors.  The Bank attracts a significant amount of deposits through its branch offices primarily from the communities in which those branch offices are located.  Therefore, competition for those deposits is principally from federal savings institutions and commercial banks located in the same communities.  The Bank competes for these deposits by offering a variety of deposit accounts at competitive rates, convenient business hours, and convenient branch locations with interbranch deposit and withdrawal privileges at each.

The authority to offer money market deposits, and expanded lending and other powers authorized for savings and loan associations by federal law, have resulted in increased competition for both deposits and loans between banks and other financial institutions such as savings and loans and credit unions.

22

Personnel

At December 31, 2015, the Company employed 190 full-time and 24 part-time employees.  The Bank employees are not represented by any collective bargaining agreement.  Management of the Bank considers its relations with its employees to be good.

Executive Officers.  

The following table sets forth information regarding the executive officers of the Company and the Bank.

	Age at December 31,	Position
Name	2015	Company	Bank
J. Chris Verenes	59	Chief Executive Officer	Chief Executive Officer and Chairman of the Board
Roy G. Lindburg	55	President	—
Richard T. Harmon	60	—	President
Jessica T. Cummins	35	Chief Financial Officer	Chief Financial Officer

Biographical Information.  

The following is a description of the principal occupation and employment of the executive officers of the Corporation and the Bank during at least the past five years:

J. Chris Verenes is Chief Executive Officer of the Company and Chairman of the Board and Chief Executive Officer of the Bank, positions he has held since January 1, 2012 and January 1, 2011, respectively.  Prior to that he had served as President of the Bank since 2004.  Before joining the Bank he held a variety of management positions with Washington Group International, an engineering and construction company that manages and operates major government sites throughout the United States for the Department of Energy.  He was Director of Planning and Administration from 2001 to January 2004, Chief of Staff during 2001, Director of Strategic Programs for the business unit from 2000 to 2001 and Deputy Manager of Business Development from 1996 to 2000.  Prior to his employment by Washington Group International, Mr. Verenes served as Controller for Riegel Textile Corporation, as Director of Control Data and Business and Technology Center, and as Executive Director of the South Carolina Democratic Party.

Timothy W. Simmons has served as the Company's Chairman of the Board since October 2011.  He served as President and Chief Executive Officer of the Company from 1987 and 1994, respectively, until his retirement on January 1, 2012.  Mr. Simmons was elected President and Chief Operating Officer of the Bank in January 1987 and served in these capacities from March 1987 to December 2001.  In May 1988, Mr. Simmons became Chief Executive Officer of the Bank and in January 2002, he was elected Chairman of the Bank's Board of Directors, positions he held until his retirement in December 2010.

Roy G. Lindburg was appointed President of the Company effective June 2014. Prior to that, he served as the Chief Financial Officer of the Company and the Bank since January 1995.  He was named Executive Vice President and appointed to the Company's and the Bank's respective Boards of Directors in 2005.

Richard T. Harmon was appointed President of the Bank effective June 2014. Prior to that, he served as the Bank's Chief Lending Officer since 2011. He was appointed to the Company’s and the Bank’s respective Boards of Directors in 2013. Prior to joining the Bank, Mr. Harmon was employed with Regions Bank from 1998 to 2007 as Senior Vice President of Construction Lending. From 1985 to 1998, he was employed at Palmetto Federal Savings Bank of South Carolina serving in a variety of positions related to branch operations and lending.

Jessica T. Cummins was appointed Chief Financial Officer of the Company and the Bank effective June 2014. Prior to that, she served as the Treasurer of the Company since joining the Company and the Bank in 2007. Prior to 2007, Ms. Cummins was employed by Elliott Davis LLC in their Financial Services practice, specializing in financial institutions with an emphasis on publicly traded companies. Ms. Cummins is a Certified Public Accountant.

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REGULATION

The following is a brief description of certain laws and regulations which are applicable to the Company and the Bank. Descriptions of laws and regulations here and elsewhere in this Form 10-K do not purport to be complete and are qualified in their entirety by reference to the actual laws and regulations. Legislation is introduced from time to time in the United States Congress or in the South Carolina State Legislature that may affect the operations of the Company and the Bank. In addition, the regulations governing the Company and the Bank may be amended from time to time by the State Board, the FDIC, the Federal Reserve or the SEC, as appropriate. Any such legislation or regulatory changes in the future could have an adverse effect on our operations and financial condition. We cannot predict whether any such changes may occur.

As a bank holding company, the Company is subject to examination and supervision by, and is required to file certain reports with, the Federal Reserve. The Company also is subject to the rules and regulations of the SEC under the federal securities laws. The Bank, as a state-chartered savings bank, is subject to regulation and oversight by the State Board, the applicable provisions of South Carolina law and by the regulations of the State Board adopted thereunder.  The Bank also is subject to regulation and examination by the FDIC, which insures its deposits to the maximum extent permitted by law.

The laws and regulations affecting depository institutions and their holding companies have changed significantly particularly in connection with the enactment of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). Among other changes, the Dodd-Frank Act established the Consumer Protection Financial Bureau (“CFPB”) as an independent bureau of the Federal Reserve. The CFPB assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. The Bank is subject to consumer protection regulations issued by the CFPB, but as a smaller financial institution, we are generally subject to supervision and enforcement by the FDIC and the State Board with respect to our compliance with consumer financial protection laws and CFPB regulations

Many aspects of the Dodd-Frank Act are subject to rulemaking by the federal banking agencies, which has not been completed and in some instances will not take effect for some time, making it difficult to anticipate the overall financial impact of the Dodd-Frank Act on the Bank, the Company and the financial services industry more generally.

Regulation of the Bank

The Bank is an FDIC-insured, state-chartered commercial bank and is subject to various statutory requirements and rules and regulations promulgated and enforced primarily by the FDIC and the State Board. These statutes, rules, and regulations relate to insurance of deposits, required reserves, allowable investments, loans, mergers, consolidations, issuance of securities, payment of dividends, establishment of branches and other aspects of the business of the Bank. The FDIC has broad authority to prohibit the Bank from engaging in what it determines to be unsafe or unsound banking practices. In addition, federal law imposes a number of restrictions on state-chartered, FDIC-insured banks, and their subsidiaries. These restrictions range from prohibitions against engaging as a principal in certain activities to the requirement of prior notification of branch closings. The Bank is not a member of the Federal Reserve System.

The Bank is required to file periodic reports with the FDIC and the State Board and is subject to periodic examinations and evaluations by those regulatory authorities. Based on these evaluations, the regulators may revalue the assets of an institution and require that it establish specific reserves to compensate for the differences between the determined value and the book value of these assets. The FDIC and the State Board may each accept the results of an examination by the other in lieu of conducting an independent examination.

Federal Deposit Insurance Corporation. The Deposit Insurance Fund ("DIF") of the FDIC insures deposit accounts in the Bank up to $250,000 per separately insured depositor and such insurance is backed by the full faith and credit of the United States Government. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund. The FDIC also has the authority to initiate enforcement actions against savings institutions and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition. Our deposit insurance premiums for the year ended December 31, 2015 were $611,000.

The Dodd-Frank Act requires the FDIC's deposit insurance assessments to be based on assets instead of deposits.  The FDIC issued rules which specify that the assessment base for a bank is equal to its total average consolidated assets less average tangible capital.  The FDIC revised assessment schedule established assessment rates that range from approximately 2.5 basis points to 45 basis points, depending on applicable adjustments for unsecured debt issued by an institution and brokered deposits

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(and a further adjustment for institutions that hold unsecured debt of other FDIC-insured institutions), until such time as the FDIC's reserve ratio equals 1.15%. Once the FDIC's reserve ratio reaches 1.15% and the reserve ratio for the immediately prior assessment period is less than 2.0%, the applicable assessment rates may range from three basis points to 30 basis points (subject to adjustments as described above).  If the reserve ratio for the prior assessment period is equal to, or greater than 2.0% and less than 2.5%, the assessment rates may range from two basis points to 28 basis points and if the reserve ratio for the prior assessment period is greater than 2.5%, the assessment rates may range from one basis point to 25 basis points (in each case subject to adjustments as described above).  No institution may pay a dividend if it is in default on its federal deposit insurance assessment.

The FDIC conducts examinations of and requires reporting by state non-member banks, such as the Bank. The FDIC also may prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious risk to the DIF.

In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. These assessments, which may be revised based upon the level of DIF deposits, will continue until the bonds mature in the years 2017 through 2019. This payment is established quarterly and is an annual rate of 0.58 basis points of assessable assets for December 31, 2015. The Financing Corporation was chartered in 1987 solely for the purpose of functioning as a vehicle for the recapitalization of the deposit insurance system. For 2015, the Bank incurred approximately $43,000 in assessments.

The FDIC may terminate the deposit insurance of any insured depository institution if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC.  It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance if the institution has no tangible capital.  If insurance of accounts is terminated, the accounts at the institution at the time of the termination, less subsequent withdrawals, shall continue to be insured for a period of six months to two years, as determined by the FDIC.  Management is not aware of any existing circumstances which would result in termination of the Bank's deposit insurance.

A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank.  There can be no prediction as to what changes in insurance assessment rates may be made in the future.

Prompt Corrective Action. Federal statutes establish a supervisory framework based on five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. An institution's category depends upon where its capital levels are in relation to relevant capital measures, which include a risk-based capital measure, a leverage ratio capital measure and certain other factors. The well-capitalized category is described below in "Capital Requirements".

An institution that is not well capitalized is subject to certain restrictions on brokered deposits, including restrictions on the rates it can offer on its deposits, generally. Any institution which is neither well capitalized nor adequately capitalized is considered undercapitalized.

Undercapitalized institutions are also subject to certain prompt corrective action requirements, regulatory controls and restrictions that become more extensive as an institution becomes more severely undercapitalized. Failure by institutions to comply with applicable capital requirements would, if unremedied, result in progressively more severe restrictions on their activities and lead to enforcement actions, including, but not limited to, the issuance of a capital directive to ensure the maintenance of required capital levels and, ultimately, the appointment of the FDIC as receiver or conservator. Banking regulators will take prompt corrective action with respect to depository institutions that do not meet minimum capital requirements. Additionally, approval of any regulatory application filed for review by the banking agencies may be dependent on compliance with capital requirements.

At December 31, 2015, the Bank was categorized as "well capitalized" under the prompt corrective action regulations of the FDIC. For additional information, see "Capital Requirements" below and Note 14 of the Notes to Consolidated Financial Statements included in the Annual Report.

Capital Requirements. Federally insured financial institutions, such as the Bank, are required to maintain a minimum level of regulatory capital.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank became subject to new capital adequacy requirements adopted by the FDIC, which create a new required ratio for common equity Tier 1 ("CET1") capital, increases the leverage and Tier 1 capital ratios, changes the risk-weightings of certain assets for purposes of the risk-based capital ratios, creates an additional capital conservation buffer over the required capital ratios and changes what qualifies

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as capital for purpose of meeting these various capital requirements. These regulations implement the regulatory capital reforms required by the Dodd Frank Act and the “Basel III” requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. The Bank is required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before it may pay dividends, repurchase shares or pay discretionary bonuses.

Under the new capital regulations, the minimum requirements are a ratio of CET1 capital to total risk-weighted assets (the "CET1 risk-based ratio") of 4.5%, a Tier 1 capital ratio of 6.0%, a total capital ratio of 8.0%, and a leverage ratio of 4.0%. In addition to the minimum CET1, Tier 1 and total capital ratios, the Bank will have to maintain a capital conservation buffer consisting of additional CET1 capital equal to 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement is to be phased in beginning in January 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented in January 2019.

In addition to the capital requirements, there are a number of changes in what constitutes regulatory capital, subject to transition periods. These changes include the phasing-out of certain instruments as qualifying capital. Mortgage servicing rights and deferred tax assets over designated percentages of CET1 will be deducted from capital, subject to a four-year transition period. CET1 will consist of Tier 1 capital less all capital components that are not considered common equity. In addition, Tier 1 capital will include accumulated other comprehensive income (loss), which includes all unrealized gains and losses on available for sale debt and equity securities, subject to a four-year transition period. Because of the Bank's asset size, it was not considered an advanced approaches banking organization and elected in the first quarter of calendar year 2015 to take the one-time option of deciding to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in its capital calculations. The new requirements also include changes in the risk-weighting of assets to better reflect credit risk and other risk exposure. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days or more past due or otherwise on non-accrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital.

Under the new standards, in order to be considered well-capitalized, the Bank must have a CET1 risk-based capital ratio of 6.5% (new), a Tier 1 risk-based capital ratio of 8.0% (increased from 6.0%), a total risk-based capital ratio of 10.0% (unchanged) and a Tier 1 leverage capital ratio of 5.0% (unchanged).

At December 31, 2015, the Bank met the requirements to be "well capitalized" and met the fully phased-in capital conservation buffer requirement. Management monitors the capital levels of the Bank to provide for current and future business opportunities and to meet regulatory guidelines for “well capitalized” institutions.

The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution's capital level is or may become inadequate in light of particular risks or circumstances. Management of the Bank believes that, under the current regulations, the Bank will continue to meet its minimum capital requirements in the foreseeable future.

For a complete description of the Bank's required and actual capital levels on December 31, 2015, see Note 14 of the Notes to Consolidated Financial Statements included in the Annual Report.

Federal Home Loan Bank System. The Bank is a member of the FHLB of Atlanta, which is one of 11 regional FHLBs that administer the home financing credit function of financial institutions. The FHLBs are subject to the oversight of the Federal Housing Finance Agency and each FHLB serves as a reserve or central bank for its members within its assigned region. The FHLBs are funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System and makes loans or advances to members in accordance with policies and procedures established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing. At December 31, 2015, the Bank had $34.6 million of outstanding advances from the FHLB of Atlanta under an available credit facility of $240.2 million, which is limited to available collateral. See "Business - Sources of Funds - Borrowings."

As a member, the Bank is required to purchase and maintain stock in the FHLB of Atlanta. At December 31, 2015, the Bank had $2.2 million in FHLB stock, which was in compliance with this requirement. In past years, the Bank has received

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substantial dividends on its FHLB stock. These dividend yields have averaged 4.91% for the year ended December 31, 2015; 4.16% for the year ended December 31, 2014; and 2.61% for the year ended December 31, 2013.

The FHLBs continue to contribute to low- and moderately-priced housing programs through direct loans or interest subsidies on advances targeted for community investment and low- and moderate-income housing projects. These contributions have in the past affected adversely the level of FHLB dividends paid and could continue to do so in the future. These contributions could also have an adverse effect on the value of FHLB stock in the future. A reduction in value of the Bank's FHLB stock may result in a corresponding reduction in the Bank's capital.

Emergency Economic Stabilization Act of 2008 ("EESA").ESA was enacted in October 2008 and authorizes the Treasury Department to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program ("TARP"). The purpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other. Under the TARP CPP, the Treasury purchased debt or equity securities from participating institutions. The TARP also included direct purchases or guarantees of troubled assets of financial institutions. Participants in the CPP are subject to executive compensation limits and are encouraged to expand their lending and mortgage loan modifications. The Company completed its TARP CPP transaction on December 19, 2008, receiving $18.0 million in funding for the issuance of its Series A Preferred Stock to Treasury.

Under TARP, the Company also is a participant in the U.S. Treasury's CDCI. The Company completed its CDCI transaction on September 29, 2010. In connection with its participation in the CDCI, the Company exchanged $18.0 million of its Series A Preferred Stock for $18.0 million of Series B Preferred Stock and simultaneously sold an additional $4.0 million of its Series B Preferred Stock to the U.S. Treasury. For additional information regarding the Company's participation in the CDCI, see " - Corporate Overview - Community Development Capital Initiative ("CDCI").

The American Recovery and Reinvestment Act of 2009. On February 17, 2009, President Obama signed The American Recovery and Reinvestment Act of 2009 ("ARRA") into law.  The ARRA is intended to revive the U.S. economy by creating millions of new jobs and stemming home foreclosures. For financial institutions that received financial assistance under TARP or related programs, the ARRA significantly rewrote the original executive compensation and corporate governance provisions of Section 111 of the EESA. Among the most important changes instituted by the ARRA were new limits on the ability of TARP recipients to pay incentive compensation to up to 20 of the next most highly-compensated employees in addition to the "senior executive officers," a restriction on termination of employment payments to senior executive officers and the five next most highly-compensated employees and a requirement that TARP recipients implement "say on pay" shareholder votes.

Affiliate Transactions. The Company and the Bank are separate and distinct legal entities. Federal laws strictly limit the ability of banks to engage in certain transactions with their affiliates, including their bank holding companies. Transactions deemed to be a "covered transaction" under Section 23A of the Federal Reserve Act and between a subsidiary bank and its parent company or the nonbank subsidiaries of the bank holding company are limited to 10% of the bank subsidiary's capital and surplus and, with respect to the parent company and all such nonbank subsidiaries, to an aggregate of 20% of the bank subsidiary's capital and surplus. Further, covered transactions that are loans and extensions of credit generally are required to be secured by eligible collateral in specified amounts. Federal law also requires that covered transactions and certain other transactions listed in Section 23B of the Federal Reserve Act between a bank and its affiliates be on terms as favorable to the bank as transactions with non-affiliates.

Community Reinvestment Act. The Bank is also subject to the provisions of the Community Reinvestment Act of 1977, which requires the appropriate federal bank regulatory agency to assess a bank's record in meeting the credit needs of the community serviced by the bank, including low and moderate income neighborhoods. The regulatory agency's assessment of the bank's record is made available to the public. Further, an assessment is required of any bank which has applied to establish a new branch office that will accept deposits, relocate an existing office or merge or consolidate with, or acquire the assets or assume the liabilities of, a federally regulated financial institution. The Bank received an "outstanding" rating during its most recent examination.

Dividends. Dividends from the Bank constitute the major source of funds for dividends which may be paid by the Company to shareholders. The amount of dividends payable by the Bank to the Company depends upon the Bank's earnings and capital position, and is limited by federal and state laws, regulations and policies. South Carolina banking regulations restrict the amount of dividends that the Bank can pay to the Company, and may require prior approval before declaration and payment of any excess dividend.

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The amount of dividends actually paid during any one period will be strongly affected by the Bank's management policy of maintaining a strong capital position. Federal law further provides that no insured depository institution may pay a cash dividend if it would cause the institution to be "undercapitalized," as defined in the prompt corrective action regulations. Moreover, the federal bank regulatory agencies also have the general authority to limit the dividends paid by insured banks if such payments should be deemed to constitute an unsafe and unsound practice.

Activities of Insured State-Chartered Financial Institutions. Federal law generally limits the activities and equity investments of FDIC-insured, state-chartered banks to those that are permissible for national banks. An insured state bank is not prohibited from, among other things, (i) acquiring or retaining a majority interest in a subsidiary, (ii) investing as a limited partner in a partnership the sole purpose of which is direct or indirect investment in the acquisition, rehabilitation or new construction of a qualified housing project, provided that such limited partnership investments may not exceed 2% of the bank's total assets, (iii) acquiring up to 10% of the voting stock of a company that solely provides or reinsures directors', trustees' and officers' liability insurance coverage or bankers' blanket bond group insurance coverage for insured depository institutions, (iv) acting as agent for a customer in many capacities, and (v) acquiring or retaining the voting shares of a depository institution if certain requirements are met.

Federal Reserve System. The Federal Reserve Board requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits. These reserves may be in the form of cash or non-interest-bearing deposits with the regional Federal Reserve Bank. Negotiable order of withdrawal (NOW) accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to the reserve requirements, as are any non-personal time deposits at a savings bank. As of December 31, 2015, the Bank's deposit with the Federal Reserve Bank and vault cash exceeded its reserve requirements.

Standards for Safety and Soundness. The federal banking regulatory agencies have prescribed, by regulation, guidelines for all insured depository institutions relating to internal controls, information systems and internal audit systems; loan documentation; credit underwriting; interest rate risk exposure; asset growth; asset quality; earnings; and compensation, fees and benefits. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. Each insured depository institution must implement a comprehensive written information security program that includes administrative, technical, and physical safeguards appropriate to the institution’s size and complexity and the nature and scope of its activities. The information security program must be designed to ensure the security and confidentiality of customer information, protect against any unanticipated threats or hazards to the security or integrity of such information, protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer, and ensure the proper disposal of customer and consumer information. Each insured depository institution must also develop and implement a risk-based response program to address incidents of unauthorized access to customer information in customer information systems. If the FDIC determines that an institution fails to meet any of these guidelines, it may require an institution to submit to the FDIC an acceptable plan to achieve compliance.

Environmental Issues Associated with Real Estate Lending. The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), a federal statute, generally imposes strict liability on all prior and present "owners and operators" of sites containing hazardous waste. However, Congress acted to protect secured creditors by providing that the term "owner and operator" excludes a person whose ownership is limited to protecting its security interest in the site. Since the enactment of the CERCLA, this "secured creditor exemption" has been the subject of judicial interpretations which have left open the possibility that lenders could be liable for cleanup costs on contaminated property that they hold as collateral for a loan.

To the extent that legal uncertainty exists in this area, all creditors, including the Bank, that have made loans secured by properties with potential hazardous waste contamination (such as petroleum contamination) could be subject to liability for cleanup costs, which costs often substantially exceed the value of the collateral property.

Privacy Standards. The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (“GLBA”) modernized the financial services industry by establishing a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms and other financial service providers. The Bank is subject to FDIC regulations implementing the privacy protection provisions of the GLBA. These regulations require the Bank to disclose its privacy policy, including informing consumers of its information sharing practices and informing consumers of their rights to opt out of certain practices.

Other Consumer Protection Laws and Regulations. The Dodd-Frank Act established the CFPB and empowered it to exercise broad regulatory, supervisory and enforcement authority with respect to both new and existing consumer financial protection laws. The Bank is subject to consumer protection regulations issued by the CFPB, but as a financial institution with assets of less than $10 billion, the Bank is generally subject to supervision and enforcement by the FDIC and the State Board with respect to our compliance with consumer financial protection laws and CFPB regulations.

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The Bank is subject to a broad array of federal and state consumer protection laws and regulations that govern almost every aspect of its business relationships with consumers. While the list set forth below is not exhaustive, these include the Truth-in-Lending Act, the Truth in Savings Act, the Electronic Fund Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act, the Home Mortgage Disclosure Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act, the Home Ownership and Equity Protection Act, the Consumer Leasing Act, the Fair Credit Billing Act, the Homeowners Protection Act, the Check Clearing for the 21st Century Act, laws governing flood insurance, laws governing consumer protections in connection with the sale of insurance, federal and state laws prohibiting unfair and deceptive business practices, and various regulations that implement some or all of the foregoing. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits, making loans, collecting loans, and providing other services. Failure to comply with these laws and regulations can subject the Bank to various penalties, including but not limited to, enforcement actions, injunctions, fines, civil liability, criminal penalties, punitive damages, and the loss of certain contractual rights.

Regulation of the Company

General. The Company, as the sole shareholder of the Bank, is a registered bank holding company with the Federal Reserve. Bank holding companies are subject to comprehensive regulation by the Federal Reserve under the Bank Holding Company Act of 1956, as amended ("BHCA"), and the regulations promulgated thereunder. As a bank holding company, the Company is required to file with the Federal Reserve quarterly and periodic reports and such additional information as the Federal Reserve may require and is subject to regular examinations by the Federal Reserve. The Federal Reserve may examine the Company, and any of its subsidiaries, and charge the Company for the cost of the examination. The Federal Reserve also has extensive enforcement authority over bank holding companies, including, among other things, the ability to assess civil money penalties, to issue cease and desist or removal orders and to require that a holding company divest subsidiaries (including its bank subsidiaries). In general, enforcement actions may be initiated for violations of law and regulations and unsafe or unsound practices.

The Bank Holding Company Act. Under the BHCA, the Company is supervised by the Federal Reserve. The Federal Reserve has a policy that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, the Dodd-Frank Act and earlier Federal Reserve policy provide that a bank holding company should serve as a source of strength to its subsidiary bank by having the ability to provide financial assistance to its subsidiary bank during periods of financial distress to the bank, and should maintain the financial flexibility and capital raising capacity to obtain additional resources for assisting its subsidiary bank. A bank holding company's failure to meet its obligation to serve as a source of strength to its subsidiary banks will generally be considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve's regulations or both. No regulations have yet been proposed by the Federal Reserve to implement the source of strength doctrine required by the Dodd-Frank Act.

The Company and any subsidiaries that it may control are considered "affiliates" within the meaning of the Federal Reserve Act, and transactions between the Bank and affiliates are subject to numerous restrictions. With some exceptions, the Company and its subsidiaries, are prohibited from tying the provision of various services, such as extensions of credit, to other services offered by the Company, or by its affiliates.

Acquisitions. The BHCA prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank or bank holding company and from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, or providing services for its subsidiaries. Under the BHCA, the Federal Reserve is authorized to approve the ownership of shares by a bank holding company in any company, the activities of which the Federal Reserve has determined to be so closely related to the business of banking or managing or controlling banks as to be a proper incident thereto. The list of activities determined by regulation to be closely related to banking within the meaning of the BHCA includes, among other things: operating a savings institution, mortgage company, finance company, credit card company or factoring company; performing certain data processing operations; providing certain investment and financial advice; underwriting and acting as an insurance agent for certain types of credit-related insurance; leasing property on a full-payout, non-operating basis; selling money orders, travelers' checks and U.S. Savings Bonds; real estate and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage services for customers.

Capital Requirements. Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the BHCA and the regulations of the Federal Reserve. For a bank holding company with less than $1.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company's subsidiary banks to be well-capitalized under the prompt corrective action regulations.   As of December 31, 2015, the Company’s total risk-based capital

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was 24.4% of risk-weighted assets and its Tier 1 (core) capital was 21.7% of risk-weighted assets. If Security Federal Corporation was subject to regulatory guidelines for bank holding companies with $1.0 billion or more in assets, at December 31, 2015, it would have exceeded all regulatory capital requirements. Effective January 1, 2015, the amended regulatory risk-based capital rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act were implemented. For a discussion of the new capital rules, see the section above entitled “- Regulation of the Bank - Capital Requirements” and Note 14 of the Notes to Consolidated Financial Statements included in the Annual Report.

Interstate Banking. The Federal Reserve may approve an application of a bank holding company to acquire control of, or acquire all or substantially all of the assets of, a bank located in a state other than such holding company's home state, without regard to whether the transaction is prohibited by the laws of any state except with respect to the acquisition of a bank that has not been in existence for the minimum time period, not exceeding five years, specified by the law of the host state. The Federal Reserve may not approve an application if the applicant controls or would control more than 10% of the insured deposits in the United States or 30% or more of the deposits in the target bank's home state or in any state in which the target bank maintains a branch. Federal law does not affect the authority of states to limit the percentage of total insured deposits in the state that may be held or controlled by a bank holding company to the extent such limitation does not discriminate against out-of-state banks or bank holding companies. Individual states may also waive the 30% state-wide concentration limit contained in the federal law.

The federal banking agencies are authorized to approve interstate merger transactions without regard to whether such transaction is prohibited by the law of any state, unless the home state of one of the banks adopted a law prior to June 1, 1997 which applies equally to all out-of-state banks and expressly prohibits merger transactions involving out-of-state banks. Interstate acquisitions of branches will be permitted only if the law of the state in which the branch is located permits such acquisitions. Interstate mergers and branch acquisitions will also be subject to the nationwide and statewide insured deposit concentration amounts described above.

Dividends. As a South Carolina corporation, the Company is subject to restrictions on the payment of dividends under South Carolina law. In addition, the Company is an entity separate and distinct from its principal subsidiary, Security Federal Bank, and derives substantially all of its revenue in the form of dividends from this subsidiary. Accordingly, the Company is, and will be, dependent upon dividends from the Bank to pay the principal of and interest on its indebtedness, to satisfy its other cash needs and to pay dividends on its common stock. The Company is also subject to certain federal regulatory considerations. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve's view that a bank holding company should pay cash dividends only to the extent that the company's net income for the past year is sufficient to cover both the cash dividends and a rate of earning retention that is consistent with the company's capital needs, asset quality and overall financial condition, and that it is inappropriate for a company experiencing serious financial problems to borrow funds to pay dividends.

As a result of the Company's participation in the TARP CDCI, it is subject to certain limitations regarding the payment of dividends on and the repurchase of its common stock. Without the consent of the U.S. Treasury, the Company may not increase the cash dividend on its common stock or, pay any dividends on its common stock unless it is current in its dividend payments to the U.S. Treasury on the Series B Preferred Stock. In addition and subject to limited exceptions, with the consent of the U.S. Treasury, the Company also may not redeem, repurchase or otherwise acquire shares of its common stock or preferred stock other than the Series B Preferred Stock or trust preferred securities.

Stock Repurchases. Bank holding companies, except for certain "well-capitalized" and highly rated bank holding companies, are required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of their consolidated net worth. The Federal Reserve may disapprove a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order, or any condition imposed by, or written agreement with, the Federal Reserve.

Federal Securities Laws. The Company’s common stock is registered with the SEC under Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  We are subject to information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

The Dodd-Frank Act. On July 21, 2010, the Dodd-Frank Act was signed into law. The Dodd-Frank-Act imposes new restrictions and an expanded framework of regulatory oversight for financial institutions, including depository institutions and implements new capital regulations that the Company and the Bank will become subject to and that are discussed above under the section entitled “- Regulation of the Bank - Capital Requirements.”

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In addition, among other changes, the Dodd-Frank Act requires public companies, like the Company, to (i) provide their shareholders with a non-binding vote (a) at least once every three years on the compensation paid to executive officers and (b) at least once every six years on whether they should have a “say on pay” vote every one, two or three years; (ii) have a separate, non-binding shareholder vote regarding golden parachutes for named executive officers when a shareholder vote takes place on mergers, acquisitions, dispositions or other transactions that would trigger the parachute payments; (iii) provide disclosure in annual proxy materials concerning the relationship between the executive compensation paid and the financial performance of the issuer; and (iv) amend Item 402 of Regulation S-K to require companies to disclose the ratio of the Chief Executive Officer's annual total compensation to the median annual total compensation of all other employees. For certain of these changes, the implementing regulations have not been promulgated, so the full impact of the Dodd-Frank Act on public companies cannot be determined at this time.

Sarbanes-Oxley Act of 2002.  As a public company that files periodic reports with the SEC under the Exchange Act, the Company is subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), which addresses, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information. The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees. Our policies and procedures have been updated to comply with the requirements of the Sarbanes-Oxley Act.

Jumpstart Our Business Startups ("JOBS") Act. The JOBS Act was signed into law on April 5, 2012 and allows banks and bank holding companies to terminate the registration of a class of securities under Section 12(g) and Section 12(b) of the Exchange Act if such class is held of record by less than 1,200 persons, an increase from the prior 300 person threshold. The SEC issued proposed rules on August 29, 2012 and on December 18, 2014 and has also mandated rules under Title III of the JOBS Act. The Company's Board continues to evaluate the costs and advantages and disadvantages of being an SEC registered company and the affects of deregistering its shares of common stock, including among other things, the resulting decrease in the liquidity of its shares.

TAXATION

Federal Taxation

General.  The Company and the Bank report their income on a calendar year basis using the accrual method of accounting and are subject to federal income taxation in the same manner as other corporations with some exceptions, including particularly the Bank's reserve for bad debts discussed below.  The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company.

Distributions.  To the extent that the Bank makes "nondividend distributions" to the Company, these distributions will be considered to result in distributions from the balance of its bad debt reserve as of December 31, 1987 (or a lesser amount if the Bank's loan portfolio decreased since December 31, 1987) and then from the supplemental reserve for losses on loans ("Excess Distributions"), and an amount based on the Excess Distributions will be included in the Bank's taxable income.  Nondividend distributions include distributions in excess of the Bank's current and accumulated earnings and profits, distributions in redemption of stock and distributions in partial or complete liquidation.  However, dividends paid out of the Bank's current or accumulated earnings and profits, as calculated for federal income tax purposes, will not be considered to result in a distribution from the Bank's bad debt reserve.  The amount of additional taxable income created from an Excess Distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution.  Thus, if, after the Conversion, the Bank makes a "nondividend distribution," then approximately one and one-half times the Excess Distribution would be includable in gross income for federal income tax purposes, assuming a 34% corporate income tax rate (exclusive of state and local taxes).  See "Regulation - Regulation of the Bank - Dividends” for limits on the payment of dividends by the Bank.  The Bank does not intend to pay dividends that would result in a recapture of any portion of its tax bad debt reserve.

Corporate Alternative Minimum Tax.  The Code imposes a tax on alternative minimum taxable income ("AMTI") at a rate of 20%.  The excess of the tax bad debt reserve deduction using the percentage of taxable income method over the deduction that would have been allowable under the experience method is treated as a preference item for purposes of computing the AMTI.  In addition, only 90% of AMTI can be offset by net operating loss carryovers.  AMTI is increased by an amount equal to 75% of the amount by which the Bank's adjusted current earnings exceeds its AMTI (determined without regard to this preference and prior to reduction for net operating losses).  For taxable years beginning after December 31, 1986, and before January 1, 1996, an environmental tax of 0.12% of the excess of AMTI (with certain modification) over $2.0 million is imposed on corporations, including the Bank, whether or not an Alternative Minimum Tax is paid.

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Dividends-Received Deduction.  The Company may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations.  The corporate dividends-received deduction is generally 70% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank owns more than 20% of the stock of a corporation distributing a dividend, then 80% of any dividends received may be deducted.

Audits.  The Company, the Bank and its consolidated subsidiaries have been audited or their books closed without audit by the IRS with respect to consolidated federal income tax returns through March 31, 2011.  See Note 13 of the Notes to Consolidated Financial Statements contained in the Annual Report for additional information regarding income taxes.

State Taxation

South Carolina has adopted the Internal Revenue Code as it relates to commercial banks, effective for taxable years beginning after December 31, 1986.  The Bank is subject to South Carolina income tax at the rate of 4.5%.  The Bank has not been audited by the State of South Carolina during the past five years.

The Company's income tax returns have not been audited by federal or state authorities within the last five years.  For additional information regarding income taxes, see Note 13 of the Notes to Consolidated Financial Statements contained in the Annual Report.

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Item 1A. Risk Factors.

An investment in our common stock involves various risks which are particular to Security Federal Corporation, our industry, and our market area. Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with all of the other information included in this report and out filings with the SEC. In addition to the risks and uncertainties described below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, capital levels, liquidity, results of operations and prospects. The market price of our common stock could decline significantly due to any of these identified or other risks, and you could lose some or all of your investment.

Risks Related to our Business

Our business may be adversely affected by downturns in the national economy and in the economies in our market areas.

Our operations are significantly affected by the general economic conditions of the states of South Carolina and Georgia and the specific local markets in which we operate. Our entire real estate portfolio consists of loans secured by properties located in Aiken, Richland, and Lexington Counties in South Carolina and Columbia County in Georgia. A decline in the economies of these four counties in which we operate, which we consider to be our primary market area, could have a material adverse effect on our business, financial condition, results of operations, and prospects.

While real estate values and unemployment rates have recently improved, a prolonged slow economic recovery or a deterioration in economic conditions in the market areas we serve could result in the following consequences, any of which could have a materially adverse impact on our business, financial condition, results of operations:

• loan delinquencies, problem assets and foreclosures may increase;

• we may increase our allowance for loan losses;

• demand for our products and services may decline resulting in a decrease in our total loans or assets;

• collateral for loans, especially real estate, may decline in value, exposing us to increased risk of loss on existing loans, reducing customers’ borrowing power, and reducing the value of assets and collateral associated with existing loans;

• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and

• the amount of our low-cost or noninterest-bearing deposits may decrease and the composition of our deposits may be adversely affected.

A decline in local economic conditions may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are geographically diverse. If we are required to liquidate a significant amount of collateral during a period of reduced real estate values, our financial condition and profitability could be adversely affected.

Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

Lending money is a substantial part of our business and each loan carries a certain risk that it will not be repaid in accordance with its terms or that any underlying collateral will not be sufficient to assure repayment. This risk is affected by, among other things:

• cash flow of the borrower and/or the project being financed;

• the changes and uncertainties as to the future value of the collateral, in the case of a collateralized loan;

• the duration of the loan;

• the character and creditworthiness of a particular borrower; and

• changes in economic and industry conditions.

We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, which we believe is appropriate to provide for probable losses in our loan portfolio. The amount of this allowance is determined by our management through periodic reviews and consideration of several factors, including, but not limited to:

• our general reserve, based on our historical default and loss experience and certain macroeconomic factors based on management's expectations of future events;

• our specific reserve, based on our evaluation of impaired loans and their underlying collateral; and

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• an unallocated reserve to provide for other credit losses inherent in our portfolio that may not have been contemplated in the other loss factors.

The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. If our estimates are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for additions to our allowance through an increase in the provision for loan losses. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may increase our loan charge-offs and/or may otherwise require an increase in the allowance for loan losses. Our allowance for loan losses was 2.46% of total loans outstanding and 72.6% of non-performing loans at December 31, 2015. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. Moreover, if charge-offs in future periods exceed the allowance for loan losses, we may need additional provisions to replenish the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material negative effect on our financial condition, results of operations and capital. In addition, proposed regulatory changes relating to the allowance for loan losses, including, but not limited to, the Financial Accounting Standards Board’s (“FASB'”) proposed Current Expected Credit Losses Model, could significantly impact the calculation and timing of amounts required to be included in the allowance for loan losses to cover expected losses over the entire life of a loan.

If our non-performing assets increase, our earnings will be adversely affected.

At December 31, 2015, our non-performing assets (which consist of non-accruing loans and other real estate owned ("OREO")) were $11.4 million, or 1.4% of total assets. Our non-performing assets adversely affect our net income in various ways:

• we record interest income only on a cash basis for nonaccrual loans and any non-performing investment securities; we do not record interest income for OREO;

• we provide for probable loan losses through a current period charge to the provision for loan losses;

• non-interest expense increases when we write down the value of properties in our OREO portfolio to reflect changing market values or recognize other-than-temporary impairment on non-performing investment securities;

• there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees related to our OREO; and

• the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.

If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations.

Our loan portfolio includes commercial real estate loans with a higher risk of loss.

At December 31, 2015, commercial real estate loans were $200.1 million or 58.5% of our total loan portfolio. These loans typically involve higher principal amounts than other types of loans. Repayment is dependent upon income being generated from the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions. In addition, some of our commercial real estate loans are not fully amortizing and contain large balloon payments upon maturity. These balloon payments may require the borrower to either sell or refinance the underlying property in order to make the balloon payment, which may increase the risk of default or non-payment. This risk was exacerbated in the recent recession and could remain an elevated risk in the current slow recovery economic environment. These loans also generally have relatively large balances to single borrowers or related groups of borrowers. Accordingly, if we make any errors in judgment in the collectibility of our commercial real estate loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.

Included within commercial real estate loans are acquisition and development ("A&D") loans. At December 31, 2015, A&D loans were $8.6 million or 2.5% of our total loan portfolio. Also included in commercial real estate loans was $17.3 million or 5.1% of our total loan portfolio in loans for the construction of single family dwellings to builders. This type of lending contains the inherent difficulty in estimating both a property's value at completion of the project and the estimated cost (including interest) of the project. If the estimate of construction cost proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value upon completion proves to be inaccurate, we

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may be confronted at, or prior to, the maturity of the loan with a project the value of which is insufficient to assure full repayment. In addition, speculative construction loans to a builder are often associated with homes that are not pre-sold, and thus pose a greater potential risk to us than construction loans to individuals on their personal residences. Loans on land under development or held for future construction also poses additional risk because of the lack of income being produced by the property and the potential illiquid nature of the collateral. These risks can be significantly impacted by supply and demand conditions. As a result, this type of lending often involves the disbursement of substantial funds with repayment dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to independently repay principal and interest. While our origination of A&D loans have decreased significantly in recent years, we continue to have significant levels of construction loan balances. Most of our construction loans are for the construction of single family residences. Reflecting the current slowdown in the residential market, the secondary market for land and construction loans is not readily liquid, so we have less opportunity to mitigate our credit risk by selling part or all of our interest in these loans. If we foreclose on a construction loan, our holding period for the collateral typically may be longer than we have historically experienced because there are fewer potential purchasers of the collateral. The decline in the number of potential purchasers has contributed to the decline in the value of these loans. Accordingly, charge-offs on construction and land loans may be larger than those incurred by other segments of our loan portfolio.

Repayment of our commercial business loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.

At December 31, 2015, we had $12.5 million or 3.7% of our total loans in commercial business loans. Commercial business lending involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral being viewed as the primary source of repayment in the event of borrower default. Our commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The borrowers' cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories may be obsolete or of limited use, among other things. Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral provided by the borrower.

The level of our commercial real estate loan portfolio may subject us to additional regulatory scrutiny.

The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency, have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors, (i) total reported loans for construction, land acquisition and development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multi-family and non-farm residential properties, loans for construction, land acquisition and development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. The particular focus of the guidance is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. Regulatory scrutiny of commercial real estate is generally at a ratio of 300% or more. At December 31, 2015, total commercial real estate loans represented 216% of risk based capital plus the excess allowance for loan losses; however, if the Bank paid back its $22 million CDCI preferred stock, the total commercial real estate to total risk based capital plus excess allowance would increase to approximately 283%. While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us.

Declines in property values have increased loan-to-value ratios on a significant portion of our one- to four-family loans and home equity lines of credit, which exposes us to greater risk of loss.

Many of our one- to four-family loans and home equity lines of credit are secured by liens on mortgage properties in which the borrowers have little or no equity because of the declines in home values in our primary market area. Residential loans

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with high combined loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, they may be unable to repay their loans in full from the sale proceeds. Further, the majority of our home equity lines of credit consist of second mortgage loans. For those home equity lines secured by a second mortgage, it is unlikely that we will be successful in recovering all or a portion of our loan proceeds in the event of default unless we are prepared to repay the first mortgage loan and such repayment and the costs associated with a foreclosure are justified by the value of the property. For these reasons, these loans may experience higher rates of delinquencies, defaults and losses.

Our real estate lending also exposes us to the risk of environmental liabilities.

In the course of our business, we may foreclose and take title to real estate, and we could be subject to environmental liabilities with respect to these properties. We may be held liable to a governmental entity or to third persons for property damage, personal injury, investigation, and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we ever become subject to significant environmental liabilities, our business, financial condition and results of operations could be materially and adversely affected.

If our investments in real estate are not properly valued or sufficiently reserved to cover actual losses, or if we are required to increase our valuation reserves, our earnings could be reduced.

We obtain updated valuations in the form of appraisals and broker price opinions when a loan has been foreclosed upon and the property taken in as OREO, and at certain other times during the assets holding period. Our net book value in the loan at the time of foreclosure and thereafter is compared to the updated market value of the foreclosed property less estimated selling costs (fair value). A charge-off is recorded for any excess in the asset's net book value over its fair value. If our valuation process is incorrect, or if the property declines in value after foreclosure, the fair value of our investments in OREO may not be sufficient to recover our net book value in such assets, resulting in the need for additional charge-offs. Additional material charge-offs to our investments in OREO could have a material adverse effect on our financial condition and results of operations.

In addition, bank regulators periodically review our OREO and may require us to recognize further charge-offs. Significant charge-offs, as required by such regulators, may have a material adverse effect on our financial condition and results of operations.

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Our securities portfolio may be negatively impacted by fluctuations in market value and interest rates.

Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other comprehensive income and/or earnings. Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand. Our securities portfolio is evaluated for other-than-temporary impairment. If this evaluation shows impairment to the actual or projected cash flows associated with one or more securities, a potential loss to earnings may occur. Changes in interest rates can also have an adverse effect on our financial condition, as our available-for-sale securities are reported at their estimated fair value, and therefore are impacted by fluctuations in interest rates. We increase or decrease our shareholders' equity by the amount of change in the estimated fair value of the available-for-sale securities, net of taxes. There can be no assurance that the declines in market value will not result in other-than-temporary impairments of these assets, which would lead to accounting charges that could have a material adverse effect on our net income and capital levels.

Changes in interest rates may reduce our net interest income, and may result in higher defaults in a rising rate environment.

Our earnings and cash flows are largely dependent upon our net interest income.  Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve.  Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but these changes could also affect (i) our ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities and (iii) the average duration of our mortgage-backed securities portfolio and other interest-earning assets.  If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected.  As a result of the relatively low interest rate environment, an increasing percentage of our deposits have been comprised of deposits bearing no or a relatively low rate of interest. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.  In addition, a substantial amount of our loans have adjustable interest rates.  As a result, these loans may experience a higher rate of default in a rising interest rate environment.  Further, a significant portion of our adjustable rate loans have interest rate floors below which the loan's contractual interest rate may not adjust.  Approximately $125.1 million or 36.6% of our loan portfolio was comprised of adjustable or floating-rate loans at December 31, 2015, and approximately $86.3 million, or 69.0%, of those loans contained interest rate floors, below which the loans' contractual interest rate may not adjust.   At December 31, 2015, the weighted average floor interest rate of these loans was 4.69%.  At that date, approximately $70.9 million, or 82.2%, of these loans were at their floor interest rate.  The inability of our loans to adjust downward can contribute to increased income in periods of declining interest rates, although this result is subject to the risks that borrowers may refinance these loans during periods of declining interest rates.  Also, when loans are at their floors, there is a further risk that our interest income may not increase as rapidly as our cost of funds during periods of increasing interest rates which could have a material adverse effect on our results of operations.  

Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Further, a prolonged period of exceptionally low market interest rates, such as we are currently experiencing, limits our ability to lower our interest expense, while the average yield on our interest-earning assets may continue to decrease as our loans reprice or are originated at these low market rates. Accordingly, our net interest income may continue to decrease, which may have an adverse effect on our profitability. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our balance sheet or projected operating results.

Liquidity risk could impair our ability to fund operations and jeopardize our financial condition, growth and prospects.

Liquidity is essential to our business. We rely on a number of different sources in order to meet our potential liquidity demands. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our primary sources of liquidity are increases in deposits, advances, as needed, from the FHLB of Atlanta ("FHLB"), borrowings, as needed, from the Federal Reserve Bank of Atlanta ("FRB") and other borrowings to fund our operations. Although we have historically been able to replace maturing deposits and advances if desired, we may not be able to replace such funds in the future if, among other things, our financial condition, the financial condition of the FHLB or FRB, or market conditions change. Factors that could detrimentally impact our access to liquidity sources include a decrease in the level of our business activity as a result of a downturn in the South Carolina or Georgia markets where our loans are concentrated, negative operating results, or adverse regulatory action against us. Our ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the recent turmoil faced by banking organizations or deterioration in credit markets. Deposit flows, calls of investment securities and wholesale borrowings, and the prepayment of loans and mortgage-related securities are

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also strongly influenced by such external factors as the direction of interest rates, whether actual or perceived, and competition for deposits and loans in the markets we serve. Furthermore, changes to the FHLB's underwriting guidelines for wholesale borrowings or lending policies may limit or restrict our ability to borrow, and could therefore have a significant adverse impact on our liquidity. In addition, the need to replace funds in the event of large-scale withdrawals of brokered deposits could require us to pay significantly higher interest rates on retail deposits or other wholesale funding sources, which would have an adverse impact on our net interest income and net income. A decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses, or to fulfill such obligations as repaying our borrowings or meeting deposit withdrawal demands.

Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Although we consider our sources of funds adequate for our liquidity needs, we may seek additional debt in the future to achieve our long-term business objectives. Additional borrowings, if sought, may not be available to us or, if available, may not be available on reasonable terms. If additional financing sources are unavailable, or are not available on reasonable terms, our financial condition, results of operations, growth and future prospects could be materially adversely affected. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. Additionally, collateralized public funds are bank deposits of state and local municipalities. These deposits are required to be secured by certain investment grade securities to ensure repayment, which on the one hand tends to reduce our contingent liquidity risk by making these funds somewhat less credit sensitive, but on the other hand reduces standby liquidity by restricting the potential liquidity of the pledged collateral. Although these funds historically have been a relatively stable source of funds for us, availability depends on the individual municipality's fiscal policies and cash flow needs. At December 31, 2015, $11.4 million of our deposits were public funds.

We operate in a highly regulated environment and may be adversely affected by changes in federal and state laws and regulations that are expected to increase our costs of operations.

As a state-chartered, federally insured commercial bank, the Bank is currently subject to extensive examination, supervision and comprehensive regulation by the FDIC and the State Board and as a bank holding company the Company is subject to examination, supervision and regulation by the Federal Reserve. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on an institution's operations, reclassify assets, determine the adequacy of an institution's allowance for loan losses and determine the level of deposit insurance premiums assessed.

Additionally, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has significantly changed the bank regulatory structure and will affect the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently, many of the details and much of the impact of the Dodd-Frank Act may not be known for many months or years.

Certain provisions of the Dodd-Frank Act are expected to have a near term impact on us. For example, a provision of the Dodd-Frank Act eliminates the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest bearing checking accounts. Depending on competitive responses, this significant change to existing law could have an adverse impact on our interest expense.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau (the “CFPB”) with broad powers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Financial institutions such as the Bank with $10 billion or less in assets will continue to be examined for compliance with the consumer laws by their primary bank regulators but are subject to the rules of the CFPB.

In January 2013, the CFPB issued several final regulations and changes to certain consumer protections under existing laws. These final rules, most of the provisions of which (including the qualified mortgage rule) became effective January 10, 2014, generally prohibit creditors from extending mortgage loans without regard for the consumer’s ability-to-repay and add restrictions and requirements to mortgage origination and servicing practices. In addition, these rules limit prepayment penalties and require the creditor to retain evidence of compliance with the ability-to-repay requirement for three years. Compliance with these rules will likely increase our overall regulatory compliance costs and may require changes to our underwriting practices

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with respect to mortgage loans. Moreover, these rules may adversely affect the volume of mortgage loans that we underwrite and may subject us to increased potential liabilities related to such residential loan origination activities.

The Dodd-Frank Act requires minimum leverage (Tier 1) and risk-based capital requirements for bank holding companies and savings and loan holding companies that are no less stringent than those applicable to banks, which will limit our ability to borrow at the holding company level and invest the proceeds from such borrowings as capital in the Bank, and will exclude certain instruments that previously have been eligible for inclusion by bank holding companies as Tier 1 capital, such as trust preferred securities.

It is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on community banks. However, it is expected that at a minimum they will increase our operating and compliance costs, which could adversely affect key operating efficiency ratios, and could increase our interest expense. See - “Business - How We are Regulated” contained in Part I, Item I of this report.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions. During the last year, several banking institutions have received large fines for non-compliance with these laws and regulations. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.

Our growth or future losses may require us to raise additional capital in the future, but that capital may not be available when it is needed, or the cost of that capital may be very high.

We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. We anticipate that our capital resources will satisfy our capital requirements for the foreseeable future. Nonetheless, we may at some point need to raise additional capital to support continued growth or be required by our regulators to increase our capital resources.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial condition and performance. Accordingly, we may not be able to raise additional capital, if needed, on terms that are acceptable to us. If we cannot raise additional capital when needed, our operations could be materially impaired and our financial condition and liquidity could be materially and adversely affected. In addition, if we are unable to raise additional capital when required by our banking regulators, we may be subject to additional adverse regulatory action.

An increase in interest rates, change in the programs offered by governmental sponsored entities ("GSE"), or our ability to qualify for such programs may reduce our mortgage revenues, which would negatively impact our non-interest income.

Our mortgage banking operations provide a portion of our non-interest income.  We generate mortgage revenues primarily from gains on the sale of single-family mortgage loans pursuant to programs currently offered by Freddie Mac and non-GSE investors. These entities account for a substantial portion of the secondary market in residential mortgage loans. Any future changes in these programs, our eligibility to participate in such programs, the criteria for loans to be accepted or laws that significantly affect the activity of such entities could, in turn, materially adversely affect our results of operations. Mortgage banking is generally considered a volatile source of income because it depends largely on the level of loan volume which, in turn, depends largely on prevailing market interest rates. In a rising or higher interest rate environment, our originations of mortgage loans may decrease, resulting in fewer loans that are available to be sold to investors. This would result in a decrease in mortgage banking revenues and a corresponding decrease in non-interest income. In addition, our results of operations are affected by the amount of non-interest expense associated with mortgage banking activities, such as salaries and employee benefits, occupancy, equipment and data processing expense and other operating costs. During periods of reduced loan demand, our results of operations may be adversely affected to the extent that we are unable to reduce expenses commensurate with the decline in loan originations. In addition, although we sell loans into the secondary market without recourse, we are required to give customary representations and warranties about the loans to the buyers. If we breach those representations and warranties, the buyers may require us to repurchase the loans and we may incur a loss on the repurchase.

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We are subject to certain risks in connection with our use of technology.

Our security measures may not be sufficient to mitigate the risk of a cyber attack. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger and virtually all other aspects of our business. Our operations rely on the secure processing, storage, and transmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify them as circumstances warrant, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber attacks that could have a security impact. If one or more of these events occur, this could jeopardize our or our customers' confidential and other information processed and stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of our customers or counterparties. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against or not fully covered through any insurance maintained by us. We could also suffer significant reputational damage.

Security breaches in our internet banking activities could further expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures, which could result in significant legal liability and significant damage to our reputation and our business.

Our security measures may not protect us from systems failures or interruptions. While we have established policies and procedures to prevent or limit the impact of systems failures and interruptions, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, we outsource certain aspects of our data processing and other operational functions to certain third-party providers. If our third-party providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely impacted. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality asfound in our existing systems without the need to expend substantial resources, if at all. Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

We rely on dividends from Security Federal Bank for substantially all of our revenue.

Security Federal Corporation is a separate and distinct legal entity from our principal subsidiary, Security Federal Bank, and receives substantially all of its revenue in the form of dividends from that subsidiary. Accordingly, Security Federal Corporation is, and will be, dependent upon dividends from Security Federal Bank to pay dividends on Security Federal Corporation's capital stock and interest and principal on its debt. Various federal and/or state laws and regulations limit the amount of dividends that Security Federal Bank may pay to Security Federal Corporation. In the event Security Federal Bank is unable to pay dividends, Security Federal Corporation may not be able to service its debt, pay obligations or pay dividends on its capital stock. The inability of Security Federal Corporation to receive dividends from Security Federal Bank could have a material adverse effect on Security Federal Corporation’s business, financial condition and results of operations.

Our business may be adversely affected by an increasing prevalence of fraud and other financial crimes.

Our loans to businesses and individuals and our deposit relationships and related transactions are subject to exposure to the risk of loss due to fraud and other financial crimes. Nationally, reported incidents of fraud and other financial crimes have increased. We have also experienced losses due to apparent fraud and other financial crimes. While we have policies and procedures designed to prevent such losses, there can be no assurance that such losses will not occur.

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We are dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our prospects.

Competition for qualified employees and personnel in the banking industry is intense and there are a limited number of qualified persons with knowledge of, and experience in, the community banking industry where Security Federal Bank conducts its business. The process of recruiting personnel with the combination of skills and attributes required to carry out our strategies is often lengthy. Our success depends to a significant degree upon our ability to attract and retain qualified management, loan origination, finance, administrative, marketing and technical personnel and upon the continued contributions of our management and personnel. In particular, our success has been and continues to be highly dependent upon the abilities of key executives, including our Chief Executive Officer, J. Chris Verenes, and certain other employees. In addition, our success has been and continues to be highly dependent upon the services of our directors, many of whom are at or nearing retirement age, and we may not be able to identify and attract suitable candidates to replace such directors.

Item 1B. Unresolved Staff Comments

None.

Item 2.    Properties

At December 31, 2015, Security Federal owned the buildings and land for 10 of its branch offices and the operations center, leased the land and owned the improvements thereon for one of its offices, and leased the remaining five offices, including its main office.  The property related to the offices owned by Security Federal had a depreciated cost (including land) of approximately $13.0 million at December 31, 2015.  At December 31, 2015, the aggregate net book value of leasehold improvements (excluding furniture and equipment) associated with leased premises was $1.8 million.  In addition to the properties related to current Company offices, Security Federal owned five other properties at December 31, 2015.  The five properties consist of (i) three lots owned for future branch sites located in Aiken County, South Carolina; Columbia County, Georgia; and Richland County, South Carolina, which had a combined book value of $2.6 million at December 31, 2015, (ii)  another lot in Aiken County, South Carolina that will possibly be used for a new Operations Center, which had a book value of $236,000 at December 31, 2015, and (iii) a property consisting of land and a building that is located adjacent to our 1705 Whiskey Road office, is currently leased and had a book value of $267,000 at December 31, 2015.  The Company also rents the building located at 234 Richland Avenue, which is adjacent to our main office, and then subleases it to another business. See Note 5 of the Notes to Consolidated Financial Statements contained in the Annual Report.

The following table sets forth the net book value of the offices owned (including land) and leasehold improvements on properties leased by Security Federal at December 31, 2015.

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Location	Owned or Leased	Lease Expiration Date	Date Facility Opened/ Acquired	Gross Square Footage	Net Book Value
Main Office:
238 Richland Avenue, N.W.   Aiken, South Carolina	Leased	2016	2006	3,840	$	690,000
Full Service Branch Offices:
100 Laurens Street, N.W.   Aiken, South Carolina	Leased	2016	1959	3,840	690,000
1705 Whiskey Road S.   Aiken, South Carolina	Owned	N/A	1980	10,000	813,000
313 East Martintown Road   North Augusta, South Carolina	Owned	N/A	1973	4,356	727,000
1665 Richland Avenue, W.   Aiken, South Carolina	Owned	N/A	1984	1,942	137,000
Montgomery & Canal Streets   Masonic Shopping Center   Graniteville, South Carolina	Leased	2,017	1993 (1)	3,576	32,000
2812 Augusta Road   Langley, South Carolina	Owned	N/A	1993 (1)	2,509	37,000
4568 Jefferson Davis Highway   Clearwater, South Carolina	Owned	N/A	2008	2,287	1,350,000
118 Main Street North   Wagener, South Carolina	Owned	N/A	1993 (1)	3,600	99,000
1185 Sunset Boulevard   West Columbia, South Carolina	Leased	2015	2000	10,000	—
2587 Whiskey Road   Aiken, South Carolina	Owned	N/A	2006	4,000	1,220,000
5446 Sunset Boulevard   Lexington, South Carolina	Owned  (2)	N/A	2003	9,200	887,000
1900 Assembly Street Columbia, South Carolina	Leased  (3)	N/A	2007	6,000	434,000
7004 Evans Town Center Evans, Georgia	Owned	N/A	2007	18,000	3,671,000
1790 Dutch Fork Road Ballentine, South Carolina	Owned	N/A	2015	3,453	2,977,000
Operations Center:
871 East Pine Log Road   Aiken, South Carolina	Owned	N/A	1988	14,460	1,055,000

____________

(1) Represents acquisition date.

(2) Security Federal has a lease on the land for this office which expires in 2018, but has options through 2063.

(3) Security Federal has a lease on the land for this office which expires in 2027, but has options through 2047.

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Item 3.     Legal Proceedings

The Company is involved as plaintiff or defendant in various legal actions arising in the course of its business.  It is the opinion of management, after consultation with counsel, that the resolution of these legal actions will not have a material adverse effect on the Company's financial condition and results of operations.

Item 4.Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The information contained in the section captioned "Shareholders Information - Price Range of Common Stock" and " - Dividends" in the Annual Report which is incorporated herein by reference.

Stock Repurchases.  The Company had no stock repurchases of its outstanding common stock during the year ended December 31, 2015.

The Company is subject to restrictions on its ability to repurchase its common stock pursuant to the terms of the securities purchase agreement between the Company and the U.S. Treasury.  Accordingly, no shares were repurchased during the year endedDecember 31, 2015.

Equity Compensation Plan Information.  The equity compensation plan information presented under subparagraph (d) in Part III, Item 12 of this report is incorporated herein by reference.

Performance Graph.  The following graph compares the cumulative total shareholder return on the Company's Common Stock with the cumulative total return on the NASDAQ Composite Index and a peer group of the SNL All Thrift Index.  Total return assumes the reinvestment of all dividends and that the value of Common Stock and each index was $100 on December 31,2010.

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	Period Ending
Index	12/31/2010	12/31/2011	12/31/2012	12/31/2013	12/31/2014	12/31/2015
Security Federal Corporation	$100.00	$68.98	$72.44	$107.87	$164.18	$202.81
NASDAQ Composite	$100.00	$99.21	$116.82	$163.75	$188.03	$201.40
SNL Bank Index	$100.00	$84.12	$102.32	$131.30	$141.22	$158.80

Source: SNL Financial LC, Charlottesville, VA

Item 6. Selected Financial Data

The information contained in the section captioned "Selected Consolidated Financial and Other Data" in the Annual Report is incorporated herein by reference.

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Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Annual Report is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates.  Our market risk arises principally from interest rate risk inherent in our lending, investing, deposit and borrowings activities.  Management actively monitors and manages its interest rate risk exposure.  In addition to other risks that we manage in the normal course of business, such as credit quality and liquidity, management considers interest rate risk to be a significant market risk that could  potentially have a material effect on our financial condition and result of operations.  The information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations - Asset and Liability Management" in the Annual Report is incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm*

Consolidated Balance Sheets at December 31, 2015 and December 31, 2014*

Consolidated Statements of Income For the Years Ended December 31, 2015, 2014 and 2013*

Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, 2015, 2014 and 2013*

Consolidated Statements of Changes in Shareholders' Equity For the Years Ended December 31, 2015, 2014 and 2013*

Consolidated Statements of Cash Flows For the Years Ended December 31, 2015, 2014 and 2013*

Notes to Consolidated Financial Statements*

* Contained in the Annual Report filed as an exhibit hereto and incorporated herein by reference.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a)      Evaluation of Disclosure Controls and Procedures: An evaluation of the Company's disclosure controls and procedures (as defined in Section 13a-15(e) of the Securities Exchange Act of 1934 (the "Act")) was carried out under the supervision and with the participation of the Company's Chief Executive Officer, Chief Financial Officer and several other members of the Company's senior management as of the end of the period covered by this report.  The Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures as currently in effect are effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is (i) accumulated and communicated to the Company's management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

(b)      Report of Management on Internal Control over Financial Reporting:  The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2015, utilizing the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company's internal control over financial reporting as of December 31, 2015 is effective.

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles

45

generally accepted in the United States; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the Company's financial statements are prevented or timely detected.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

(c)      Changes in Internal Controls: There have been no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information contained under the section captioned "Proposal 1 - Election of Directors" in the Proxy Statement is incorporated herein by reference.

For information regarding the executive officers of the Company and the Bank, see the information contained herein under the section captioned "Item 1.  Business -  Personnel - Executive Officers of the Registrant."

Audit Committee Financial Expert.  The Audit Committee of the Company is composed of Directors Moore (Chairperson), Alexander, Clyburn, Thomas and Simmons.Each member of the Audit Committee is "independent" as defined in the Nasdaq Stock Market listing standards.  The Board of Directors has determined there is no "audit committee financial expert" as defined by the SEC.  The Board believes that the current members of the Audit Committee are qualified to serve based on their collective experience and background.  Each member of the Audit Committee is independent as that term is used in Rule 10A-3 of the Exchange Act.

Code of Ethics.  The Board of Directors has adopted a Code of Ethics for the Company's officers (including its senior financial officers), directors and employees.  The Code is applicable to the Company's principal executive officer and senior financial officers.  The Company has posted its Code of Ethics on its website www.securityfederalbank.com.

Compliance with Section 16(a) of the Exchange Act.  The information contained under the section captioned "Section 16(a) Beneficial Ownership Reporting Compliance" is included in the Company's Proxy Statement and is incorporated herein by reference.

Item 11. Executive Compensation

The information contained in the section captioned "Executive Compensation" in the Proxy Statement  is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(a) Security Ownership of Certain Beneficial Owners.

46

The information contained in the section captioned "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement  is incorporated herein by reference.

(b) Security Ownership of Management.

The information contained in the section captioned "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement  is incorporated herein by reference.

(c) Changes In Control

The Company is not aware of any arrangements, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

(d) Equity Compensation Plan Information

The following table sets forth certain information with respect to securities to be issued under the Company's equitycompensation plans as of December 31, 2015.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights	(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders:
1999 Stock Option Plan	20,500	$23.76	—
2002 Stock Option Plan	1,000	23.91	—
2006 Stock Option Plan	8,000	22.96	—
2008 Equity Incentive Plan	—	—	50,000
Equity compensation plans not approved by security holders	—	—	—
Total	29,500	$23.55	50,000

Item 13. Certain Relationships and Related Transactions, and Director Independence

Related Transactions.  The information contained in the section captioned "Meetings and Committees of the Board of Directors and Corporate Governance Matters - Corporate Governance - Related Party Transactions" in the Proxy Statement is incorporated herein by reference.

Director Independence.  The information contained in the section captioned "Meetings and Committees of the Board of Directors and Corporate Governance Matters - Corporate Governance - Director Independence" in the Proxy Statement is incorporated herein by reference.

Item 14. Principal Accounting Fees and Services

The information contained under the section captioned "Auditor" is included in the Company's Proxy Statement and is incorporated herein by reference.

47

PART IV

Item 15. Exhibits and Financial Statement Schedules

1. Financial Statements.

For a list of the financial statements filed as part of this report see Part II - Item  8.

2. Financial Statement Schedules.

All schedules have been omitted as the required information is either inapplicable or contained in the Consolidated Financial Statements or related Notes contained in the Annual Report filed as an exhibit hereto.

3.    Exhibits:

3.1	Articles of Incorporation, as amended (1)
3.2	Articles of Amendment, including Certificate of Designation relating to the Company's Fixed Rate Cumulative Perpetual Preferred Stock Series B (2)
3.3	Amended and Restated Bylaws (3)
4.1	Form of Stock Certificate of the Company and other instruments defining the rights of security holders, including indentures (4)
4.2	Form of Certificate for the Series B Preferred Shares (2)
4.3	Form of Indenture with respect to the Company's 8.0% Convertible Senior Debentures Due 2029 (5)
4.4	Specimen Convertible Senior Debenture Due 2029 (5)
4.5	Letter Agreement (including Securities Exchange Agreement B Standard Terms, attached as Exhibit A) dated September 29, 2010 between the Company and the United States Department of the Treasury (2)
4.6	Letter Agreement (including Securities Purchase Agreement B Standard Terms, attached as Exhibit A) dated September 29, 2010 between the Company and the United States Department of the Treasury (2)
10.1	1993 Salary Continuation Agreements (6)
10.2	Amendment One to 1993 Salary Continuation Agreements (7)
10.3	Form of 2006 Salary Continuation Agreement (8)
10.4	Form of Security Federal Split Dollar Agreement (8)
10.5	1999 Stock Option Plan (9)
10.6	2002 Stock Option Plan (10)
10.7	2006 Stock Option Plan (11)
10.8	2008 Equity Incentive Plan (12)
10.9	Form of incentive stock option agreement and non-qualified stock option agreement pursuant to the 2006 Stock Option Plan (11)
10.10	2004 Employee Stock Purchase Plan (13)
10.11	Incentive Compensation Plan (6)
10.12	Form of Compensation Modification Agreement (14)
13	Annual Report to Stockholders
14	Code of Ethics (15)
21	Subsidiaries of Registrant

48

23.0	Consent of Elliott Davis Decosimo, LLC
25.0	Form T-1; Statement of Eligibility of Trustee (5)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
32.0	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
99.1	Certification of Principal Executive Officer of Security Federal Corporation To Chief Compliance Officer Of The Troubled Asset Relief Program Pursuant to 31 CFR § 30.15
99.2	Certification of Principal Financial Officer of Security Federal Corporation To Chief Compliance Officer Of The Troubled Asset Relief Program Pursuant to 31 CFR § 30.15
101.0	The following materials from Security Federal Corporation's Annual Report on Form 10-K for the year ended December 31, 2014, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income (Loss); (4) Consolidated Statements of Changes in Shareholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements

___________

(1) Filed on June 26, 1998, as an exhibit to the Company's Proxy Statement and incorporated herein by reference.

(2) Incorporated by reference to the Registrant's Current Report on Form 8-K filed on September 30, 2010.

(3) Incorporated herein by reference to the Registrant's Current Report on Form 8-K filed on January 16, 2015.

(4) Filed on August 12, 1987, as an exhibit to the Company's Registration Statement on Form 8-A and incorporated herein by reference.

(5) Filed on July 13, 2009 as an exhibit to the Company's Registration Statement on Form S-1 (File No. 333-160553) and incorporated herein by reference.

(6) Filed on June 28, 1993, as an exhibit to the Company's Annual Report on Form 10-KSB and incorporated herein by reference.

(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1993 and incorporated herein by reference.

(8) Filed on May 24, 2006 as an exhibit to the Company's Current Report on Form 8-K dated May 18, 2006 and incorporated herein by reference.

(9) Filed on March 2, 2000, as an exhibit to the Company's Registration Statement on Form S-8 (Registration Statement No. 333-31500) and incorporated herein by reference

(10) Filed on January 3, 2003, as an exhibit to the Company's Registration Statement on Form S-8 (Registration Statement No. 333-102337) and incorporated herein by reference.

(11) Filed on August 22, 2006, as an exhibit to the Company's Registration Statement on Form S-8 (Registration Statement No. 333-136813) and incorporated herein by reference.

(12) Filed on November 12, 2008, as an exhibit to the Company's Registration Statement on Form S-8 (Registration Statement No. 333-155295) and incorporated herein by reference.

(13) Filed on June 18, 2004, as an exhibit to the Company's Proxy Statement and incorporated herein by reference.

(14) Filed as an exhibit to the Company's Current Report on Form 8-K filed on December 23, 2008.

(15) Filed on June 29, 2006, as an exhibit to the Company's Annual Report on Form 10-K and incorporated herein by  reference.

49

SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SECURITY FEDERAL CORPORATION

Date:  March 21, 2016	/s/ J. Chris Verenes
	J. Chris Verenes
	Chief Executive Officer and Director
	(Duly Authorized Representative)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ J. Chris Verenes	March 21, 2016
	J. Chris Verenes
	Chief Executive Officer and Director
	(Principal Executive Officer)

By:	/s/Jessica T. Cummins	March 21, 2016
	Jessica T. Cummins
	Chief  Financial Officer
	(Principal Financial and Accounting Officer)

By:	/s/Roy G. Lindburg	March 21, 2016
	Roy G. Lindburg
	President and Director

By:	/s/Richard T. Harmon	March 21, 2016
	Richard T. Harmon
	Director and President of Security Federal Bank

By:	/s/Timothy W. Simmons	March 21, 2016
	Timothy W. Simmons
	Chairman of the Board and Director

By:	/s/Frank M. Thomas, Jr.	March 21, 2016
	Frank M. Thomas, Jr.
	Director

By:	/s/Gasper L. Toole III	March 21, 2016
	Gasper L. Toole III
	Director

50

By:	/s/Robert E. Alexander	March 21, 2016
	Robert E. Alexander
	Director

By:	/s/Thomas L. Moore	March 21, 2016
	Thomas L. Moore
	Director

By:	/s/William Clyburn	March 21, 2016
	William Clyburn
	Director

By:	/s/Harry O. Weeks, Jr.	March 21, 2016
	Harry O. Weeks, Jr.
	Director

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INDEX TO EXHIBITS

Exhibit Number

13	Annual Report to Stockholders
21	Subsidiaries of the Registrant
23	Consent of Elliott Davis Decosimo, LLC
31.1	Certification of Chief Executive Officer of Security Federal Corporation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer of Security Federal Corporation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer of Security Federal Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act
99.1	Certification of Principal Executive Officer of Security Federal Corporation To Chief Compliance Officer of the Troubled Asset Relief Program Pursuant to 31 CFR §30.15
99.2	Certification of Principal Financial Officer of Security Federal Corporation To Chief Compliance Officer of the Troubled Asset Relief Program Pursuant to 31 CFR §30.15
101	The following materials from Security Federal Corporation's Annual Report on Form 10-K for the year ended December 31, 2015, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income (Loss); (4) Consolidated Statements of Changes in Shareholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements

52

EX-13

Exhibit 13

Annual Report to Stockholders

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Selected Consolidated Financial and Other Data

The following table provides selected consolidated financial and operating data of Security Federal Corporation at the dates and for the periods indicated. In conjunction with the data provided in the following tables and in order to more fully understand our historical consolidated financial and operating data, you should also read our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the accompanying notes included in this report.

	At Or For The Year Ended December 31,						At Or For The Nine Months Ended December 31,		At Or For The Year Ended March 31,
	2015		2014		2013		2012		2012
Balance Sheet Data	(Dollars In Thousands, Except Per Share Data)
Total Assets	$	799,728	$	825,364	$	849,248	$	890,355	$	924,637
Cash And Cash Equivalents	8,382		10,193		7,630		7,904		9,331
Certificates Of Deposit With Other Banks	3,445		2,095		2,100		1,729		1,727
Investment And Mortgage-Backed Securities	405,387		429,701		431,003		430,988		421,631
Total Loans Receivable, Net (1)	330,573		339,874		358,917		397,706		428,511
Deposits	652,097		660,115		658,697		676,339		696,201
Advances From Federal Home Loan Bank	34,640		52,900		87,740		105,257		122,070
Total Shareholders' Equity	90,967		87,435		77,990		82,592		80,772
Income Data
Total Interest Income	$	27,906	$	29,482	$	30,447	$	24,791	$	38,529
Total Interest Expense	4,199		5,813		7,533		7,460		12,397
Net Interest Income	23,707		23,669		22,914		17,331		26,132
Provision For Loan Losses	—		450		2,645		1,975		8,650
Net Interest Income After Provision For Loan Losses	23,707		23,219		20,269		15,356		17,482
Non-Interest Income	7,007		6,163		6,896		4,365		6,942
Non-Interest Expense	22,531		21,268		22,033		17,062		20,717
Income Taxes	2,067		2,303		1,341		704		1,912
Net Income	6,116		5,811		3,791		1,955		1,795
Preferred Stock Dividends	440		440		440		330		440
Net Income Available To Common Shareholders	$	5,676	$	5,371	$	3,351	$	1,625	$	1,355
Per Common Share Data
Net Income Per Common Share (Basic)	$	1.93	$	1.82	$	1.14	$	0.55	$	0.46
Cash Dividends	$	0.32	$	0.32	$	0.32	$	0.24	$	0.32

^{(1)INCLUDES LOANS HELD FOR SALE.} 

7

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Selected Consolidated Financial and Other Data

	At Or For The Year Ended December 31,						At Or For The Nine Months Ended December 31,		At Or For The Year Ended March 31,
	2015		2014		2013		2012		2012
Other Data
Interest Rate Spread Information:
Average During Period (4)	3.15	%	2.98	%	2.81	%	2.70	%	2.98	%
End Of Period	3.15	%	3.06	%	3.19	%	3.16	%	3.30	%
Net Interest Margin (Net Interest Income/Average Earning Assets) (4)	3.23	%	3.08	%	2.91	%	2.80	%	3.09	%
Average Interest-Earning Assets To Average Interest-Bearing Liabilities	114.60	%	113.01	%	110.71	%	108.08	%	107.08	%
Common Equity To Total Assets	8.62	%	7.93	%	6.59	%	6.81	%	6.36	%
Non-Performing Assets To Total Assets (2)	1.42	%	2.06	%	1.64	%	2.83	%	3.98	%
Return On Assets (Ratio Of Net Income To Average Total Assets) (4)	0.69	%	0.64	%	0.38	%	0.24	%	0.15	%
Return On Common Equity (Ratio Of Net Income To Average Common Equity) (4)	8.46	%	8.72	%	5.79	%	3.62	%	2.35	%
Common Equity To Assets Ratio (Ratio Of Average Common  Equity To Average Total Assets)	8.17	%	7.28	%	6.64	%	6.69	%	6.22	%
Dividend Pay-Out Ratio On Common Shares(3)	16.61	%	17.54	%	28.11	%	43.48	%	69.50	%
Number Of Full-Service Offices	14		13		13		13		13

^{(2)NON-PERFORMING ASSETS CONSIST OF NON-ACCRUAL LOANS AND OTHER REAL ESTATE OWNED ("OREO")} 

^{(3)       RATIO OF DIVIDENDS PAID ON COMMON SHARES TO NET INCOME AVAILABLE TO COMMON SHAREHOLDERS} 

^{(4) ANNUALIZED FOR THE NINE MONTH TRANSITION PERIOD ENDED DECEMBER 31, 2012.}  

8

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion and analysis is presented to provide the reader with an understanding of the financial condition and the results of operations of Security Federal Corporation and its subsidiaries.  The investment and other activities of the parent company, Security Federal Corporation (the “Company”), have had no significant impact on the results of operations for the periods presented in the Consolidated Financial Statements included herein.  The information presented in the following discussion of financial results is indicative of the activities of Security Federal Bank (“Bank”), a wholly owned subsidiary of the Company.  The Bank was founded in 1922 as a mutual building and loan association. In 1987, the Bank converted to a federally chartered stock savings bank. On December 28, 2011, the Bank completed a charter conversion from a federally chartered stock savings bank to a South Carolina chartered commercial bank. In connection with this transaction, the Company reorganized from a savings and loan holding company into a bank holding company.

As a result of the Company's reorganization, in order to better align the financial reporting periods for the Company and the Bank with regulatory reporting periods, the Company elected to change its fiscal year end from March 31 to December 31. This change was effective for the reporting period ended December 31, 2012, and as a result, the Company filed a transition period annual report on Form 10-KT with the Securities and Exchange Commission for the nine month period ended December 31, 2012.

The Bank also has two wholly owned subsidiaries: Security Federal Insurance Inc. (“SFINS”) and Security Financial Services Corporation (“SFSC”).  SFINS was formed in the fiscal year ended March 31, 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, health, and home insurance. SFINS has a wholly owned subsidiary, Collier Jennings Financial Corporation (“Collier Jennings”), which has three wholly owned 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 was formed in 1975 and is currently inactive.

In addition to the Bank, Security Federal Corporation has another wholly owned subsidiary, Security Federal Statutory Trust (the “Trust”), which issued and sold fixed and floating rate capital securities of the Trust. Under current accounting guidance, however, the Trust is not consolidated in the Company’s financial statements.  Unless the context indicates otherwise, references to the Company shall include the Bank and its subsidiaries.

The principal business of the Bank is accepting deposits from the general public and originating consumer and commercial business loans as well as mortgage loans that enable borrowers to purchase or refinance one-to-four family residential real estate.  The Bank also originates construction loans on single-family residences, multi-family dwellings and projects, and commercial real estate, as well as loans for the acquisition, development and construction of residential subdivisions, and commercial projects. The Bank also provides trust services and it offers property, casualty and life insurance products through its subsidiary, Security Federal Insurance.

The Bank's net income is dependent on its interest rate spread which is the difference between the average yield earned on its loan and investment portfolios and the average rate paid on its deposits and borrowings.  The Bank’s interest spread is influenced by interest rates, deposit flows, and loan demands.  Levels of non-interest income and operating expense are also significant factors in earnings.

9

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This document, including information included or incorporated by reference, contents, and future filings by the Company on Form 10-K, Form 10-Q, and Form 8-K, and future oral and written statements by the Company and its management may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements relate to our financial condition, results of operations, plans, objectives, future performance or business. Forward-looking statements are not statements of historical fact, are based on certain assumptions and are generally identified by use of the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, assumptions and statements about, among other things, expectations of the business environment in which we operate, projections of future performance and operations or financial condition, perceived opportunities in the market, potential future credit experience, and statements regarding our mission and vision. These forward-looking statements are based upon current management's expectations and may, therefore, involve risk and uncertainties. Our actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors, including, but not limited to:

• the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be affected by deterioration in the housing and commercial real estate markets which may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves;

• changes in general economic conditions, either nationally or in our market areas;

• changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;

• fluctuations in the demand for loans, the number of unsold homes, land and other properties and fluctuations in real estate values in our market areas;

• secondary market conditions for loans and our ability to sell loans in the secondary market;

• results of examinations of the Company by the Board of Governors of the Federal Reserve System ("Federal Reserve") and our bank subsidiary by the Federal Deposit Insurance Corporation ("FDIC") and the South Carolina State Board of Financial Institutions, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements or restrictions on us, any of which could adversely affect our liquidity and earnings;

• legislative or regulatory changes that adversely affect our business, or increase capital requirements, including the effect of the Dodd-Frank Wall Street Reform and Consumer Protection Act; changes in regulatory policies and principles, or the interpretation of regulatory capital requirements or other rules, including as a result of Basel III; and any changes in rules affecting our ability to comply with the requirements of the U. S. Department of Treasury Community Development Capital Initiative;

• our ability to attract and retain deposits;

• increases in premiums for deposit insurance;

• our ability to control operating costs and expenses;

• our ability to implement our business strategies;

• the use of estimates in determining the fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;

• difficulties in reducing risk associated with the loans on our balance sheet;

• staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges;

• computer systems on which we depend could fail or experience a security breach;

• our ability to retain key members of our senior management team;

• costs and effects of litigation, including settlements and judgments;

• our ability to manage loan delinquency rates;

10

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

• increased competitive pressures among financial services companies;

• changes in consumer spending, borrowing and savings habits;

• the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;

• our ability to pay dividends on our common stock and preferred stock;

• adverse changes in the securities markets;

• inability of key third-party providers to perform their obligations to us;

• changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board ("FASB"), including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; and

• other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere in this document.

Some of these and other factors are discussed in our Annual Report on Form 10-K for the year ended December 31, 2015 under Item 1A, “Risk Factors.” Such developments could have an adverse impact on our financial position and our results of operations.

Any of the forward-looking statements that we make may turn out to be wrong because of the inaccurate assumptions we might make because of the factors set forth above or because of other factors we cannot foresee. Because of these and other uncertainties, our actual future results may be materially different from those expressed in any forward-looking statements made by or on our behalf. Therefore, these factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. We undertake no responsibility to update or revise any of these forward-looking statements.

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 the Company’s consolidated financial statements.  The significant accounting policies of the Company are described in Note 1 of the Notes to the Consolidated Financial Statements included herein.

Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities; management considers these accounting policies to be critical accounting policies.  The judgments and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances.  Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company.

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 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.

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 bank regulatory agencies that may require adjustments to the allowance based upon the information that is available at the time of their examination. For a further discussion of the Company’s estimation process and methodology related to the allowance for loan losses, see the discussion under the section entitled “Financial Condition” and “Comparison of the Years Ended December 31, 2015 and 2014-Provision for Loan Losses” included herein.

11

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company values an impaired loan 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.  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. 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.

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 the Company 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.

Asset and Liability Management

The Bank’s program of asset and liability management seeks to limit the Bank’s vulnerability to material and prolonged increases or decreases in interest rates, or "interest rate risk."  The principal determinant of the exposure of the Bank's earnings to interest rate risk is the timing difference (“gap”) between the repricing or maturity of the Bank's interest-earning assets and the repricing or maturity of its interest-bearing liabilities.  If the maturities of the Bank's assets and liabilities were perfectly matched and the interest rates borne by its assets and liabilities were equally flexible and moved concurrently (neither of which is the case), the impact on net interest income of any material and prolonged changes in interest rates would be minimal.

A positive gap position generally has an adverse effect on net interest income during periods of falling interest rates.  A positive one-year gap position occurs when the dollar amount of rate sensitive assets maturing or repricing within one year exceeds the dollar amount of rate sensitive liabilities maturing or repricing during that same one-year period.  As a result, in a period of falling interest rates, the interest received on interest-earning assets will decrease faster than the interest paid on interest-bearing liabilities, causing a decrease in net interest income.  During periods of rising interest rates, the interest received on interest-earning assets will increase faster than interest paid on interest-bearing liabilities, thus increasing net interest income.

A negative gap position generally has an adverse effect on net interest income during periods of rising interest rates.  A negative one-year gap position occurs when the dollar amount of rate sensitive liabilities maturing or repricing within one year exceeds the dollar amount of rate sensitive assets maturing or repricing during that same period.  As a result, during periods of rising interest rates, the interest paid on interest-bearing liabilities will increase faster than interest received from interest-earning assets, thus reducing net interest income.  The reverse is true in periods of declining interest rates, as discussed above, which generally results in an increase in net interest income.

At December 31, 2015 and 2014, the Bank's one-year gap position was a positive mismatch. At December 31, 2015, assets repricing exceeded liabilities repricing within one year by $36.6 million or 4.9% of total interest earning assets. At December 31, 2014, assets repricing exceeded liabilities repricing within one year by $46.5 million or 5.9% of total interest earning assets.  For more information on the Bank’s repricing position at December 31, 2015, see the tables on pages 14 and 15.

12

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

During the year ended December 31, 2015, Bank originated, for investment purposes, $14.3 million in adjustable rate residential real estate loans (“ARMs”). The Bank’s loan portfolio included $125.1 million of adjustable rate consumer loans, commercial loans, and mortgage loans or 36.6% of total loans at December 31, 2015. During the year ended December 31, 2015, the Bank originated $141.8 million in new and renewed consumer and commercial loans, which are usually short term in nature.  The Bank's portfolio of consumer and commercial loans was $263.0 million at December 31, 2015, $270.5 million at December 31, 2014, and $288.4 million at December 31, 2013. Consumer and commercial loans combined were 76.9% of total loans at December 31, 2015 and 77.4% of total loans at both December 31, 2014 and 2013.

At December 31, 2015, the Bank held approximately $11.7 million in longer term fixed rate residential mortgage loans. Typically, long term, newly originated fixed rate mortgage loans are not retained in the portfolio but are sold immediately. ARMs are typically retained in the portfolio.

Fixed rate residential loans sold to institutional investors, on a service-released basis totaled $24.2 million during the year ended December 31, 2015, $23.6 million during the year ended December 31, 2014 and $33.1 million during the year ended December 31, 2013. The Bank sells all its fixed rate mortgage loans on a service-released basis.

Certificates of deposit of $100,000 or more, referred to as “Jumbo Certificates,” are normally considered to be interest rate sensitive because of their relatively short maturities.  At December 31, 2015, the Bank had $132.0 million outstanding in Jumbo Certificates compared to $140.0 million at December 31, 2014.  Brokered deposits totaled $42.5 million at December 31, 2015 compared to $38.8 million at December 31, 2014. The majority of the Bank’s deposits are originated within the Bank’s immediate market area.

The following table sets forth the maturity schedule of certificates of deposit with balances of $100,000 or greater at December 31, 2015:

	(In Thousands)
Within 3 Months	$	24,356
After 3 Months, Within 6 Months	19,795
After 6 Months, Within 12 Months	29,449
After 12 Months	58,412
	$	132,012

13

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following table sets forth the Bank’s interest-bearing liabilities and interest-earning assets repricing or maturing within one year.  The table on the following page presents the Bank's entire interest-bearing liabilities and interest-earning assets into repricing or maturity time periods. Both tables present adjustable rate loans in the periods they are scheduled to reprice and fixed rate loans are shown in the time frame of corresponding principal amortization schedules.  Adjustable and fixed rate loans are also adjusted for the Company’s estimates of pre-payments.  Mortgage-backed securities are shown at repricing dates, but also include prepayment estimates.  Both tables also assume that investments reprice at the earlier of maturity; the likely call date, if any, based on current interest rates; or the next scheduled interest rate change, if any.  NOW accounts are assumed to have a decay rate of 20% the first year, money market accounts are assumed to have a decay rate of 65% the first year, and statement savings accounts are assumed to have a decay rate of 20% the first year.  The balance, for all three products, is deemed to reprice in the one to three year category.  Callable fixed rate Federal Home Loan Bank (“FHLB”) advances are included in borrowings, and are deemed to mature at the expected call date or maturity, based on the stated interest rate of the advance and current market rates.  Junior subordinated debentures are shown at their repricing date or call date.

	At December 31,
	2015			2014
	(Dollars In Thousands)
Loans (1)	$	188,160		$	188,034
Mortgage-Backed Securities:
Available For Sale, At Fair Value	94,426			105,128
Held To Maturity, At Cost	2,936			—
Investment Securities:
Available For Sale, At Fair Value	90,154			94,862
Other Interest-Earning Assets And FHLB Stock	4,800			5,497
Total Interest Rate Sensitive Assets Repricing Within 1 Year	$	380,476		$	393,521
Deposits	$	315,571		$	318,368
FHLB Advances And Other Borrowed Money	28,307			28,678
Total Interest Rate Sensitive Liabilities Repricing Within 1 Year	$	343,878		$	347,046
Gap	$	36,598		$	46,475
Interest Rate Sensitive Assets/Interest Rate Sensitive Liabilities	110.6		%	113.4		%
Gap As A Percent Of Total Interest-Earning Assets	4.9		%	5.9		%

^{(1)  LOANS ARE  NET OF UNDISBURSED FUNDS AND LOANS IN PROCESS.}

14

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following table sets forth the interest rate sensitivity of the Bank's assets and liabilities at December 31, 2015, on the basis of the factors and assumptions set forth in the table on the previous page.

	Three Months Or Less			Over 3 –12 Months			Over 1 – 3 Years			Over 3 – 5 Years			Over 5 – 10 Years			Over  10 Years			Total
	(Dollars In Thousands)
Interest-Earnings Assets
Loans (1)	$	96,342		$	91,818		$	71,470		$	52,632		$	14,952		$	11,696		$	338,910
Mortgage-Backed Securities:
Held To Maturity, At Cost	818			2,118			3,678			1,983			2,839			18,437			29,873
Available For Sale, At Fair Value	78,452			15,974			13,996			9,694			21,970			42,711			182,797
Investment Securities:
Available For Sale, At Fair Value	86,350			3,804			6,960			5,588			80,240			9,775			192,717
FHLB Stock, At Cost	—			2,215			—			—			—			—			2,215
Other Interest-Earning Assets	490			2,095			1,350			—			—			—			3,935
Total Interest-Earning Assets	$	262,452		$	118,024		$	97,454		$	69,897		$	120,001		$	82,619		$	750,447
Interest-Bearing Liabilities
Deposits:
Certificate Accounts	$	49,293		$	92,093		$	79,162		$	15,574		$	—		$	—		$	236,122
NOW Accounts	4,771			14,314			76,342			—			—			—			95,427
Money Market Accounts	36,643			112,218			80,156			—			—			—			229,017
Statement Savings Accounts	1,560			4,679			24,953			—			—			—			31,192
Borrowings (2)	23,307			5,000			17,900			—			—			6,084			52,291
Total Interest-Bearing   Liabilities	$	115,574		$	228,304		$	278,513		$	15,574		$	—		$	6,084		$	644,049
Current Period Gap	$	146,878		$	(110,280	)	$	(181,059	)	$	54,323		$	120,001		$	76,535		$	106,398
Cumulative Gap	$	146,878		$	36,598		$	(144,461	)	$	(90,138	)	$	29,863		$	106,398		$	106,398
Cumulative Gap As A Percent Of Total Interest-Earning Assets	19.6		%	4.9		%	(19.2		)%	(12.0		)%	4.0		%	14.2		%	14.2		%

^{(1)  LOANS INCLUDE LOANS HELD FOR SALE AND ARE NET OF UNDISBURSED FUNDS AND LOANS IN PROCESS.} 

^{(2)  CALLABLE SECURITIES AND FHLB ADVANCES ARE SHOWN AT THEIR LIKELY CALL DATES BASED ON MANAGEMENT’S ESTIMATES AT DECEMBER 31, 2015.} 

In evaluating the Bank's exposure to interest rate risk, certain shortcomings inherent in the method of analysis presented in the foregoing tables are considered.  For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates.  Additionally, the interest rates of certain types of assets and liabilities may fluctuate in advance of changes in market interest rates.  Loan repayment rates and withdrawals of deposits will likely differ substantially from the assumed rates previously set forth in the event of significant changes in interest rates due to the option of borrowers to prepay their loans and the ability of depositors to withdraw funds prior to maturity.  Further, certain assets, such as ARMs, have features that restrict changes in interest rates on a short-term basis as well as over the life of the asset.

15

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Financial Condition

Total assets at December 31, 2015 were $799.7 million, a decrease of $25.6 million or 3.1% from $825.4 million at December 31, 2014.  This decrease was primarily the result of a decrease in investments and net loans receivable.

Cash and cash equivalents decreased $1.8 million or 17.8% to $8.4 million at December 31, 2015 compared to $10.2 million at December 31, 2014.  Total investments and mortgage-backed securities available for sale decreased $54.2 million or 12.6% to $375.5 million at December 31, 2015 from $429.7 million at December 31, 2014. This decrease was due to the sale of 56 available for sale investment securities combined with the transfer of 22 mortgage-backed securities from the Bank's available for sale portfolio to its held to maturity portfolio during the year ended December 31, 2015. As a result, investment and mortgage-backed securities held to maturity had a balance of $29.9 million at December 31, 2015 compared to no balance at December 31, 2014.

Total net loans receivable were $330.6 million at December 31, 2015, a decrease of $9.3 million or 2.7% from $339.9 million at December 31, 2014.  This decrease was the result of increased loan repayments on commercial real estate loans combined with lower loan demand and increased competition. Residential real estate loans held for investment decreased $910,000 or 1.2% from $77.3 million at December 31, 2014 to $76.4 million at December 31, 2015.   Typically, long term, newly originated fixed rate mortgage loans are not retained in the portfolio but are sold immediately.  ARMs are typically retained in the portfolio.  At December 31, 2015, the Bank held 82.0% of its residential mortgage loans in ARMs, while it had 18.0% in fixed rate residential mortgage loans.  Consumer loans remained flat with a balance of $50.4 million at December 31, 2015 and 2014. Commercial business loans increased $1.9 million or 18.5% to $12.5 million at December 31, 2015 from $10.6 million at December 31, 2014 while commercial real estate loans decreased $9.4 million or 4.5% to $200.1 million at December 31, 2015 from $209.5 million at December 31, 2014.  Loans held for sale, which were $2.5 million at December 31, 2015, increased $598,000 or 32.0% from $1.9 million at December 31, 2014.

Premises and equipment increased $1.9 million or 10.3% to $20.1 million at December 31, 2015 compared to $18.2 million at December 31, 2014. The increase was due to the construction of the Bank's newest full-service branch in Ballentine, South Carolina which opened in December 2015.

The cash value of Bank Owned Life Insurance (“BOLI”) increased $5.4 million or 48.6% to $16.6 million at December 31, 2015 compared to $11.2 million at December 31, 2014. The increase is due to $5.0 million in premiums paid for the purchase of 27 new policies combined with $423,000 in BOLI income during the year ended December 31, 2015. There were no redemptions of BOLI during the year ended December 31, 2015.  BOLI, which earns tax-free yields, is utilized to partially offset the cost of the Company’s employee benefits programs and to provide key person insurance on certain officers of the Company.

16

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

The Company’s non-performing assets decreased $5.6 million or 32.9% to $11.4 million at December 31, 2015 from $17.0 million at December 31, 2014. The following table sets forth detailed information concerning our non-performing assets for the periods indicated:

	At December 31, 2015					At December 31, 2014					$ Increase			% Increase
	Amount			Percent (1)		Amount			Percent (1)		(Decrease)			(Decrease)
Loans 90 Days Or More Past Due Or Non-Accrual Loans:
Residential Real Estate	$	3,306,675		1.0	%	$	3,061,339		0.9	%	$	245,336		8.0	%
Commercial Business	178,076			0.1		246,977			0.1		(68,901		)	(27.9	)
Commercial Real Estate	2,973,135			0.8		9,859,689			2.8		(6,886,554		)	(69.8	)
Consumer	575,866			0.2		573,644			0.2		2,222			0.4
Total Non-Performing Loans	7,033,752			2.1	%	13,741,649			4.0	%	(6,707,897		)	(48.8	)%
Other Non-Performing Assets:
OREO	4,361,411			1.3		3,229,710			0.9		1,131,701			35.0
Total Other Non-Performing Assets	4,361,411			1.3	%	3,229,710			0.9	%	1,131,701			35.0	%
Total Non-Performing Assets	$	11,395,163		3.4	%	$	16,971,359		4.9	%	$	(5,576,196	)	(32.9	)%
Total Non-Performing Assets As A Percentage Of Total Assets	1.4		%			2.1		%

^{(1) PERCENT OF GROSS LOANS RECEIVABLE HELD FOR INVESTMENT, NET OF DEFERRED FEES AND LOANS IN PROCESS}  

The decrease in non-performing assets was primarily concentrated in non-performing commercial real estate loans, which decreased $6.9 million or 69.8% to $3.0 million at December 31, 2015 from $9.9 million at December 31, 2014. The balance in non-performing commercial real estate loans at December 31, 2015 consisted of 17 loans to 14 borrowers with an average loan balance of $175,000. At December 31, 2014, the balance in non-performing commercial real estate loans consisted of 46 loans to 28 borrowers with an average loan balance of $214,000. Of the non-performing commercial real estate loans, $1.6 million consisted of 11 loans secured by commercial buildings or first mortgages on principal residences throughout the Bank's market area to nine different borrowers. These loans, even though secured by principal residences, are considered commercial real estate because they were business purpose loans. The remaining non-performing commercial real estate loans at December 31, 2015 consisted of $314,000 for one loan related to the acquisition and development of a subdivision; $219,000 for one loan secured by builder lots; $160,000 for two loans secured by raw land to two separate borrowers; and $642,000 for two loans secured by a church building to one borrower. At December 31, 2015, our largest non-performing commercial real estate loan was $530,000 and was secured by a church building.

Non-performing residential real estate loans increased $245,000 or 8.0% to $3.3 million at December 31, 2015 from $3.1 million at December 31, 2014. The balance in non-performing residential real estate loans at December 31, 2015 consisted of 24 loans to 24 borrowers with an average loan balance of $138,000, the largest of which was $386,000. The balance in non-performing residential real estate loans at December 31, 2014 consisted of 27 loans to 27 borrowers with an average loan balance of $113,000, the largest of which was $415,000.

OREO increased $1.1 million or 35.0% to $4.4 million at December 31, 2015 compared to $3.2 million at December 31, 2014. At December 31, 2015, the balance of OREO consisted of the following real estate properties: seven single-family residences and 29 lots within residential subdivisions located throughout our market area in South Carolina and Georgia; eight lots within a subdivision and the adjacent 22.96 acres of land in Aiken, South Carolina; nine parcels of commercial land; two commercial buildings in Aiken, South Carolina; and 34.8 acres of land in Bluffton, South Carolina.

17

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

FHLB stock decreased $930,000 or 29.6% to $2.2 million at December 31, 2015 compared to $3.1 million at December 31, 2014 as a result of stock redemptions by the FHLB of Atlanta. The Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to a membership component, which is 0.09% of total assets plus a transaction component which equals 4.25% of outstanding advances (borrowings) from the FHLB of Atlanta. As total assets and total advances have decreased, so has the Bank’s required investment in FHLB stock.

Other assets increased $969,000 or 27.8% to $4.4 million at December 31, 2015 compared to $3.5 million at December 31, 2014 primarily due to a $702,000 increase in principal payments receivable from investment securities combined with a $327,000 increase in net deferred tax assets. The unrealized gain on investment securities available for sale decreased $2.5 million during the year ended December 31, 2015 as a result of an increase in market rates. The majority of the increase in net deferred tax assets represents the tax impact of this change.

The Bank reviews its loan portfolio and allowance for loan losses on a monthly basis.  Future additions to the Bank's allowance for loan losses are dependent on, among other things, the performance of the Bank's loan portfolio, the economy, changes in real estate values, and interest rates.  There can be no assurance that additions to the allowance will not be required in future periods. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for loan losses, we will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations. Management continually monitors its loan portfolio for the impact of local economic changes.  The ratio of the allowance for loan losses to totalloans was 2.46% and 2.41% at December 31, 2015 and 2014, respectively. The Bank closely monitors its past due loans.

The cumulative interest not accrued during the years ended December 31, 2015 and 2014 relating to all non-performing loans totaled $679,000 and $920,000, respectively. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the underlying 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 balance of loans in troubled debt restructurings (“TDRs”) decreased $2.9 million or 30.3% during the year ended December 31, 2015. The Bank had 16 loans that were TDRs totaling $6.7 million at December 31, 2015 compared to 18 loans that were TDRs totaling $9.6 million at December 31, 2014. The 16 loans that were TDRs consisted of one consumer loan secured by a first mortgage on a residential dwelling and two automobiles totaling $63,000; one unsecured consumer loan totaling $26,000; and 14 commercial real estate loans to 10 separate borrowers, the largest of which had a balance of $2.5 million at December 31, 2015. The commercial real estate loans were secured primarily by first mortgages on six single family residences, two lots, one commercial building, two hotels, three churches and five parcels of land. At December 31, 2015, six of the TDRs to five borrowers totaling $2.4 million were non-accruing. All TDRs are reviewed for impairment loss.  At December 31, 2015, the Bank held $12.6 million in impaired loans, including $6.7 million in TDRs, compared to $20.2 million in impaired loans, including $9.6 million in TDRs, at December 31, 2014.

In July 2006, the Company acquired Collier Jennings Financial Corporation, an insurance agency specializing in consumer automobile insurance and premium financing. The resulting goodwill from the acquisition was $1.2 million at December 31, 2015 and 2014 with no other intangibles recorded at those dates. Collier Jennings now operates as a subsidiary of Security Federal Insurance Inc., a subsidiary of the Bank.

18

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Deposits at the Bank decreased $8.0 million or 1.2% to $652.1 million at December 31, 2015 from $660.1 million at December 31, 2014. The Bank had brokered time deposits of $42.5 million at December 31, 2015 compared to $38.8 million at December 31, 2014. The Bank uses brokered time deposits as a tool to manage interest rate risk. These deposits can be obtained relatively easily and in bulk at rates typically only slightly higher than those in our market areas. In addition, a portion of these brokered time deposits give the Bank a call option that allows the Bank the choice to redeem them early should rates change. Total deposits at December 31, 2015, excluding brokered time deposits, decreased $11.7 million or 1.9% to $609.6 million from $621.3 million at December 31, 2014. Brokered time deposits were 6.5% of total deposits at December 31, 2015 and 5.9% of total deposits at December 31, 2014.

Advances from the FHLB decreased $18.3 million or 34.5% to $34.6 million at December 31, 2015 from $52.9 million at December 31, 2014 due to prepayments and maturities. During the years ended December 31, 2015 and 2014, as part of the Company's strategy to lower its cost of funds, management elected to prepay $15.0 million and $5.0 million, respectively, in higher rate FHLB advances.

Other borrowed money decreased $2.1 million or 24.8% to $6.4 million at December 31, 2015 from $8.5 million at December 31, 2014.  These borrowings consist of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. The repurchase agreements typically mature within one to three days and the interest rate paid on these borrowings floats monthly with money market type rates. At both December 31, 2015 and December 31, 2014, the interest rate paid on the repurchase agreements was 0.15%.

In September 2006, Security Federal Statutory Trust issued and sold capital securities of the Trust (the “Capital Securities”). The Trust used the net proceeds from the sale of the Capital Securities to purchase a like amount of junior subordinated debentures (the “Debentures”) of the Company which are reported on the Consolidated Balance Sheet as junior subordinated debentures. The Capital Securities accrue and pay distributions at a floating rate of three month LIBOR plus 170 basis points annually which was equal to 2.12% at December 31, 2015. The distribution rate payable on the Capital Securities is cumulative and payable quarterly in arrears. The Capital Securities mature or are mandatorily redeemable upon maturity on December 15, 2036, or upon earlier optional redemption as provided in the indenture. The Company has the right to redeem the Capital Securities in whole or in part.

In December 2009, the Company issued $6.1 million in convertible senior debentures. The debentures mature on December 1, 2029 and accrue interest at the rate of 8.0% per annum until maturity or earlier redemption or repayment. The debentures are convertible into the Company’s common stock at a conversion price of $20 per share at the option of the holder at any time prior to maturity. The debentures are redeemable, in whole or in part, at the option of the Company at any time on or after December 1, 2019, at a price equal to 100% of the principal amount of the debentures to be purchased plus any accrued and unpaid interest to, but excluding, the date of redemption.

Total shareholders' equity was $91.0 million at December 31, 2015, an increase of $3.5 million or 4.0% from $87.4 million at December 31, 2014. The Company’s net income for the year ended December 31, 2015 was $6.1 million. Preferred stock dividends were $440,000 resulting in net income available to common shareholders of $5.7 million. Other changes in shareholders’ equity during the period were: a net decrease in other comprehensive income of $1.2 million, representing the unrecognized gain in value of investment and mortgage-backed securities, and $943,000 in dividends paid to common shareholders.

19

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.  The table also distinguishes between the changes related to higher or lower outstanding balances and the changes related to the volatility of interest rates.  For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) changes in rate (changes in rate multiplied by prior year volume); (2) changes in volume (changes in volume multiplied by prior year rate); and (3) net change (the sum of the prior columns).  For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change attributable to volume and the change attributable to rate. Changes in income are calculated on a tax equivalent basis using a 34% federal income tax rate.

	Year Ended December 31, 2015 Compared To Year Ended December 31, 2014									Year Ended December 31, 2014 Compared To Year Ended December 31, 2013
	Volume			Rate			Net			Volume			Rate			Net
	(In Thousands)
Interest-Earning Assets:
Loans: (1)
Mortgage Loans	$	(133	)	$	70		$	(63	)	$	(350	)	$	(184	)	$	(534	)
Other Loans	(1,247		)	321			(926		)	(1,040		)	(593		)	(1,633		)
Total Loans	(1,380		)	391			(989		)	(1,390		)	(777		)	(2,167		)
Mortgage-Backed Securities (2)	(567		)	(197		)	(764		)	46			724			770
Investments (2)(3)	362			(19		)	343			19			305			324
Other Interest-Earning Assets	3			(6		)	(3		)	(4		)	7			3
Total Interest-Earning Assets	$	(1,582	)	$	169		$	(1,413	)	$	(1,329	)	$	259		$	(1,070	)
Interest-Bearing Liabilities:
Deposits:
Certificate Accounts	$	(76	)	$	(102	)	$	(178	)	$	(133	)	$	(443	)	$	(576	)
NOW Accounts	4			(31		)	(27		)	1			6			7
Money Market Accounts	(4		)	(107		)	(111		)	(15		)	(237		)	(252		)
Savings Accounts	3			—			3			3			(10		)	(7		)
Total Deposits	(73		)	(240		)	(313		)	(144		)	(684		)	(828		)
Borrowings	(1,159		)	(141		)	(1,300		)	(771		)	(121		)	(892		)
Total Interest-Bearing Liabilities	(1,232		)	(381		)	(1,613		)	(915		)	(805		)	(1,720		)
Effect On Net Interest Income	$	(350	)	$	550		$	200		$	(414	)	$	1,064		$	650

^{(1)   INTEREST ON NON-ACCRUAL LOANS IS NOT INCLUDED IN INCOME, ALTHOUGH THEIR LOAN BALANCES ARE INCLUDED IN AVERAGE LOANS OUTSTANDING.} 

^{(2)  SECURITIES AVAILABLE FOR SALE ARE COMPUTED USING THEIR HISTORICAL COST.} 

^{(3)  TAX EQUIVALENT BASIS RECOGNIZES THE INCOME TAX SAVINGS WHEN COMPARING TAXABLE AND TAX-EXEMPT ASSETS AND WAS CALCULATED USING AN EFFECTIVE TAX RATE OF 34%. THE TAX-EQUIVALENT ADJUSTMENT RELATES TO THE TAX EXEMPT MUNICIPAL BONDS AND WAS $663,419 AND $499,594 FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014, RESPECTIVELY.} 

20

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following tables present the total dollar amount of interest income on a tax equivalent basis from average interest-earning assets for the periods indicated and the resultant yields, as well as the interest expense on average interest-bearing liabilities expressed both in dollars and rates.

	Yield/ Rate		For The Year Ended December 31,
	At		2015						2014
	December 31, 2015		Average Balance		Interest		Annualized Yield/Rate		Average Balance		Interest		Annualized Yield/Rate
			(Dollars In Thousands)
Interest-Earning Assets:
Mortgage Loans	4.44	%	$	74,903	$	3,297	4.40	%	$	78,022	$	3,360	4.31	%
Other Loans	5.71	%	252,624		15,131		5.99	%	273,383		16,057		5.87	%
Total Loans (1)	5.42	%	327,527		18,428		5.63	%	351,405		19,417		5.53	%
Mortgage-Backed Securities(2)	2.34	%	225,440		5,273		2.34	%	249,066		6,037		2.42	%
Investments (2) (3)	2.42	%	196,268		4,860		2.48	%	181,419		4,517		2.49	%
Other Interest-Earning Assets	0.28	%	4,103		8		0.19	%	3,120		11		0.35	%
Total Interest-Earning Assets	3.73	%	$	753,338	$	28,569	3.79	%	$	785,010	$	29,982	3.82	%
Interest-Bearing Liabilities:
Certificate Accounts	0.69	%	$	246,422	$	1,812	0.74	%	$	256,315	$	1,990	0.78	%
NOW Accounts	0.05	%	91,575		38		0.04	%	86,553		65		0.08	%
Money Market Accounts	0.16	%	231,720		392		0.17	%	233,676		503		0.22	%
Savings Accounts	0.10	%	30,362		30		0.10	%	26,640		27		0.10	%
Total Interest-Bearing Deposits	0.36	%	600,079		2,272		0.38	%	603,184		2,585		0.43	%
Other Borrowings	0.15	%	8,560		16		0.19	%	9,450		17		0.18	%
Junior Subordinated Debt	2.21	%	5,155		104		2.02	%	5,155		101		1.96	%
Senior Convertible Debt	8.00	%	6,084		487		8.00	%	6,084		487		8.00	%
FHLB Advances	2.85	%	37,484		1,321		3.52	%	70,739		2,623		3.71	%
Total Interest-Bearing Liabilities	0.58	%	$	657,362	$	4,200	0.64	%	$	694,612	$	5,813	0.84	%
Net Interest Income					$	24,369					$	24,169
Interest Rate Spread	3.15	%					3.15	%					2.98	%
Net Yield On Earning Assets (Net Interest Margin)							3.23	%					3.08	%

^{(1)   INTEREST ON NON-ACCRUAL LOANS IS NOT INCLUDED IN INCOME, ALTHOUGH THEIR LOAN BALANCES ARE INCLUDED IN AVERAGE LOANS OUTSTANDING.} 

^{(2)  SECURITIES AVAILABLE FOR SALE ARE COMPUTED USING THEIR HISTORICAL COST.}  

^{(3)  TAX EQUIVALENT BASIS RECOGNIZES THE INCOME TAX SAVINGS WHEN COMPARING TAXABLE AND TAX-EXEMPT ASSETS AND WAS CALCULATED USING AN EFFECTIVE TAX RATE OF 34%. THE TAX-EQUIVALENT ADJUSTMENT RELATES TO THE TAX EXEMPT MUNICIPAL BONDS AND WAS $663,419 AND $499,594 FOR THE YEARS ENDED DECEMBER 31, 2015 AND 2014.} 

21

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

	Yield/ Rate		For The Year Ended December 31,
	At		2014						2013
	December 31, 2014		Average Balance		Interest		Annualized Yield/Rate		Average Balance		Interest		Annualized Yield/Rate
			(Dollars In Thousands)
Interest-Earning Assets:
Mortgage Loans	4.42	%	$	78,022	$	3,360	4.31	%	$	85,973	$	3,894	4.53	%
Other Loans	5.85	%	273,383		16,057		5.87	%	291,024		17,689		6.08	%
Total Loans (1)	5.53	%	351,405		19,417		5.53	%	376,997		21,583		5.72	%
Mortgage-Backed Securities(2)	2.47	%	249,066		6,037		2.42	%	246,921		5,267		2.13	%
Investments (2) (3)	2.54	%	181,419		4,517		2.49	%	180,588		4,193		2.32	%
Other Interest-Earning Assets	0.23	%	3,120		111		3.56	%	5,035		8		0.16	%
Total Interest-Earning Assets	3.83	%	$	785,010	$	30,082	3.83	%	$	809,541	$	31,051	3.84	%
Interest-Bearing Liabilities:
Certificate Accounts	0.79	%	$	256,315	$	1,990	0.78	%	$	271,002	$	2,566	0.95	%
NOW Accounts	0.07	%	86,553		65		0.08	%	84,230		58		0.07	%
Money Market Accounts	0.19	%	233,676		503		0.22	%	238,693		755		0.32	%
Savings Accounts	0.10	%	26,640		27		0.10	%	24,112		34		0.14	%
Total Interest-Bearing Deposits	0.42	%	603,184		2,585		0.43	%	618,037		3,413		0.55	%
Other Borrowings	0.15	%	9,450		17		0.18	%	9,270		19		0.20	%
Junior Subordinated Debt	1.94	%	5,155		101		1.96	%	5,155		103		2.00	%
Senior Convertible Debt	8.00	%	6,084		487		8.00	%	6,084		487		8.00	%
FHLB Advances	3.87	%	70,739		2,623		3.71	%	92,658		3,511		3.79	%
Total Interest-Bearing Liabilities	0.77	%	$	694,612	$	5,813	0.84	%	$	731,204	$	7,533	1.03	%
Net Interest Income					$	24,269					$	23,518
Interest Rate Spread	3.06	%					2.99	%					2.81	%
Net Yield On Earning Assets (Net Interest Margin)							3.09	%					2.91	%

^{(1)   INTEREST ON NON-ACCRUAL LOANS IS NOT INCLUDED IN INCOME, ALTHOUGH THEIR LOAN BALANCES ARE INCLUDED IN AVERAGE LOANS OUTSTANDING.} 

^{(2)  SECURITIES AVAILABLE FOR SALE ARE COMPUTED USING THEIR HISTORICAL COST.}  

^{(3)  TAX EQUIVALENT BASIS RECOGNIZES THE INCOME TAX SAVINGS WHEN COMPARING TAXABLE AND TAX-EXEMPT ASSETS AND WAS CALCULATED USING AN EFFECTIVE TAX RATE OF 34%. THE TAX-EQUIVALENT ADJUSTMENT RELATES TO THE TAX EXEMPT MUNICIPAL BONDS AND WAS $499,594 AND $604,054 FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013.} 

22

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Comparison of the Years Ended December 31, 2015 and 2014

General

The Company’s earnings available to common shareholders were $5.7 million or $1.84 per diluted common share for the year ended December 31, 2015, compared to $5.4 million or $1.75 per diluted common share for the year ended December 31, 2014.  The $305,000 or 5.7% increase in earnings was attributable primarily to an increase in non-interest income combined with a decrease in the provision for loan losses.

Net Interest Income

Net interest margin on a tax equivalent basis increased 15 basis points to 3.23% for the year ended December 31, 2015 from 3.08% for the year ended December 31, 2014.  The improvement in net interest spread was achieved through lower cost of funds as total interest expense decreased $1.6 million or 27.8% to $4.2 million for the year ended December 31, 2015, compared to $5.8 million for the year ended December 31, 2014. The decrease in interest expense was partially offset by a decrease in interest income. Net interest income after the provision for loan losses increased $487,000 or 2.1% to $23.7 million for the year ended December 31, 2015 compared to $23.2 million for the year ended December 31, 2014. Average interest-earning assets decreased $31.6 million or 4.0% to $753.3 million for the year ended December 31, 2015 from $785.0 million for the year ended December 31, 2014 while average interest-bearing liabilities decreased $37.3 million or 5.4% to $657.4 million for the year ended December 31, 2015 from $694.6 million for the year ended December 31, 2014. The interest rate spread was 3.15% for the year ended December 31, 2015 compared to 2.98% for the year ended December 31, 2014.

Interest income on loans decreased $1.0 million to $18.4 million during the year ended December 31, 2015 from $19.4 million during the year ended December 31, 2014.  The 5.1% decrease was attributable to a decrease of $23.8 million in average total loans outstanding offset by a 10 basis point increase in the average yield earned on the Bank’s loans during the year ended December 31, 2015.  Tax equivalent interest income on investment securities, mortgage-backed securities, and other investments decreased $424,000 as a result of an decrease in the yield earned combined with a $7.8 million decrease in the aggregate average balance of these interest-earning assets.

Interest expense on deposits decreased $313,000 or 12.1% to $2.3 million during the year ended December 31, 2015.  Average interest bearing deposits decreased $3.1 million to $600.1 million during the year ended December 31, 2015 compared to $603.2 million during the year ended December 31, 2014, while the average cost of those deposits decreased five basis points to 0.38% during the year ended December 31, 2015.  Interest expense on FHLB advances and other borrowings decreased $1.3 million or 49.4% to $1.3 million during the year ended December 31, 2015 from $2.6 million during the year ended December 31, 2014. The decrease was a result of a $34.1 million decrease in average FHLB advances and other borrowings outstanding during the year ended December 31, 2015 and a decrease in the average costs of those borrowings of 39 basis points to 2.90% compared to 3.29% during the year ended December 31, 2014.

Interest expense on junior subordinated debentures was $104,000 for the year ended December 31, 2015 compared to $101,000 for the year ended December 31, 2014. The average outstanding balance on these debentures remained constant at $5.2 million during both periods while the average cost increased six basis points to 2.02% during the year ended December 31, 2015 compared to 1.96% for the year ended December 31, 2014. Interest expense on senior convertible debentures was $487,000 for each of the years ended December 31, 2015 and 2014. The senior convertible debentures were issued during December 2009 and have a fixed rate of 8%.

23

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Provision for Loan Losses

The net provision for loan losses was $0 for the year ended December 31, 2015 compared to $450,000 for the year ended December 31, 2014. The decrease in the provision is attributable to the decrease in net charge offs. Net charge offs were $82,000 during the year ended December 31, 2015 compared to $2.3 million during the year ended December 31, 2014. The allowance for loan losses represented 7,535.3% of net charge offs during the year ended December 31, 2015 compared to 358.0% during the year ended December 31, 2014. Non-performing assets, which consist of non-accrual loans and repossessed assets, decreased $5.6 million or 32.9% to $11.4 million at December 31, 2015 from $17.0 million at December 31, 2014. As non-performing assets decline, the additional provision required to cover these loans has also declined. The majority of these loans are secured by real estate, and have been measured for impairment under the fair value of collateral method. As real estate values have continued to stabilize, the need to reserve for these assets has declined.

The amount of the provision is determined by management’s on-going monthly analysis of the loan portfolio and the adequacy of the allowance for loan losses. The Company has established policies and procedures for evaluating and monitoring the credit quality of the loan portfolio and for the timely identification of potential problem loans including internal and external loan reviews. The adequacy of the allowance for loan losses is reviewed monthly by the Asset Classification Committee and quarterly by the Board of Directors. Management’s monthly review of the adequacy of the allowance includes three main components.

The first component is an analysis of loss potential in various homogeneous segments of the portfolio based on historical trends and the risk inherent in each category. The historical loss periods used to calculate these ratios can range from 12 months to five years depending on which period is deemed a more relevant indicator of future losses.

The second component of management’s monthly analysis is the specific review and evaluation of significant problem credits identified through the Company’s internal monitoring system, including but not limited to classified loans, non-accrual loans and TDRs. These loans are evaluated for impairment and recorded in accordance with accounting guidance. All TDRs and substantially all non-accrual loans are individually for impairment. In accordance with our policy, non-accrual commercial loans with a balance less than $200,000 and non-accrual consumer loans with a balance less than $100,000 are deemed immaterial and therefore excluded from the individual impairment review. For each loan deemed impaired, management calculates a specific reserve for the amount in which the recorded investment in the loan exceeds the fair value. This estimate is based on a thorough analysis of the most probable source of repayment, which is typically liquidation of the collateral.

The third component is an analysis of changes in qualitative factors that may affect the portfolio, including but not limited to: relevant economic trends that could impact borrowers’ ability to repay, industry trends, changes in the volume and composition of the portfolio, credit concentrations, or lending policies and the experience and ability of the staff and Board of Directors. Management also reviews and incorporates certain ratios such as percentage of classified loans, average historical loan losses by loan category, delinquency percentages, and the assignment of percentage targets of reserves in each loan category when evaluating the allowance. Once the analysis is completed, the three components are combined and compared to the allowance amount. Based on this, charges are made to the provision as needed.

Management believes the allowance for loan losses is adequate based on its best estimates of the losses inherent in the loan portfolio, although there can be no guarantee as to these estimates.  In addition, bank regulatory agencies may require additional provisions to the allowance for loan losses based on their judgments and estimates as part of their examination process.  Because the allowance for loan losses is an estimate, there can be no guarantee that actual loan losses will not exceed the allowance for loan losses, or that additional increases in the allowance for loan losses will not be required in the future.

24

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Non-Interest Income

Non-interest income increased $844,000 or 13.7% to $7.0 million for the year ended December 31, 2015 from $6.2 million for the year ended December 31, 2014. The increase is primarily the result of an increase in the gain on sale of investment securities and loans partially offset by a decrease in grant income.

The gain on sale of investment securities increased $1.4 million or 331.7% to $1.9 million during the year ended December 31, 2015 from $437,000 during the year ended December 31, 2014.  Gain on sale of loans increased $69,000 or 11.1% to $690,000 during the year ended December 31, 2015 compared to $621,000 during the year ended December 31, 2014. Service fees on deposit accounts decreased $101,000 or 8.6% to $1.1 million during the year ended December 31, 2015 from $1.2 million during the year ended December 31, 2014.

Income from insurance agency commissions was $472,000 during the year ended December 31, 2015, an increase of $47,000 or 11.0% compared to $425,000 during the year ended December 31, 2014. Trust income increased $67,000 or 12.3% to $609,000 during the year ended December 31, 2015 from $542,000 during the year ended December 31, 2014. Income from BOLI decreased $131,000 or 23.7% to $423,000 during the year ended December 31, 2015 from $554,000 during the year ended December 31, 2014. All BOLI income recognized in 2015 was related to accrued interest credited to the cash surrender value underlying the BOLI policies. During 2014, the Bank recognized $254,000 in death benefits in addition to $300,000 in income related to an increase in the cash surrender value of the BOLI policies.

Check card fee income increased $68,000 or 7.5% to $970,000 for the year ended December 31, 2015 compared to $902,000 for the same period in the prior year. Other non-interest income including annuity and investment brokerage commissions, bank credit life insurance on loans, and other miscellaneous income remained relatively unchanged at $652,000 during the years ended December 31, 2015 and 2014.

In 2012, the U.S. Treasury's Community Development Financial Institutions Fund ("CDFI Fund") awarded the Bank a grant totaling $1.5 million in recognition of its commitment to community development. The award is part of a CDFI program that recognizes organizations who serve low income and distressed communities. As part of the award, the Bank committed to establish a small business micro lending program that lends specifically in low to moderate income areas. The Bank was required to lend $1.2 million over a five year period to qualifying customers. The Bank recognized $230,000 in grant income related to this award during the year ended December 31, 2015 compared to $295,000 during the year ended December 31, 2014. The grant income is recognized during the period in which the loans are funded. At December 31, 2015, there was no income remaining to be recognized related to unfunded microloans. During the year ended December 31, 2014, the Bank also recognized $557,000 in grant income, which was awarded by the Bank Enterprise Award (BEA) Program in recognition of the Bank’s investments in distressed communities and its continued commitment to community development. The amount of the award increases as the Bank’s investment in these areas increases. The Bank did not receive a similar award under this program during the year ended December 31, 2015. Due to a change in the timing of the award, the Bank anticipates receiving an award for its 2015 performance in early fiscal 2016.

Non-Interest Expense

Non-interest expense increased $1.3 million or 5.9% to $22.5 million during the year ended December 31, 2015 compared to $21.3 million during the same period one year earlier.  The increase in non-interest expense was primarily the result of an increase in compensation and employee benefits expense and prepayment penalties on FHLB advances.

Compensation and employee benefits increased $872,000 or 7.7% to $12.2 million during the year ended December 31, 2015 from $11.3 million for the year ended December 31, 2014. The Company recognized $150,000 in accrued bonuses related to its incentive compensation plan offered to employees during the year ended December 31, 2015. The incentive compensation plan, first implemented in 2014, was designed to maximize achievement of the Bank’s overall goals by setting performance objectives for employees that are directly linked to the financial and strategic performance of the Bank. It encourages employees to focus on the success and profitability of the Bank and provides a means for the Bank to offer competitive pay to attract and retain the highest quality and highest performing employees.

25

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Occupancy expense decreased $92,000 or 4.6% to $1.9 million for the year ended December 31, 2015 compared to $2.0 million for the year ended December 31, 2014. Depreciation and maintenance of equipment remained relatively unchanged at $1.7 million for the years ended December 31, 2015 and 2014. Advertising expense decreased $68,000 or 14.0% to $416,000 for the year ended December 31, 2015 from $484,000 for the year ended December 31, 2014.

Net cost of operation of OREO decreased $17,000 or 3.2% to $524,000 for the year ended December 31, 2015 from $542,000 for the same period in 2014. OREO was $4.4 million at December 31, 2015 compared to $3.2 million at December 31, 2014. The decrease in the cost of OREO was the result of a decrease in OREO write downs during the year. OREO is recorded at the lower of cost or estimated fair value less costs to sell. As local real estate values declined significantly in the prior years, the Bank was required to write down these properties to their fair values. Write downs on OREO decreased to $312,000 for the year ended December 31, 2015 compared to $505,000 for the year ended December 31, 2014 as a result of the improvement of in real estate values in our market areas.

As part of the Company's strategy to lower its cost of funds, management elected to prepay some higher rate advances during 2015 and 2014. The Company incurred prepayment penalties of $788,000 and $178,000 for paying down FHLB advances during the years ended December 31, 2015 and 2014, respectively.

Other expenses remained unchanged at $4.4 million for the year ended December 31, 2015 and 2014. Other expenses include legal, professional, and consulting expenses, office supplies and other miscellaneous expenses.

Income Taxes

The provision for income taxes decreased $236,000 or 10.2% to $2.1 million during the year ended December 31, 2015 compared to $2.3 million for the year ended December 31, 2014.  The effective tax rate was 25.3% for 2015 and 28.3% for 2014.

26

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Comparison of the Years Ended December 31, 2014 and 2013

General

The Company’s earnings available to common shareholders were $5.4 million or $1.75 per diluted common share for the year ended December 31, 2014, compared to $3.4 million or $1.12 per diluted common share for the year ended December 31, 2013.  The $2.0 million or 60.3% increase in earnings was attributable primarily to an increase in net interest income combined with a decrease in the provision for loan losses.

Net Interest Income

Net interest margin on a tax equivalent basis increased 17 basis points to 3.08% for the year ended December 31, 2014 from 2.91% for the year ended December 31, 2013.  The improvement in net interest spread was achieved through lower cost of funds as total interest expense decreased 22.8% for the year ended December 31, 2014, compared to the year ended December 31, 2013. The decrease in interest expense was partially offset by slightly lower interest income. Consistent with the increase in interest spread, net interest income increased $755,000 or 3.3% to $23.7 million for the year ended December 31, 2014 compared to $22.9 million for the year ended December 31, 2013. Average interest-earning assets decreased $24.5 million or 3.0% to $785.0 million million while average interest-bearing liabilities decreased $36.6 million or 5.0% to $694.6 million for the year ended December 31, 2014. The interest rate spread was 2.98% for the year ended December 31, 2014 compared to 2.81% for the year ended December 31, 2013.

Interest income on loans decreased $2.2 million to $19.4 million during the year ended December 31, 2014 from $21.6 million during the year ended December 31, 2013.  The 10.0% decrease was attributable to a decrease in average total loans outstanding of $25.6 million combined with a 19 basis point decrease in the average yield earned on the Bank’s loans during the year ended December 31, 2014.Tax equivalent interest income on investment securities, mortgage-backed securities, and other investments increased $1.1 million as a result of an increase in the yield earned combined with a $1.1 million increase in the aggregate average balance in these interest-earning assets.

Interest expense on deposits decreased $828,000 or 24.3% to $2.6 million during the year ended December 31, 2014.  Average interest bearing deposits decreased $14.9 million while the average cost of those deposits decreased 12 basis points during the year ended December 31, 2014. Interest expense on FHLB advances and other borrowings decreased $889,000 or 25.2% to $2.6 million during 2014. The decrease was a result of a $21.7 million decrease in average FHLB advances and other borrowings outstanding during the year ended December 31, 2014 and a decrease in the average costs of those borrowings of 17 basis points to 3.29% compared to 3.46% during the year ended December 31, 2013.

Interest expense on junior subordinated debentures was $101,000 for the year ended December 31, 2014 compared to $103,000 for the year ended December 31, 2013. The average outstanding balance on these debentures remained constant at $5.2 million during both periods while the average cost decreased four basis points to 1.96% during the year ended December 31, 2014 compared to 2.00% for the year ended December 31, 2013. Interest expense on senior convertible debentures was $487,000 for the year ended December 31, 2014 and 2013. The senior convertible debentures were issued during December 2009 and have a fixed rate of 8%.

Provision for Loan Losses

The provision for loan losses was $450,000 for the year ended December 31, 2014, a $2.2 million or 83.0% decrease from $2.6 million for the year ended December 31, 2013. The decrease in the provision is attributable to the decrease in net charge offs. Net charge offs were $2.3 million or 0.7% of gross loans during the year ended December 31, 2014 compared to$3.7 million or 1.0% of gross loans for the year ended December 31, 2013. The allowance for loan losses represented 358.0% of net charge offs during the year ended December 31, 2014 compared to 275.2% during the year ended December 31, 2013. Non-performing assets, which consist of non-accrual loans and repossessed assets, increased $3.0 million or 21.6% to $17.0 million at December 31, 2014 from $14.0 million at December 31, 2013. Despite the increase in non- performing assets, the additional provision required to cover these loans has declined. Substantially all of these loans are secured by real estate, and have been measured for impairment under the fair value of collateral method. As real estate values have begun to stabilize, the need to reserve for these assets has declined.

27

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Non-Interest Income

Non-interest income decreased $733,000 or 10.6% to $6.2 million for the year ended December 31, 2014 from $6.9 million for the year ended December 31, 2013. The decrease is primarily the result of a decrease in the gain on sale of investments and loans partially offset by an increase in Bank Owned Life Insurance (BOLI) income.

Gain on sale of investments decreased $889,000 or 67.0% to $437,000 during the year ended December 31, 2014 from $1.3 million during the year ended December 31, 2013.  Gain on sale of loans decreased $159,000 or 20.3% to $621,000 during the year ended December 31, 2014 compared to $780,000 during the year ended December 31, 2013. Service fees on deposit accounts remained relatively unchanged at $1.2 million during the years ended December 31, 2014 and 2013.

Income from insurance agency commissions was $425,000 during the year ended December 31, 2014, a decrease of $28,000 or 6.3% compared to $453,000 during the year ended December 31, 2013. Trust income increased $22,000 or 4.2% to $542,000 during the year ended December 31, 2014 from $520,000 during the year ended December 31, 2013. Income from BOLI increased $215,000 or 63.5% to $554,000 during the year ended December 31, 2014 from $339,000 during the year ended December 31, 2013, reflecting improvement in the value of the securities underlying the BOLI policies. The Bank recognized $254,000 in death benefits in 2014 in addition to $300,000 in income related to an increase in the cash surrender value of the BOLI policies.

Check card fee income increased $49,000 or 5.7% to $902,000 for the year ended December 31, 2014 compared to $853,000 for the same period in the prior year. Other non-interest income including annuity and investment brokerage commissions, bank credit life insurance on loans, and other miscellaneous income increased $110,000 or 20.3% to $653,000 during the year ended December 31, 2014 from $543,000 during the same period in 2013.

The Bank recognized $295,000 in grant income related to micro loan program during the year ended December 31, 2014 compared to $929,000 during the year ended December 31, 2013. The grant income is recognized during the period in which the loans are funded. At December 31, 2014, there was $230,000 in income related to unfunded microloans that remained to be recognized. During the year ended December 31, 2014, the Bank also recognized $557,000 in grant income, which was awarded by the Bank Enterprise Award (BEA) Program in recognition of the Bank’s investments in distressed communities and its continued commitment to community development. The amount of the award increases as the Bank’s investment in these areas increases. There was no BEA grant income recognized during the year ended December 31, 2013.

Non-Interest Expense

Non-interest expense decreased $765,000 or 3.5% to $21.3 million during the year ended December 31, 2014 compared to $22.0 million during the same period one year earlier.  The decrease in non-interest expense was primarily a result of a decrease in the net costs associated with the operation of OREO, including write downs on these properties, combined with a decrease in prepayment penalties on FHLB advances partially offset by increases in compensation and other expenses.

Compensation and employee benefits increased $344,000 or 3.1% to $11.3 million during the year ended December 31, 2014 from $11.0 million for the year ended December 31, 2013. The Company recognized $335,000 in accrued bonuses related to a new incentive compensation plan offered to employees during the year ended December 31, 2014. The incentive compensation plan was designed to maximize achievement of the Bank’s overall goals by setting performance objectives for employees that are directly linked to the financial and strategic performance of the Bank. This encourages employees to focus on the success and profitability of the Bank as a whole and provides a means for the Bank to offer competitive pay to attract and retain the highest quality and highest performing employees.

Occupancy expense remained relatively unchanged at $2.0 million for the years ended December 31, 2014 and 2013, while depreciation and maintenance of equipment expense increased $67,000 or 4.2% to $1.7 million for the year ended December 31, 2014 compared to $1.6 million for the year ended December 31, 2013. Advertising expense increased $128,000 or 36.1% to $484,000 for the year ended December 31, 2014 from $356,000 for the year ended December 31, 2013.

28

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Net cost of operation of OREO decreased $1.0 million or 65.8% to $542,000 for the year ended December 31, 2014 from $1.6 million for the same period in 2013. OREO was $3.2 million at December 31, 2014 compared to $3.9 million at December 31, 2013. This decrease was the result of a decrease in the balance of OREO and a decrease in write downs on OREO during the year. OREO is recorded at the lower of cost or estimated fair value less costs to sell. As local real estate values declined significantly in the prior years, the Bank was required to write down these properties to their fair values. Write downs on OREO decreased to $505,000 for the year ended December 31, 2014 compared to $1.4 million for the year ended December 31, 2013 as a result of the improvement of in real estate values in our market areas.

The Company incurred prepayment penalties of $178,000 and $589,000 for paying down FHLB advances during the years ended December 31, 2014 and 2013, respectively. As part of the Company's strategy to lower cost of funds, management elected to prepay some higher rate advances during 2014 and 2013.

Other expenses increased $214,000 or 5.1% to $4.4 million for the year ended December 31, 2014 compared to $4.2 million for the year ended December 31, 2013. Other expenses include legal, professional, and consulting expenses, stationary and office supplies and other miscellaneous expenses.

Income Taxes

The provision for income taxes increased $963,000 or 71.8% to $2.3 million during the year ended December 31, 2014 compared to $1.3 million for the year ended December 31, 2013.  The effective tax rate was 28.3% for 2014 and 26.1% for 2013.

Regulatory Capital

The following table reconciles the Bank's shareholders' equity to its various regulatory capital positions:

	At December 31,
	2015		2014
	(In Thousands)
Bank’s Shareholders’ Equity (1)	$	88,928	$	88,422
Reduction For Goodwill And Other Intangibles	1,200		1,200
Tangible Capital	87,728		87,222
Core Capital	87,728		87,222
Supplemental Capital	4,925		4,751
Total Risk-Based Capital	$	92,653	$	91,973

^{(1)  THE YEARS ENDED DECEMBER 31, 2015 AND 2014 EXCLUDE UNREALIZED GAINS OF $4.2 MILLION and $5.4 MILLION, RESPECTIVELY, ON INVESTMENT SECURITIES.} 

Security Federal Corporation is a bank holding company registered with the Federal Reserve.  Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve.  Security Federal Bank, as a state-chartered, federally insured commercial bank, is subject to the capital requirements established by the FDIC.

The capital adequacy requirements are quantitative measures established by regulation that require Security Federal Corporation and Security Federal Bank to maintain minimum amounts and ratios of capital.  Federally-insured state-chartered banks are required to maintain minimum levels of regulatory capital.    

Effective January 1, 2015, FDIC regulations require insured state-chartered banks to maintain (i) a minimum ratio of Tier 1 capital to total assets of 4.00%, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, (iii) a minimum ratio of total-capital to risk-weighted assets of 8.00% and (iv) a minimum ratio of “Common Equity Tier 1 Capital” to risk-weighted assets of

29

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

4.50%. The Federal Reserve requires Security Federal Corporation to maintain capital adequacy that generally parallels the FDIC requirements.  At December 31, 2015, Security Federal Corporation and Security Federal Bank each exceeded all applicable capital requirements.

A “well-capitalized” institution must generally maintain capital ratios 200 bps higher than the minimum guidelines. As of December 31, 2015, Security Federal Bank was “well capitalized” under the capital adequacy requirements. A bank holding company such as Security Federal Corporation does not have a “well-capitalized” measurement because “well-capitalized” only applies to banks. For additional information, see Note 14 of the Notes To Consolidated Financial Statements.

The following table compares Security Federal Corporation’s and Security Federal Bank’s actual capital amounts at December 31, 2015 to its minimum regulatory capital requirements at that date (dollars in thousands):

	Amount Required		Percent Required	Actual Amount		Actual Percent	Excess Amount		Excess Percent
	(Dollars In Thousands)
Tier 1 Leverage (Core) Capital:
Security Federal Corporation	$	31,811	4.0%	$	84,672	10.6%	$	52,861	6.6%
Security Federal Bank	31,801		4.0%	87,728		11.0%	55,927		7.0%
Tier 1 Risk-Based (Core) Capital:
Security Federal Corporation	23,429		6.0%	84,672		21.7%	61,243		15.7%
Security Federal Bank	23,440		6.0%	87,728		22.5%	64,288		16.5%
Total Risk-Based Capital:
Security Federal Corporation	31,239		8.0%	95,429		24.4%	64,190		16.4%
Security Federal Bank	31,254		8.0%	92,653		23.7%	61,399		15.7%
Common Equity Tier 1 Capital:
Security Federal Corporation	17,572		4.5%	63,504		16.3%	45,932		11.8%
Security Federal Bank	17,580		4.5%	87,728		22.5%	70,148		18.0%

Liquidity and Capital Resources

Liquidity refers to the ability to generate sufficient cash flows to fund current loan demand, repay maturing borrowings, fund maturing deposit withdrawals, and meet operating expenses.  The Bank's primary sources of funds include loan repayments, loan sales, increased deposits, advances from the FHLB, and cash flow generated from operations.  The need for funds varies among periods depending on funding needs as well as the rate of amortization and prepayment on loans.  The use of FHLB and other advances and borrowings varies depending on loan demand, deposit inflows, and the use of investment leverage strategies to increase net interest income.

The principal use of the Bank's funds is the origination of mortgages and other loans and the purchase of investments and mortgage-backed securities. Originations of new loans and renewals of previously funded loans on loans held for investment were $156.7 million during the year ended December 31, 2015 compared to $139.2 million during the year ended December 31, 2014 and $193.2 million during the year ended December 31, 2013.  The increase in originations and renewals during the year ended December 31, 2015 was primarily the result of a $14.1 million increase in commercial loan originations. Purchases of investments and mortgage-backed securities were $114.5 million during the year ended December 31, 2015 compared to $119.3 million during the year ended December 31, 2014, and $162.5 million during the year ended December 31, 2013. Other uses of the Bank's funds during the year ended December 31, 2015 included paying down FHLB advances, dividend payments to shareholders and purchases of additional BOLI policies.

Unused lines of credit on home equity loans, credit cards, and commercial loans amounted to $52.1 million at December 31, 2015.  Home equity loans are made on a floating rate basis with final maturities of 10 to 15 years.  Credit cards are made on a fixed rate basis, currently at 9.99% and are renewed annually or every other year.  In addition to the above commitments, the Bank has undisbursed loans-in-process of $2.9 million at December 31, 2015, which will be disbursed over an average of 90 days.  These

30

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

commitments to originate loans and future advances of lines of credit are expected to be funded from loan amortizations and prepayments, deposit inflows, maturing investments, and short-term borrowing capacity.

The following table sets forth the length of time until maturity for unused commitments to extend credit and standby letters of credit at December 31, 2015:

(In Thousands)	One Month Or Less		After One Through Three Months		After Three Through Twelve Months		Within One Year		One Year Or Greater		Total
Unused Lines Of Credit	$	17	$	—	$	6,560	$	6,577	$	44,615	$	51,192
Standby Letters Of Credit	—		513		368		881		1		882
Total	$	17	$	513	$	6,928	$	7,458	$	44,616	$	52,074

Management believes that future liquidity can be met through the Bank's deposit base, which had a balance of $652.1 million at December 31, 2015, and from maturing investments.  In addition, at December 31, 2015 the Bank had another $240.2 million in unused borrowing capacity at the FHLB.

Historically the Bank’s cash flow from operating activities has been relatively stable.  The cash flows from investing activities vary with sales of investments and with the need to invest excess funds or utilize leverage strategies with the purchase of mortgage-backed and investment securities.  The cash flows from financing activities vary depending on the need for FHLB advances and other borrowings.

Security Federal Corporation is a separate legal entity from Security Federal Bank and must provide for its own liquidity and pay its own operating expenses. Sources of capital and liquidity for Security Federal Corporation include distributions from Security Federal Bank and the issuance of debt or equity securities, although there are regulatory restrictions on the ability of the Security Federal Bank to pay dividends. At December 31, 2015, Security Federal Corporation (on an unconsolidated basis) had liquid assets of $8.9 million.

Contractual Obligations

In the normal course of business, the Company enters into contractual obligations that meet various business needs.  These contractual obligations include time deposits to customers, borrowings from the FHLB of Atlanta, other borrowings, junior subordinated debentures, senior convertible debentures and lease obligations for facilities.  See Notes 5, 9, 10, 11 and 12 of theNotes to the Consolidated Financial Statements included herein for additional information.  The following table summarizes the Company’s long-term contractual obligations at December 31, 2015. Contractual repayments may differ from actual repayments because some of the obligations may be subject to calls.

	One Year Or Less		Over One to Three Years		Over Three to Five Years		Thereafter		Total
	(In Thousands)
Time deposits	$	142,490	$	79,755	$	31,006	$	—	$	253,251
FHLB Advances	15,000		32,900		5,000		—		52,900
Other Borrowings	6,412		—		—		—		6,412
Jr. Sub. Debentures	—		—		—		5,155		5,155
Sr. Conv. Debentures	—		—		—		6,084		6,084
Operating Lease Obligations	356		549		429		1,212		2,546
Total	$	164,258	$	113,204	$	36,435	$	12,451	$	326,348

31

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and Results of Operations

Off-Balance Sheet Arrangements

In the normal course of business, the Company makes off-balance sheet arrangements, including credit commitments to its customers to meet their financial needs.  These arrangements involve, to varying degrees, elements of credit and interest rate risk not recognized in the consolidated statement of financial condition.  The Bank makes personal, commercial, and real estate lines of credit available to customers and does issue standby letters of credit.

Commitments to extend credit to customers are subject to the Bank’s normal credit policies and are essentially the same as those involved in extending loans to customers.  See Note 18 of the Notes to the Consolidated Financial Statements included herein for additional information.

Impact of Inflation and Changing Prices

The Consolidated Financial Statements, related notes, and other financial information presented herein have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) that require the measurement of financial position and operating results in terms of historical dollars without considering changes in relative purchasing power over time due to inflation.  Unlike most industrial companies, substantially all of the assets and liabilities of a financial institution are monetary in nature.  As a result, interest rates generally have a more significant impact on a financial institution's performance than does the effect of inflation.

32

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Security Federal Corporation and Subsidiaries

Aiken, South Carolina

We have audited the accompanying consolidated balance sheets of Security Federal Corporation and Subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the three year period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Security Federal Corporation and Subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

/s/ Elliott Davis Decosimo, LLC

Columbia, South Carolina

March 21, 2016

33

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets	December 31, 2015			December 31, 2014
ASSETS:
Cash and Cash Equivalents	$	8,381,951		$	10,192,702
Certificates Of Deposit With Other Banks	3,445,005			2,095,000
Investment and Mortgage-Backed Securities:
Available For Sale	375,513,870			429,700,540
Held To Maturity (Fair Value of $29,681,280 and $0 at December 31, 2015 and 2014, Respectively)	29,873,098			—
Total Investments and Mortgage-Backed Securities	405,386,968			429,700,540
Loans Receivable, Net:
Held For Sale	2,462,559			1,864,999
Held For Investment:  (Net of Allowance of $8,275,133 and $8,357,496 at December 31, 2015 and December 31, 2014, Respectively)	328,110,170			338,009,496
Total Loans Receivable, Net	330,572,729			339,874,495
Accrued Interest Receivable:
Loans	886,968			971,569
Mortgage-Backed Securities	614,925			682,585
Investment Securities	1,523,200			1,408,924
Total Accrued Interest Receivable	3,025,093			3,063,078
Premises and Equipment, Net	20,116,918			18,233,226
Federal Home Loan Bank ("FHLB") Stock, At Cost	2,214,800			3,144,600
Other Real Estate Owned ("OREO")	4,361,411			3,229,710
Bank Owned Life Insurance	16,573,045			11,150,045
Goodwill	1,199,754			1,199,754
Other Assets	4,449,956			3,480,676
Total Assets	$	799,727,630		$	825,363,826
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Deposit Accounts	$	652,096,545		$	660,115,164
Advances From FHLB	34,640,000			52,900,000
Other Borrowings	6,411,977			8,523,348
Junior Subordinated Debentures	5,155,000			5,155,000
Advance Payments By Borrowers For Taxes and Insurance	256,730			266,352
Senior Convertible Debentures	6,084,000			6,084,000
Other Liabilities	4,115,956			4,884,577
Total Liabilities	708,760,208			737,928,441
Commitments (Notes 5 and 18)
Shareholders' Equity:
Serial Preferred Stock, $.01 Par Value; Authorized 200,000 Shares; Issued and Outstanding, 22,000	22,000,000			22,000,000
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued and Outstanding Shares, 3,146,407 and 2,945,474, Respectively, at December 31, 2015 and 3,144,934 and 2,944,001, Respectively, at December 31, 2014	31,464			31,449
Additional Paid-In Capital	12,028,832			11,990,813
Treasury Stock, At Cost (200,933 Shares)	(4,330,712		)	(4,330,712		)
Unvested Restricted Stock	(25,358		)	—
Accumulated Other Comprehensive Income	4,262,361			5,476,375
Retained Earnings	57,000,835			52,267,460
Total Shareholders' Equity	90,967,422			87,435,385
Total Liabilities and Shareholders' Equity	$	799,727,630		$	825,363,826

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

34

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income	For The Years Ended December 31,
	2015		2014		2013
Interest Income:
Loans	$	18,428,185	$	19,416,904	$	21,583,028
Mortgage-Backed Securities	5,273,457		6,036,955		5,267,280
Investment Securities	4,196,609		4,017,705		3,588,794
Other	7,501		10,600		8,265
Total Interest Income	27,905,752		29,482,164		30,447,367
Interest Expense:
NOW and Money Market Accounts	429,539		568,397		813,278
Statement Savings Accounts	30,315		26,600		33,897
Certificate Accounts	1,811,651		1,990,003		2,566,220
FHLB Advances and Other Borrowings	1,336,620		2,640,197		3,529,553
Senior Convertible Debentures	486,720		486,720		486,720
Junior Subordinated Debentures	104,334		101,139		103,268
Total Interest Expense	4,199,179		5,813,056		7,532,936
Net Interest Income	23,706,573		23,669,108		22,914,431
Provision For Loan Losses	—		450,000		2,645,381
Net Interest Income After Provision For Loan Losses	23,706,573		23,219,108		20,269,050
Non-Interest Income:
Gain on Sale of Investment Securities	1,886,081		436,871		1,325,823
Gain on Sale of Loans	689,843		620,994		779,554
Service Fees on Deposit Accounts	1,076,102		1,176,849		1,152,875
Commissions From Insurance Agency	472,145		424,969		453,446
Trust Income	608,800		542,000		520,000
Bank Owned Life Insurance Income	423,000		554,364		339,000
Check Card Fee Income	969,710		901,998		853,027
Grant Income	229,848		851,999		929,346
Other	651,720		652,739		542,733
Total Non-Interest Income	7,007,249		6,162,783		6,895,804
Non-Interest Expense:
Compensation and Employee Benefits	12,180,420		11,308,610		10,964,366
Occupancy	1,903,288		1,995,283		1,970,403
Advertising	416,322		484,056		355,678
Depreciation and Maintenance of Equipment	1,706,397		1,665,454		1,598,067
FDIC Insurance Premiums	611,157		691,937		746,389
Amortization of Intangibles	—		11,970		50,004
Net Cost of Operation of Other Real Estate Owned	524,345		541,840		1,582,168
Prepayment Penalties on FHLB Advances	787,851		178,067		589,023
Other	4,401,016		4,390,766		4,177,210
Total Non-Interest Expense	22,530,796		21,267,983		22,033,308
Income Before Income Taxes	8,183,026		8,113,908		5,131,546
Provision For Income Taxes	2,067,099		2,303,168		1,340,384
Net Income	6,115,927		5,810,740		3,791,162
Preferred Stock Dividends	440,000		440,000		440,000
Net Income Available To Common Shareholders	$	5,675,927	$	5,370,740	$	3,351,162
Net Income Per Common Share (Basic)	$	1.93	$	1.82	$	1.14
Net Income Per Common Share (Diluted)	$	1.84	$	1.75	$	1.12
Cash Dividend Per Share On Common Stock	$	0.32	$	0.32	$	0.32
Weighted Average Shares Outstanding (Basic)	2,944,001		2,944,001		2,944,001
Weighted Average Shares Outstanding (Diluted)	3,248,312		3,248,201		3,248,201

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

35

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

	Years Ended December 31,
	2015			2014			2013
Net Income	$	6,115,927		$	5,810,740		$	3,791,162
Other Comprehensive Income (Loss)
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gains (Losses) on Securities Available For Sale, Net of Taxes of $15,023; $3,224,059 and $(4,286,481) at December 31, 2015, 2014 and 2013, Respectively	22,905			5,274,829			(7,002,827		)
Reclassification Adjustment For Gains Included in Net Income, Net of Taxes of $716,710; $166,011 and $503,813 at December 31, 2015, 2014 and 2013, Respectively	(1,169,371		)	(270,860		)	(822,010		)
Held To Maturity Transfer To Available For Sale, Net of Taxes of $530,733 at December 31, 2013	—			—			865,933
Amortization of Unrealized Gains On Available For Sale Securities Transfer to Held To Maturity, Net of Taxes of $(41,330) at December 31, 2015	(67,548		)	—			—
Other Comprehensive Income (Loss)	(1,214,014		)	5,003,969			(6,958,904		)
Comprehensive Income (Loss)	$	4,901,913		$	10,814,709		$	(3,167,742	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

36

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity

For the Years Ended December 31,2015, 2014 and 2013

	Preferred Stock		Common Stock		Unvested Restricted Stock			Additional Paid – In  Capital		Treasury Stock			Accumulated Other Comprehensive Income			Retained Earnings			Total
Balance at December 31, 2014	$	22,000,000	$	31,449	$	—		$	11,990,813	$	(4,330,712	)	$	5,476,375		$	52,267,460		$	87,435,385
Net Income	—		—		—			—		—			—			6,115,927			6,115,927
Other Comprehensive Income, Net of Tax	—		—		—			—		—			(1,214,014		)	—			(1,214,014		)
Common Stock Issuance	—		15		(25,358		)	25,343		—			—			—			—
Stock Option Compensation Expense	—		—		—			12,676		—			—			—			12,676
Cash Dividends on Preferred Stock	—		—		—			—		—			—			(440,000		)	(440,000		)
Cash Dividends on Common Stock	—		—		—			—		—			—			(942,552		)	(942,552		)
Balance at December 31, 2015	$	22,000,000	$	31,464	$	(25,358	)	$	12,028,832	$	(4,330,712	)	$	4,262,361		$	57,000,835		$	90,967,422

	Preferred  Stock		Common Stock		Additional Paid – In  Capital		Treasury Stock			Accumulated Other  Comprehensive Income		Retained Earnings			Total
Balance at December 31, 2013	$	22,000,000	$	31,449	$	11,978,137	$	(4,330,712	)	$	472,406	$	47,838,800		$	77,990,080
Net Income	—		—		—		—			—		5,810,740			5,810,740
Other Comprehensive Income, Net of Tax:	—		—		—		—			5,003,969		—			5,003,969
Stock Option Compensation Expense	—		—		12,676		—			—		—			12,676
Cash Dividends on Preferred Stock	—		—		—		—			—		(440,000		)	(440,000		)
Cash Dividends on Common Stock	—		—		—		—			—		(942,080		)	(942,080		)
Balance at December 31, 2014	$	22,000,000	$	31,449	$	11,990,813	$	(4,330,712	)	$	5,476,375	$	52,267,460		$	87,435,385

37

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity

For the Years Ended December 31,2015, 2014 and 2013, Continued

	Preferred Stock		Warrants			Common Stock		Additional Paid – In  Capital			Treasury Stock			Accumulated Other Comprehensive Income			Retained Earnings			Total
Balance at December 31, 2012	$	22,000,000	$	400,000		$	31,449	$	11,630,717		$	(4,330,712	)	$	7,431,310		$	45,429,720		$	82,592,484
Net Income	—		—			—		—			—			—			3,791,162			3,791,162
Other Comprehensive Loss, Net of Tax:	—		—			—		—			—			(6,958,904		)	—			(6,958,904		)
Stock Option Compensation Expense	—		—			—		(2,580		)	—			—			—			(2,580		)
Redemption of Warrant Issued in Conjunction with Preferred Stock	—		(400,000		)			350,000												(50,000		)
Cash Dividends on Preferred Stock	—		—			—		—			—			—			(440,000		)	(440,000		)
Cash Dividends on Common Stock	—		—			—		—			—			—			(942,082		)	(942,082		)
Balance at December 31, 2013	$	22,000,000	$	—		$	31,449	$	11,978,137		$	(4,330,712	)	$	472,406		$	47,838,800		$	77,990,080

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

38

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	For the Years Ended December 31,
	2015			2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	6,115,927		$	5,810,740		$	3,791,162
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Depreciation Expense	1,242,378			1,214,912			1,243,839
Amortization of Intangible Assets	—			11,970			50,004
Stock Option Compensation Expense	12,676			12,676			(2,580		)
Discount Accretion and Premium Amortization	4,852,140			5,180,338			7,162,479
Provisions For Losses on Loans	—			450,000			2,645,381
Income From Bank Owned Life Insurance	(423,000		)	(300,000		)	(339,000		)
Gain on Sales of Loans	(689,843		)	(620,994		)	(779,554		)
Gain On Sales of Mortgage-Backed Securities	(510,702		)	(503,288		)	(1,104,491		)
(Gain) Loss on Sales of Investment Securities	(1,375,379		)	66,417			(221,332		)
Gain on Sale of OREO	(227,053		)	(303,440		)	(101,645		)
Write Down on OREO	312,347			505,000			1,394,378
Gain on Disposal of Premises and Equipment	(5,647		)	—			—
Amortization of Deferred Costs on Loans	64,257			6,154			6,589
Proceeds From Sale of Loans Held For Sale	24,272,860			23,607,017			33,207,780
Origination of Loans Held For Sale	(24,180,577		)	(23,616,864		)	(28,891,624		)
(Increase) Decrease in Accrued Interest Receivable:
Loans	84,601			60,178			210,325
Mortgage-Backed Securities	67,660			49,515			169,323
Investment Securities	(114,276		)	(15,768		)	(261,894		)
Increase (Decrease) in Advance Payments By Borrowers	(9,622		)	10,988			65,940
Decrease in Prepaid FDIC Assessment	—			—			1,781,476
Other, Net	(502,072		)	575,230			335,386
Net Cash Provided By Operating Activities	8,986,675			12,200,781			20,361,942
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Mortgage-Backed Securities Available For Sale ("AFS")	(35,881,719		)	(54,673,351		)	(88,844,145		)
Principal Repayments on Mortgage-Backed Securities AFS	28,187,696			32,752,039			56,166,594
Principal Repayments on Mortgage-Backed Securities Held To Maturity	2,663,303			—			942,806
Purchase of Investment Securities AFS	(78,573,124		)	(64,593,473		)	(72,626,491		)
Principal Repayments on Investment Securities AFS	21,151,344			—			—
Maturities of Investment Securities AFS	9,707,511			21,531,825			22,028,941
Purchase of Investment Securities Held To Maturity	—			—			(1,000,000		)
Maturities of Investment Securities Held To Maturity	—			—			3,501,978
Proceeds From Sale of Investment Securities AFS	44,312,795			37,842,271			21,957,851
Proceeds From Sale of Mortgage-Backed Securities AFS	27,329,862			31,762,151			40,802,371
Investment in Certificates of Deposits with Other Banks	(1,350,005		)	—			(370,000		)
Purchase of FHLB Stock	(5,044,000		)	(5,905,180		)	(4,950,606		)
Redemption of FHLB Stock	5,973,800			7,777,180			6,112,706
(Purchase of) Proceeds From Bank Owned Life Insurance	(5,000,000		)	624,260			—
Decrease in Loans Receivable	5,472,435			17,578,222			28,739,400
Proceeds From Sale of OREO	3,145,640			2,154,091			5,375,648
Purchase and Improvement of Premises and Equipment	(3,164,108		)	(2,204,748		)	(567,582		)
Proceeds From Sale and Disposal of Premises and Equipment	43,686			—			—
Net Cash Provided By Investing Activities	18,975,116			24,645,287			17,269,471

39

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

	For the Years Ended December 31,
	2015			2014			2013
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Deposit Accounts	(8,018,619		)	1,418,392			(17,641,881		)
Proceeds From FHLB Advances	284,804,000			253,630,000			150,800,000
Repayment of FHLB Advances	(303,064,000		)	(288,470,058		)	(168,317,124		)
Proceeds From (Repayments of) Other Borrowings, Net	(2,111,371		)	520,609			(1,314,505		)
Repayment of Warrant Issued in Conjunction with Preferred Stock	—			—			(50,000		)
Dividends to Preferred Stock Shareholders	(440,000		)	(440,000		)	(440,000		)
Dividends to Common Stock Shareholders	(942,552		)	(942,080		)	(942,082		)
Net Cash Used By Financing Activities	(29,772,542		)	(34,283,137		)	(37,905,592		)
Net Increase (Decrease) in Cash and Cash Equivalents	(1,810,751		)	2,562,931			(274,179		)
Cash and Cash Equivalents at Beginning of Year	10,192,702			7,629,771			7,903,950
Cash and Cash Equivalents at End of Year	$	8,381,951		$	10,192,702		$	7,629,771
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During the Period For:
Interest	$	4,384,109		$	5,969,581		$	7,728,772
Income Taxes	$	2,258,388		$	1,464,350		$	448,419
Supplemental Schedule of Non Cash Transactions:
Transfers from Loans Receivable to OREO	$	4,362,635		$	1,638,135		$	3,861,182
Transfers from Investment Securities Held To Maturity to AFS	$	—		$	—		$	49,907,323
Transfers from Mortgage-Backed Securities Held To Maturity to AFS	$	—		$	—		$	22,100,000
Transfers from Mortgage-Backed Securities AFS to Held To Maturity	$	32,811,452		$	—		$	—
Increase (Decrease) in Unrealized Gains on Securities AFS, Net of Taxes	$	(1,214,014	)	$	5,003,969		$	(6,958,904	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

40

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies

The following is a description of the more significant accounting and reporting policies used in the preparation and presentation of the accompanying consolidated financial statements.  All significant intercompany transactions have been eliminated in consolidation.

(a) Basis of Consolidation and Nature of Operations

The accompanying consolidated financial statements include the accounts of Security Federal Corporation (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”).  Security Federal Corporation 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 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.  SFINS was formed during fiscal 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, 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 was formed in 1975 and is currently inactive.

(b) Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing balances in other banks, and federal funds sold.  Cash equivalents have original maturities of three months or less.

(c) Investment and Mortgage-Backed Securities

Investment securities, including mortgage-backed securities, are classified in one of three categories: held to maturity, available for sale, or trading.  Management determines the appropriate classification of debt securities at the time of purchase. Investment securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity.  These securities are recorded at cost and adjusted for amortization of premiums and accretion of discounts over the estimated life of the security using a method that approximates a level yield.  Prepayment assumptions on mortgage-backed securities are anticipated.

Management classifies investment securities that are not considered to be held to maturity as available for sale.  This type of investment is stated at fair value with unrealized gains and losses, net of tax, reported in a separate component of shareholders' equity (“accumulated other comprehensive income”).  Gains and losses from sales of investment and mortgage-backed securities available for sale are determined using the specific identification method.  The Company had no investment in trading securities.

(d) Loans Receivable Held for Investment

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest is recognized over the term of the loan based on the outstanding loan balance. Fees charged for originating loans, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees are recognized as yield adjustments by applying the interest method.

41

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

(e) Allowance for Loan Losses

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. 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 bank regulatory agencies 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 less estimated selling costs.  In accordance with our policy, non-accrual commercial loans with a balance less than $200,000 and non-accrual consumer loans with a balance less than $100,000 are deemed immaterial and therefore excluded from the individual impairment review. 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.

(f) Loans Receivable Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate.  Net unrealized losses are provided for in a valuation allowance by charges to operations.

(g) Other Real Estate Owned

Other real estate owned represents real estate and other assets acquired through foreclosure or repossession and are initially recorded at the estimated fair value less costs to sell.  Subsequent improvements are capitalized.  Costs of holding real estate, such as property taxes, insurance, general maintenance and interest expense, are expensed as a period cost.  Fair values are reviewed regularly and allowances for possible losses are established when the carrying value of the asset owned exceeds the fair value less estimated costs to sell.  Fair values are generally determined by reference to an outside appraisal.

(h) Premises and Equipment

Premises and equipment are carried at cost, net of accumulated depreciation.  Depreciation of premises and equipment is amortized on a straight-line method over the estimated useful life of the related asset.  Estimated lives are seven to 40 years for buildings and improvements and generally three to 10 years for furniture, fixtures and equipment.  Maintenance and repairs are charged to current expense.  The cost of major renewals and improvements are capitalized.

(i) Intangible Assets and Goodwill

The goodwill is a result of the excess of the cost over the fair value of net assets resulting from the Collier Jennings acquisition in July 2006.

42

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

Intangible assets are amortized over their estimated economic lives using methods that reflect the pattern in which the economic benefits are utilized.  The intangible assets which consisted of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation, were fully amortized during the year ended December 31, 2015. Goodwill is reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

(j) Income Taxes

Income tax expense or benefit is recognized for the net change during the year in the deferred tax liability or asset.  That amount together with income taxes currently payable is the total amount of income tax expense or benefit for the year.  Deferred taxes are provided for by the differences in financial reporting bases for assets and liabilities compared with their tax bases.  Generally, a current tax liability or asset is established for taxes presently payable or refundable and a deferred tax liability or asset is established for future tax items.  A valuation allowance, if applicable, is established for deferred tax assets that may not be realized.  Tax bad debt reserves in excess of the base year amount (established as taxable years ending March 31, 1988 or later) would create a deferred tax liability.  Deferred income taxes are provided for in differences between the provision for loan losses for financial statement purposes and those allowed for income tax purposes.

The Company adopted accounting guidance which prescribes a threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosures.

There have been no gross amounts of unrecognized tax benefits or interest or penalties related to uncertain tax positions since adoption. There are no unrecognized tax benefits that would, if recognized, affect the effective tax rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. Years prior to March 31, 2012 are closed for federal, state and local income tax matters.

(k) Loan Fees and Costs Associated with Originating Loans

Loan fees received, net of direct incremental costs of originating loans, are deferred and amortized over the contractual life of the related loan.  The net fees are recognized as yield adjustments by applying the interest method.  Prepayments are not anticipated.

(l) Interest Income

Interest on loans is accrued and credited to income monthly based on the principal balance outstanding and the contractual rate on the loan.  The Company places loans on non-accrual status when they become greater than 90 days delinquent or when, in the opinion of management, full collection of principal or interest is unlikely.  When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received first to principal and then to interest income. The loans are returned to an accrual status when full collection of principal and interest appears likely.

(m) Advertising Expense

Advertising and public relations costs are generally expensed as incurred.  External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent.  Advertising and public relations costs of$416,000, $484,000, and $356,000 were included in the Company’s results of operations for the years ended December 31, 2015, 2014 and 2013, respectively.

(n) Stock-Based Compensation

The Company accounts for compensation costs under its stock option plans using the fair value method. This method requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is recognized in the income statement over the vesting period of the award.

43

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

(o) Net Income Per Common Share

Accounting guidance specifies computation and presentation requirements for both basic net income per common share ("EPS") and, for entities with complex capital structures, diluted EPS.  Basic EPS is computed by dividing net income available to common shareholders 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 potential common shares had been issued.  The dilutive effect of options and warrants outstanding is reflected in diluted earnings per share by application of the treasury stock method.

Net income available to common shareholders represents consolidated net income adjusted for preferred dividends declared, accretion of discounts and amortization of premiums on preferred stock issuances and cumulative dividends related to the current dividend period that have not been declared as of period end.

The following table provides a reconciliation of net income to net income available to common shareholders for the periods presented:

	For the Years Ended December 31,
	2015		2014		2013
Earnings Available To Common Shareholders
Net Income	$	6,115,927	$	5,810,740	$	3,791,162
Preferred Stock Dividends	440,000		440,000		440,000
Net Income Available To Common Shareholders	$	5,675,927	$	5,370,740	$	3,351,162

The following tables show the effect of dilutive options and warrants on the Company’s net income per common share for the periods indicated:

	For the Year Ended December 31, 2015
	Income		Shares	Per Share Amounts
Basic EPS	$	5,675,927	2,944,001	$	1.93
Effect of Dilutive Securities:
Senior Convertible Debentures	301,766		304,200	(0.09		)
Unvested Restricted Stock	—		111	—
Diluted EPS	$	5,977,693	3,248,312	$	1.84

	For the Year Ended December 31, 2014
	Income		Shares	Per Share Amounts
Basic EPS	$	5,370,740	2,944,001	$	1.82
Effect of Dilutive Securities:
Senior Convertible Debentures	301,766		304,200	(0.07		)
Diluted EPS	$	5,672,506	3,248,201	$	1.75

	For the Year Ended December 31, 2013
	Income		Shares	Per Share Amounts
Basic EPS	$	3,351,162	2,944,001	$	1.14
Effect of Dilutive Securities:
Senior Convertible Debentures	301,766		304,200	(0.02		)
Diluted EPS	$	3,652,928	3,248,201	$	1.12

44

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

The average market price used in calculating the assumed number of dilutive shares issued for the years ended December 31, 2015, 2014 and 2013 was $18.61, $14.56, and $11.37 respectively. As a result of the average stock price being less than the exercise price of all options in the years ended December 31, 2015, 2014 and 2013, the options were not dilutive in calculating diluted earnings per share for those periods.

(p) Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of income and expenses during the reporting periods.  Actual results could differ from those estimates.

(q) Recently Issued Accounting Standards

The following is a summary of recent authoritative pronouncements that could affect accounting, reporting, and disclosure of financial information by the Company:

In January 2014, the FASB amended the Investments-Equity Method and Joint Ventures topic of the Accounting Standards Codification ("ASC") to address accounting for investments in qualified affordable housing projects. If certain conditions are met, the amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects by amortizing the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizing the net investment performance in the income statement as a component of income tax expense (benefit). If those conditions are not met, the investment should be accounted for as an equity method investment or a cost method investment in accordance with existing accounting guidance. The amendments were effective for the Company for interim and annual reporting periods beginning after December 15, 2014 and were applied retrospectively for all periods presented. The amendments did not have a material effect on the Company's financial statements.

In January 2014, the FASB amended the Receivables topic of the ASC. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned, or OREO. In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The amendments were effective for the Company for annual and interim periods beginning after December 15, 2014. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company applied the amendments prospectively. These amendments did not have a material effect on the Company's consolidated financial statements.

In May 2014 and August 2015, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments were effective for the Company on January 1, 2015. These amendments did not have a material effect on the Company's consolidated financial statements.

45

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

In June 2014, the FASB issued guidance which clarifies that performance targets associated with stock compensation should be treated as a performance condition and should not be reflected in the grant date fair value of the stock award. The amendments will be effective for the Company for fiscal years that begin after December 15, 2015. The Company will apply the guidance to all stock awards granted or modified after the amendments are effective. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In February 2015, the FASB issued guidance which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all of its previous consolidation conclusions. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In November 2015, the FASB voted to amend the current lease accounting standard to bring most leases on the balance sheet. The new lease standard will be implemented using a modified retrospective approach. Under this approach, lessees and lessors will compute lease assets and liabilities based on the remaining payments for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements (the date of initial application). In addition, a lessee may elect specified transition relief provisions. The final ASU is expected to be published in early 2016 and will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption willl be permitted. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the ASC to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting authorities are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

(r) Risks and Uncertainties

In the normal course of its business, the Company encounters two significant types of risk: economic and regulatory.  There are three main components of economic risk: interest rate risk, credit risk, and market risk.  The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different bases, than its interest-earning assets.  Credit risk is the risk of default on the Company’s loan portfolio that results from borrowers’ inability or unwillingness to make contractually required payments.  Market risk reflects changes in the value of collateral underlying loans receivable, the valuation of real estate held by the Company, and the valuation of loans held for sale and mortgage-backed securities available for sale.  The Company is subject to the regulations of various government agencies.  These regulations can and do change significantly from period to period.  The Company also undergoes periodic examinations by the bank regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances, and operating restrictions, resulting from the regulators’ judgments based on information available to them at the time of their examination.

(s) Reclassifications

Certain amounts in prior years’ consolidated financial statements have been reclassified to conform to current period classifications.

46

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(2)         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 are as follows:

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	2,000,000	$	—	$	67,912	$	1,932,088
Federal Farm Credit Bank ("FFCB") Securities	2,000,000		—		12,064		1,987,936
Federal National Mortgage Association ("FNMA") Bonds	997,564		6,767		—		1,004,331
Small Business Administration (“SBA”) Bonds	110,195,113		1,415,464		193,795		111,416,782
Tax Exempt Municipal Bonds	73,499,636		2,770,115		204,132		76,065,619
Mortgage-Backed Securities	180,197,347		3,281,116		681,251		182,797,212
Equity Securities	250,438		59,464		—		309,902
	$	369,140,098	$	7,532,926	$	1,159,154	$	375,513,870
	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,317,462	$	83,691	$	154,492	$	13,246,661
FFCB Securities	5,750,000		—		82,006		5,667,994
FNMA Bonds	996,822		7,559		—		1,004,381
SBA Bonds	106,637,400		1,796,943		307,649		108,126,694
Tax Exempt Municipal Bonds	59,960,960		2,579,543		45,080		62,495,423
Mortgage-Backed Securities	233,963,842		5,704,855		815,984		238,852,713
Equity Securities	250,438		56,236		—		306,674
	$	420,876,924	$	10,228,827	$	1,405,211	$	429,700,540

FHLB securities, FFCB securities, FNMA bonds, and FNMA and FHLMC mortgage-backed securities are issued by government-sponsored enterprises (“GSEs”).  GSEs are not backed by the full faith and credit of the United States government.  SBA bonds are 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 December 31, 2015, the Bank held an amortized cost and fair value of $116.8 million and $118.5 million, respectively, in GNMA mortgage-backed securities, which are included in mortgage-backed securities in the tables above, compared to an amortized cost and fair value of $156.8 million and $160.6 million, respectively, at December 31, 2014. Also included in mortgage-backed securities in the tables above and below are four private label collateralized mortgage obligation ("CMO") securities purchased by the Bank during the year ended December 31, 2015. These securities are issued by non-governmental real estate mortgage investment conduits, which are not backed by the full faith and credit of the United States government.  At December 31, 2015 the Bank held both an amortized cost and fair value of $3.8 million in private label CMO mortgage-backed securities, which are included in mortgage-backed securities in the tables above. There were no private label mortgage-backed securities held at December 31, 2014.

47

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(2)         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 December 31, 2015 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 the maturity groupings below.

	Amortized Cost		Fair Value
Less Than One Year	$	421,237	$	420,631
One – Five Years	13,898,304		14,144,321
Five – Ten Years	57,135,325		58,129,443
After Ten Years	117,487,885		120,022,263
Mortgage-Backed Securities	180,197,347		182,797,212
	$	369,140,098	$	375,513,870

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 $81.0 million and $83.2 million, respectively, at December 31, 2015 and $120.7 million and $124.4 million, respectively, at December 31, 2014.

The Bank received $71.6 million, $69.6 million and $62.8 million in gross proceeds from sales of available for sale securities during the years ended December 31, 2015, 2014 and 2013, respectively. As a result, the Bank recognized $2.0 million in gross gains and $72,000 in gross losses for the year ended December 31, 2015, $1.1 million in gross gains and $623,000 in gross losses for the year ended December 31, 2014, and $1.6 million in gross gains and $279,000 in gross losses for the year ended December 31, 2013.

The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that individual available for sale securities have been in a continuous unrealized loss position for the periods indicated.

	December 31, 2015
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	—	$	—	$	1,932,088	$	67,912	$	1,932,088	$	67,912
FFCB Securities	1,987,936		12,064		—		—		1,987,936		12,064
SBA Bonds	25,090,453		119,533		7,982,777		74,262		33,073,230		193,795
Tax Exempt Municipal Bonds	13,668,473		175,020		709,800		29,112		14,378,273		204,132
Mortgage-Backed Securities	63,273,417		648,862		1,706,086		32,389		64,979,503		681,251
	$	104,020,279	$	955,479	$	12,330,751	$	203,675	$	116,351,030	$	1,159,154

48

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(2)         Investment and Mortgage-Backed Securities, Available For Sale, Continued

	December 31, 2014
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	994,818	$	5,182	$	3,850,690	$	149,310	$	4,845,508	$	154,492
FFCB Securities	—		—		5,667,994		82,006		5,667,994		82,006
SBA Bonds	27,859,461		223,070		4,920,631		84,579		32,780,092		307,649
Tax Exempt Municipal Bonds	3,605,319		16,039		1,710,586		29,041		5,315,905		45,080
Mortgage-Backed Securities	34,840,832		208,242		30,899,075		607,742		65,739,907		815,984
	$	67,300,430	$	452,533	$	47,048,976	$	952,678	$	114,349,406	$	1,405,211

Securities classified as available-for-sale are recorded at fair market value.  At December 31, 2015, 17.6% of the unrealized losses, or nine individual securities, consisted of securities in a continuous loss position for 12 months or more.  At December 31, 2014, 67.8% of the unrealized losses, or 24 individual securities, 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 a portion may be recognized 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 years ended December 31, 2015, 2014 and 2013.

49

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(3)         Investment and Mortgage-Backed Securities, Held to Maturity

During the year ended December 31, 2015 the Company transferred 22 mortgage-backed securities classified as available for sale to its held to maturity portfolio. Management expects interest rates to rise in 2016 and elected to transfer these securities in an effort to reduce volatility in equity. At the date of the transfer these securities had a fair value $32.8 million, which resulted in an unrealized gain of $602,000 that is reported in accumulated other comprehensive income and will be amortized over the remaining life of the securities. The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of held to maturity securities at December 31, 2015 are as follows:

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage-Backed Securities (1)	$	29,873,098	$	22,600	$	214,418	$	29,681,280
Total Held To Maturity	$	29,873,098	$	22,600	$	214,418	$	29,681,280

^{(1) COMPRISED OF GSES OR GNMA MORTGAGE-BACKED SECURITIES} 

Other than the mortgage-backed securities included in the table above, there were no other investment securities classified as held to maturity at December 31, 2015. There were no investment or mortgage-backed securities classified as held to maturity at December 31, 2014.

At December 31, 2015, the Bank held GNMA mortgage-backed securities that had an amortized cost and fair value of $20.5 million and $20.4 million, respectively. The Company has not invested in any private label mortgage-backed securities classified as held to maturity.

At December 31, 2015, the amortized cost and fair value of mortgage-backed securities held to maturity pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $26.0 million and $25.8 million, respectively.

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 December 31, 2015.

Insert Title Here
	December 31, 2015
	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)	$	25,484,972	$	214,418	$	—	$	—	$	25,484,972	$	214,418
	$	25,484,972	$	214,418	$	—	$	—	$	25,484,972	$	214,418

^{(1) COMPRISED OF GNMA MORTGAGE-BACKED SECURITIES} 

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.

50

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates shown:

	December 31, 2015		December 31, 2014
Residential Real Estate Loans	$	76,373,071	$	77,282,817
Consumer Loans	50,380,289		50,391,224
Commercial Business	12,514,133		10,564,467
Commercial Real Estate	200,083,125		209,530,209
Total Loans Held For Investment	339,350,618		347,768,717
Loans Held For Sale	2,462,559		1,864,999
Total Loans Receivable, Gross	341,813,177		349,633,716
Less:
Allowance For Loan Losses	8,275,133		8,357,496
Loans In Process	2,902,849		1,379,114
Deferred Loan Fees	62,466		22,611
	11,240,448		9,759,221
Total Loans Receivable, Net	$	330,572,729	$	339,874,495

Changes in the allowance for loan losses for the years ended December 31, 2015, 2014 and 2013 are summarized as follows:

	2015			2014			2013
Balance At Beginning Of Period	$	8,357,496		$	10,241,970		$	11,318,371
Provision For Loan Losses	—			450,000			2,645,381
Charge Offs	(1,516,468		)	(3,114,833		)	(5,209,830		)
Recoveries	1,434,105			780,359			1,488,048
Total Allowance For Loan Losses	$	8,275,133		$	8,357,496		$	10,241,970

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 60 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 possess weaknesses that do not currently expose the Company to sufficient risk to warrant adverse classification.

51

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net, Continued

The following tables list the loan grades used by the Company as credit quality indicators and the balance in each category at the dates presented, excluding loans held for sale.

	Credit Quality Measures
December 31, 2015	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	67,605,311	$	1,264,415	$	607,336	$	6,896,009	$	76,373,071
Consumer	46,344,056		2,510,519		81,617		1,444,097		50,380,289
Commercial Business	10,519,123		1,465,136		102,046		427,828		12,514,133
Commercial Real Estate	129,242,390		43,863,659		17,304,431		9,672,645		200,083,125
Total	$	253,710,880	$	49,103,729	$	18,095,430	$	18,440,579	$	339,350,618

	Credit Quality Measures
December 31, 2014	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	69,163,911	$	956,976	$	639,638	$	6,522,292	$	77,282,817
Consumer	48,283,560		1,046,624		128,033		933,007		50,391,224
Commercial Business	9,691,685		340,706		202,895		329,181		10,564,467
Commercial Real Estate	125,339,273		32,549,335		35,169,358		16,472,243		209,530,209
Total	$	252,478,429	$	34,893,641	$	36,139,924	$	24,256,723	$	347,768,717

The following table presents an age analysis of past due balances by category at December 31, 2015.

	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	$	—	$	1,144,381	$	3,306,675	$	4,451,056	$	71,922,015	$	76,373,071
Consumer	710,881		282,314		575,866		1,569,061		48,811,228		50,380,289
Commercial Business	101,201		—		178,076		279,277		12,234,856		12,514,133
Commercial Real Estate	3,309,287		929,819		2,973,135		7,212,241		192,870,884		200,083,125
Total	$	4,121,369	$	2,356,514	$	7,033,752	$	13,511,635	$	325,838,983	$	339,350,618

The following table presents an age analysis of past due balances by category at December 31, 2014.

	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	$	—	$	1,087,299	$	3,061,339	$	4,148,638	$	73,134,179	$	77,282,817
Consumer	1,868,787		91,223		573,644		2,533,654		47,857,570		50,391,224
Commercial Business	162,481		99,784		246,977		509,242		10,055,225		10,564,467
Commercial Real Estate	4,544,813		1,094,701		9,859,689		15,499,203		194,031,006		209,530,209
Total	$	6,576,081	$	2,373,007	$	13,741,649	$	22,690,737	$	325,077,980	$	347,768,717

52

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net, Continued

At December 31, 2015 and 2014, 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 December 31, 2015 compared to 2014.

	At December 31, 2015				At December 31, 2014				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	3,306,675	1.0	%	$	3,061,339	0.9	%	$	245,336		8.0	%
Commercial Business	178,076		0.1		246,977		0.1		(68,901		)	(27.9	)
Commercial Real Estate	2,973,135		0.8		9,859,689		2.8		(6,886,554		)	(69.8	)
Consumer	575,866		0.2		573,644		0.2		2,222			0.4
Total Non- accrual Loans	$	7,033,752	2.1	%	$	13,741,649	4.0	%	$	(6,707,897	)	(48.8	)%

^{(1) PERCENT OF GROSS LOANS RECEIVABLE 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 periods indicated.

	For the Year Ended December 31, 2015
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,392,065		$	886,716		$	159,353		$	5,919,362		$	8,357,496
Provision	53,694			549,462			617,658			(1,220,814		)	—
Charge-Offs	(216,525		)	(527,055		)	(10,947		)	(761,941		)	(1,516,468		)
Recoveries	93,949			154,030			7,884			1,178,242			1,434,105
Ending Balance	$	1,323,183		$	1,063,153		$	773,948		$	5,114,849		$	8,275,133

	For the Year Ended December 31, 2014
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,706,643		$	847,777		$	426,658		$	7,260,892		$	10,241,970
Provision	(91,991		)	352,305			(53,435		)	243,121			450,000
Charge-Offs	(359,021		)	(372,460		)	(328,094		)	(2,055,258		)	(3,114,833		)
Recoveries	136,434			59,094			114,224			470,607			780,359
Ending Balance	$	1,392,065		$	886,716		$	159,353		$	5,919,362		$	8,357,496

	For the Year Ended December 31, 2013
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,521,559		$	1,001,271		$	618,919		$	8,176,622		$	11,318,371
Provision	1,030,237			(5,306		)	(187,377		)	1,807,827			2,645,381
Charge-Offs	(1,118,168		)	(207,230		)	(31,831		)	(3,852,601		)	(5,209,830		)
Recoveries	273,015			59,042			26,947			1,129,044			1,488,048
Ending Balance	$	1,706,643		$	847,777		$	426,658		$	7,260,892		$	10,241,970

53

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net, Continued

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses as of the dates indicated.

	Allowance For Loan Losses
December 31, 2015	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,323,183	$	1,323,183
Consumer	32,300		1,030,853		1,063,153
Commercial Business	—		773,948		773,948
Commercial Real Estate	49,300		5,065,549		5,114,849
Total	$	81,600	$	8,193,533	$	8,275,133

	Allowance For Loan Losses
December 31, 2014	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,392,065	$	1,392,065
Consumer	2,600		884,116		886,716
Commercial Business	—		159,353		159,353
Commercial Real Estate	472,400		5,446,962		5,919,362
Total	$	475,000	$	7,882,496	$	8,357,496

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in loans receivable as of the dates indicated.

	Loans Receivable
December 31, 2015	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,922,105	$	73,450,966	$	76,373,071
Consumer	372,382		50,007,907		50,380,289
Commercial Business	162,201		12,351,932		12,514,133
Commercial Real Estate	9,190,640		190,892,485		200,083,125
Total	$	12,647,328	$	326,703,290	$	339,350,618

	Loans Receivable
December 31, 2014	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,519,814	$	74,763,003	$	77,282,817
Consumer	218,232		50,172,992		50,391,224
Commercial Business	236,030		10,328,437		10,564,467
Commercial Real Estate	17,273,879		192,256,330		209,530,209
Total	$	20,247,955	$	327,520,762	$	347,768,717

54

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       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 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 sale, 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 total impaired loans was $13.1 million for year ended December 31, 2015 compared to $22.2 million for the year ended December 31, 2014.

The following tables are a summary of information related to impaired loans as of and for the years ended December 31, 2015, 2014 and 2013.

	December 31, 2015
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	2,922,105	$	3,033,735	$	—	$	3,014,807	$	13,909
Consumer	120,889		129,188		—		130,202		—
Commercial Business	162,201		362,201		—		190,562		—
Commercial Real Estate	8,620,301		10,969,642		—		8,952,868		245,197
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	251,493		256,923		32,300		254,611		4,789
Commercial Business	—		—		—		—		—
Commercial Real Estate	570,339		577,139		49,300		579,418		31,684
Total
Residential Real Estate	2,922,105		3,033,735		—		3,014,807		13,909
Consumer	372,382		386,111		32,300		384,813		4,789
Commercial Business	162,201		362,201		—		190,562		—
Commercial Real Estate	9,190,640		11,546,781		49,300		9,532,286		276,881
Total	$	12,647,328	$	15,328,828	$	81,600	$	13,122,468	$	295,579

55

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       Loans Receivable, Net, Continued

	December 31, 2014
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	2,519,814	$	2,618,003	$	—	$	2,642,156	$	—
Consumer	152,029		159,529		—		155,602		1,510
Commercial Business	236,030		436,030		—		413,653		—
Commercial Real Estate	13,721,964		18,088,149		—		14,980,690		297,839
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	66,203		66,203		2,600		67,522		4,867
Commercial Business	—		—		—		—		—
Commercial Real Estate	3,551,915		3,582,465		472,400		3,952,066		60,207
Total
Residential Real Estate	2,519,814		2,618,003		—		2,642,156		—
Consumer	218,232		225,732		2,600		223,124		6,377
Commercial Business	236,030		436,030		—		413,653		—
Commercial Real Estate	17,273,879		21,670,614		472,400		18,932,756		358,046
Total	$	20,247,955	$	24,950,379	$	475,000	$	22,211,689	$	364,423

	December 31, 2013
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	3,936,316	$	4,588,645	$	—	$	4,044,142	$	31,704
Consumer	106,197		106,198		—		104,539		953
Commercial Business	19,775		19,775		—		19,896		389
Commercial Real Estate	21,810,347		26,775,853		—		23,618,648		886,737
With An Allowance Recorded:
Residential Real Estate	901,920		901,920		158,791		909,473		—
Consumer	169,294		169,294		103,109		170,499		5,173
Commercial Business	—		—		—		—		—
Commercial Real Estate	4,410,965		4,954,058		840,658		4,707,658		251,505
Total
Residential Real Estate	4,838,236		5,490,565		158,791		4,953,615		31,704
Consumer	275,491		275,492		103,109		275,038		6,126
Commercial Business	19,775		19,775		—		19,896		389
Commercial Real Estate	26,221,312		31,729,911		840,658		28,326,306		1,138,242
Total	$	31,354,814	$	37,515,743	$	1,102,558	$	33,574,855	$	1,176,461

56

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (FASB ASC Topic 310-40).  The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.  All TDRs are included in impaired loans at December 31, 2015 and 2014 and amounted to $6.7 million and $9.6 million, respectively.

Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of concession are initially classified as accruing TDRs if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the concession date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. Nonaccrual TDRs are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower's financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six months).

The following table is a summary of loans restructured as TDRs during the periods indicated:

	For the Year Ended December 31, 2015
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—
Consumer Loans	1	36,460		36,460
Commercial Business	—	—		—
Commercial Real Estate	6	922,000		922,000
Total	7	958,460		958,460

	For the Year Ended December 31, 2014					For the Year Ended December 31, 2013
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—	—	$	—	$	—
Consumer Loans	—	—		—		—	—		—
Commercial Business	—	—		—		1	32,850		32,850
Commercial Real Estate	2	186,188		186,188		4	1,409,693		1,409,693
Total	2	186,188		186,188		5	1,442,543		1,442,543

57

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       Loans Receivable, Net, Continued

During the year ended December 31, 2015, the Bank modified seven loans that were considered to be TDRs.The Bank lowered the interest rate on three of the loans to allow the borrowers to begin making monthly principal and interest payments on the loans and changed the monthly payment to an interest only payment for an agreed upon period for the other four loans. During the year ended December 31, 2014, the Bank modified two loans that were considered TDRs by lowering the interest rate on both loans. During the year ended December 31, 2013, the Bank modified five loans that were considered to be TDRs. The Bank lowered the interest rate on each of these loans and changed the payment to interest only on for an agreed upon period on three of these loans.

The following table is a summary of TDRs restructured during the periods indicated that subsequently defaulted during the same period:

	For the Year Ended December 31,
	2015			2014			2013
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential Real Estate	—	$	—	—	$	—	—	$	—
Consumer Loans	—	—		—	—		—	—
Commercial Business	—	—		—	—		—	—
Commercial Real Estate	2	30,713		1	66,138		1	146,267
Total	2	$	30,713	1	$	66,138	1	$	146,267

At December 31, 2015, six previously restructured loans were in default, including two which had been restructured in the last 12 months. At December 31, 2014, seven loans that had been previously restructured were in default, including one which had been restructured within the last 12 months. At December 31, 2013, five previously restructured loans were in default, including one which had been restructured during the same period. The Bank considers any loan 30 days or more past due to be in default.

Our policy with respect to accrual of interest on loans restructured in a TDR follows relevant supervisory guidance.  That is, if a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is likely.  If a borrower was materially delinquent on payments prior to the restructuring but shows capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual going forward.  Lastly, if the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status.

We will continue to closely monitor these loans and will cease accruing interest on them if management believes that the borrowers may not continue performing based on the restructured note terms.  If, after previously being classified as a TDR, a loan is restructured a second time, then that loan is automatically placed on nonaccrual status.  Our policy with respect to nonperforming loans requires the borrower to become current and then make a minimum of six consecutive payments in accordance with the loan terms before that loan can be placed back on accrual status.  Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status.

58

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(5)Premises and Equipment, Net

Premises and equipment, net, are summarized as follows at the dates indicated:

	December 31,
	2015			2014
Land	$	6,693,927		$	6,729,097
Buildings and Improvements	20,040,102			17,796,209
Furniture and Equipment	11,142,428			11,068,028
Construction in Progress	236,019			184,040
Total Premises and Equipment	38,112,476			35,777,374
Less Accumulated Depreciation	(17,995,558		)	(17,544,148		)
Total Premises and Equipment, Net	$	20,116,918		$	18,233,226

Depreciation expense was $1.2 million for each of the years ended December 31, 2015, 2014 and 2013. The Bank has entered into non-cancelable operating leases related to buildings and land.  At December 31, 2015, future minimum payments under non-cancelable operating leases with initial or remaining terms of one year or more are as follows (by fiscal year):

2016	$	356,440
2017	326,000
2018	223,029
2019	214,458
2020	214,458
Thereafter	1,211,468
Total Future Minimum Payments	$	2,545,853

Total rental expense amounted to $417,000, $424,000, and $415,000 for the years ended December 31, 2015, 2014 and 2013, respectively.  Five lease agreements with monthly expenses of $6,737, $800, $7,889, $8,571, and $9,075 have multiple renewal options totaling 30, 10, 15, 45, and 20 years, respectively.

59

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(6)         Intangible Assets and Goodwill

Intangible assets and goodwill are the result of the Collier Jennings acquisition in July 2006.  Changes in intangible assets and goodwill for periods indicated consisted of the following:

	December 31,
	2015		2014
Customer List
Balance At Beginning Of Year	$	—	$	11,970
Amortization	—		11,970
Balance At End Of Year	—		—
Total Intangibles	—		—
Goodwill	1,199,754		1,199,754
Total	$	1,199,754	$	1,199,754

In accordance with accounting guidance, the Company evaluates its goodwill on an annual basis. The evaluations were performed as of September 30, 2015 and September 30, 2014 for fiscal years ended December 31, 2015 and 2014, respectively. At the time of the evaluations the Company determined that no impairment existed. Therefore, there was no write-down of goodwill for the years ended December 31, 2015 and 2014.

(7)         FHLB Stock

The Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to a membership component, which was 0.09% and 0.15% of total assets at December 31, 2015 and 2014, respectively, plus a transaction component equal to 4.25% and 4.50% of outstanding advances (borrowings) from the FHLB of Atlanta at December 31, 2015 and 2014, respectively.  The Bank is in compliance with this requirement with an investment in FHLB of Atlanta stock of $2.2 million and $3.1 million at December 31, 2015 and 2014, respectively. No readily available market exists for this stock and it has no quoted fair value.  However, because redemption of this stock has historically been at par, it is carried at cost.

(8)         Other Real Estate Owned

The Bank owned $4.4 million and $3.2 million in OREO at December 31, 2015 and 2014, respectively. Transactions in OREO for the years ended December 31, 2015, 2014 and 2013 are summarized below.

	2015			2014			2013
Balance, Beginning Of Period	$	3,229,710		$	3,947,226		$	6,754,425
Additions	4,362,635			1,638,135			3,861,182
Sales	(2,918,587		)	(1,850,651		)	(5,274,003		)
Write Downs	(312,347		)	(505,000		)	(1,394,378		)
Balance, End Of Period	$	4,361,411		$	3,229,710		$	3,947,226

60

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(9)         Deposits

Deposits outstanding by type of account are summarized as follows:

	At December 31, 2015				At December 31, 2014
	Balance		Weighted Rate	Interest Rate Range	Balance		Weighted Rate	Interest Rate Range
Checking Accounts	$	155,765,968	0.03%	0.00-0.20%	$	143,422,150	0.03%	0.00-0.15%
Money Market Accounts	229,016,993		0.16%	0.10-0.17%	234,819,052		0.19%	0.10-0.20%
Statement Savings Accounts	31,191,828		0.10%	0.00-0.10%	28,622,933		0.10%	0.00-0.10%
Total	$	415,974,789	0.11%	0.00-0.20%	$	406,864,135	0.13%	0.00-0.20%
Certificate Accounts:
0.00 – 0.99%	$	175,755,511			$	185,458,344
1.00 – 1.99%	51,479,431				42,014,738
2.00 – 2.99%	8,886,814				25,605,349
3.00 – 3.99%	—				172,598
Total	$	236,121,756	0.69%	0.04-2.52%	$	253,251,029	0.79%	0.05-3.01%
Total Deposits	$	652,096,545	0.32%	0.00-2.52%	$	660,115,164	0.38%	0.00-3.01%

Included in the certificates above were $42.5 million and $38.8 million in brokered deposits at December 31, 2015 and 2014, respectively, with a weighted average interest rate of 0.94% and 1.14%, respectively. Of the $42.5 million in brokered deposits at December 31, 2015, $11.5 million mature within one year.

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $132.0 million and $140.0 million at December 31, 2015 and 2014, respectively.

Certificate of deposits that met or exceeded the FDIC insurance limit of $250,000 were $71.3 million and $69.6 million at December 31, 2015 and 2014, respectively.

The amounts and scheduled maturities of all certificates of deposit are as follows:

	At December 31,
	2015		2014
Within 1 Year	$	141,385,500	$	142,490,027
After 1 Year, Within 2 Years	56,022,488		57,481,254
After 2 Years, Within 3 Years	23,139,815		22,273,310
After 3 Years, Within 4 Years	9,179,894		18,114,738
After 4 Years, Within 5 Years	6,394,059		12,891,700
	$	236,121,756	$	253,251,029

At December 31, 2015 and 2014, the Bank had $46,000 and $132,000, respectively, in overdrafts that were reclassified to loans.

61

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(10)         Advances From Federal Home Loan Bank And Other Borrowings

Advances from the FHLB are summarized by year of maturity and weighted average interest rate at December 31, 2015 below:

	Amount		Weighted Rate
2016	$	16,740,000	1.51	%
2017	12,900,000		4.38	%
2018	5,000,000		3.39	%
Total	$	34,640,000	3.87	%

These advances are secured by a blanket collateral agreement with the FHLB by pledging the Bank’s portfolio of residential first mortgage loans and investment securities with an amortized cost and fair value of $77.8 million and $74.7 million, respectively, at December 31, 2015 and $99.9 million and $99.3 million, respectively, at December 31, 2014. Advances are subject to prepayment penalties.

The following table shows callable FHLB advances at December 31, 2015. These advances are also included in the above table.  All callable advances are callable at the option of the FHLB.  If an advance is called, the Bank has the option to pay off the advance without penalty, re-borrow funds on different terms, or convert the advance to a three-month floating rate advance tied to LIBOR.

Borrow Date	Maturity Date	Amount	Int. Rate	Type	Call Dates
11/29/06	11/29/16	$5,000,000	4.03%	Multi-Call	05/29/08 and quarterly thereafter
05/24/07	05/24/17	$7,900,000	4.38%	Multi-Call	05/24/08 and quarterly thereafter
07/25/07	07/25/17	$5,000,000	4.40%	Multi-Call	07/25/08 and quarterly thereafter

During the year ended December 31, 2015, the Bank prepaid three FHLB advances totaling $15.0 million and incurred $788,000 in prepayment penalties. During the year ended December 31, 2014, the Bank prepaid one FHLB advance totaling $5.0 million and incurred $178,000 in prepayment penalties. During the year ended December 31, 2013, the Bank prepaid six FHLB advances totaling $30.0 million and incurred $589,000 in prepayment penalties.

At December 31, 2015 and 2014, the Bank had $240.2 million and $195.7 million in additional borrowing capacity, respectively, at the FHLB.

The Bank had $6.4 million and $8.5 million in other borrowings at December 31, 2015 and 2014, respectively.  These borrowings consist of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. The repurchase agreements typically mature within one to three days and the interest rate paid on these borrowings floats monthly with money market type rates. At both December 31, 2015 and 2014, the interest rate paid on the repurchase agreements was 0.15%. The maximum amount outstanding at any one month end during the year ended December 31, 2015 was $10.3 million compared to $10.8 million during the year ended December 31, 2014. The Bank had pledged as collateral for these repurchase agreements investment and mortgage-backed securities with amortized costs and fair values of $14.3 million and $14.6 million, respectively, at December 31, 2015 and $17.3 million and $18.0 million, respectively, at December 31, 2014.

(11)         Junior Subordinated Debentures

On September 21, 2006, Security Federal Statutory Trust (the “Trust”), a wholly-owned subsidiary of the Company, issued and sold fixed and floating rate capital securities of the Trust (the “Capital Securities”), which are reported on the consolidated balance sheet as junior subordinated debentures, generating proceeds of $5.2 million. The Trust loaned these proceeds to the Company to use for general corporate purposes, primarily to provide capital to the Bank.

The Capital Securities accrue and pay distributions quarterly at a floating rate of three month LIBOR plus 170 basis points which was a rate per annum equal to 2.21% and 1.94% at December 31, 2015 and 2014, respectively. The distribution rate payable on the Capital Securities is cumulative and payable quarterly in arrears.

(11)         Junior Subordinated Debentures, Continued

The Company has the right, subject to events of default, to defer payments of interest on the Capital Securities for a period not to exceed 20 consecutive quarterly periods, provided that no extension period may extend beyond the maturity date of December 15, 2036. The Company has no current intention to exercise its right to defer payments of interest on the Capital Securities.

The Capital Securities mature or are mandatorily redeemable upon maturity on December 15, 2036, or upon earlier optional redemption as provided in the indenture. The Company has had the right to redeem the Capital Securities in whole or in part since September 15, 2011.

(12)    Senior Convertible Debentures

Effective December 1, 2009, the Company issued $6.1 million in convertible senior debentures. These debentures will mature on December 1, 2029 and accrue interest at the rate of 8.0% per annum until maturity or earlier redemption, repayment, or conversion into common stock. Interest on the debentures is payable on June 1 and December 1 of each year, and commenced June 1, 2010. These debentures are convertible into the Company’s common stock at a conversion price of $20 per share at the option of the holder at any time prior to maturity.

The convertible senior debentures are redeemable, in whole or in part, at the option of the Company at any time on or after December 1, 2019, at a price equal to 100% of the principal amount of the debentures to be purchased plus any accrued and unpaid interest to, but excluding, the date of redemption. These debentures are unsecured general obligations of the Company ranking equal in right of payment to all of our present and future unsecured indebtedness that is not expressly subordinated.

62

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(13)         Income Taxes

Income tax expense was comprised of the following for the dates indicated below:

	For the Years Ended December 31,
	2015		2014		2013
Current:
Federal	$	1,056,002	$	1,833,069	$	380,143
State	285,699		267,904		164,491
Total Current Tax Expense	1,341,701		2,100,973		544,634
Deferred:
Federal	722,699		192,051		784,814
State	2,699		10,144		10,936
Total Deferred Tax Expense	725,398		202,195		795,750
Total Income Tax Expense	$	2,067,099	$	2,303,168	$	1,340,384

The Company's income taxes differ from those computed at the statutory federal income tax rate, as follows:

	For the Years Ended December 31,
	2015			2014			2013
Tax at Statutory Income Tax Rate	$	2,782,229		$	2,758,729		$	1,744,725
State Tax and Other	(41,986		)	66,738			45,761
Tax Exempt Interest	(684,708		)	(534,325		)	(425,450		)
Valuation Allowance	11,564			12,026			(24,652		)
Total Income Tax Expense	$	2,067,099		$	2,303,168		$	1,340,384

63

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(13)         Income Taxes, Continued

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2015 and 2014 are presented below.

	At December 31,
	2015			2014
Deferred Tax Assets:
Deferred Compensation	$	558,870		$	521,256
Provision For Loan Losses	2,846,867			2,872,552
Other Real Estate Owned	1,004,332			1,194,141
Net Fees Deferred For Financial Reporting	112,782			114,924
Non-accrual Interest	—			431,696
Net Operating Losses	231,775			220,211
Other	205,009			207,423
Total Gross Deferred Tax Assets	4,959,635			5,562,203
Less: Valuation Allowance	(231,775		)	(220,211		)
Net Deferred Tax Assets	4,727,860			5,341,992
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,630			114,510
Depreciation	420,568			288,157
Other	42,271			63,536
Unrealized Gain on Securities Available for Sale	2,604,222			3,347,240
Total Gross Deferred Tax Liability	3,181,691			3,813,443
Net Deferred Tax Asset	$	1,546,169		$	1,528,549

Deferred tax assets represent the future tax benefit of deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. As of December 31, 2015, management has determined that it is more likely than not that the total deferred tax asset will be realized except for the deferred tax asset associated with State net operating loss carryforwards, and, accordingly, has established a valuation allowance only for this item. The change in the valuation allowance was $11,564. Net deferred tax assets are included in other assets at December 31, 2015 and 2014. The Company had state net operating losses attributable to the non-bank entities of $7.0 million and $6.7 million for the years ended December 31, 2015 and 2014, respectively.

Retained earnings at December 31, 2015 included tax bad debt reserves of $2.2 million, for which no provision for federal income tax has been made. If, in the future, these amounts are used for any purpose other than to absorb bad debt losses, including dividends, stock redemptions, or distributions in liquidation, or the Company ceases to be qualified as a bank holding company, they may be subject to federal income tax at the prevailing corporate tax rate.  

As of December 31, 2015, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company's policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

Tax returns for 2012 and subsequent years are subject to examination by taxing authorities.

64

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(14)         Regulatory Matters

As a state-chartered, federally insured commercial bank, the Bank is subject to the capital requirements established by the FDIC. Under the FDIC’s capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank became subject to new capital adequacy requirements. The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital.

The Bank is now subject to new capital requirements adopted by the FDIC, which create a new required ratio for common equity Tier 1 ("CET1") capital, increases the leverage and Tier 1 capital ratios, changes the risk-weightings of certain assets for purposes of the risk-based capital ratios, creates an additional capital conservation buffer over the required capital ratios and changes what qualifies as capital for purpose of meeting these various capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. The Bank is required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before it may pay dividends, repurchase shares or pay discretionary bonuses.

The new minimum requirements are a ratio of CET1 capital to total risk-weighted assets (the "CET1 risk-based ratio") of 4.5%, a Tier 1 capital ratio of 6.0%, a total capital ratio of 8.0%, and a leverage ratio of 4.0%. In addition to the minimum CET1, Tier 1 and total capital ratios, the Bank will have to maintain a capital conservation buffer consisting of additional CET1 capital equal to 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement is to be phased in beginning in January 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented in January 2019.

In addition to the capital requirements, there are a number of changes in what constitutes regulatory capital, subject to transition periods. These changes include the phasing-out of certain instruments as qualifying capital. Mortgage servicing rights and deferred tax assets over designated percentages of CET1 will be deducted from capital, subject to a four-year transition period. CET1 will consist of Tier 1 capital less all capital components that are not considered common equity. In addition, Tier 1 capital will include accumulated other comprehensive income (loss), which includes all unrealized gains and losses on available for sale debt and equity securities, subject to a four-year transition period. Because of the Bank's asset size, it was not considered an advanced approaches banking organization and elected in the first quarter of calendar year 2015 to take the one-time option of deciding to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in its capital calculations. The new requirements also include changes in the risk-weighting of assets to better reflect credit risk and other risk exposure. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days or more past due or otherwise on non-accrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital.

Under the new standards, in order to be considered well-capitalized, the Bank must have a CET1 risk-based capital ratio of 6.5% (new), a Tier 1 risk-based capital ratio of 8.0% (increased from 6.0%), a total risk-based capital ratio of 10.0% (unchanged) and a Tier 1 leverage capital ratio of 5.0% (unchanged).

Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. For a bank holding company with less than $1.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company's subsidiary banks to be well-capitalized under the prompt corrective action regulations. If Security Federal Corporation was subject to regulatory guidelines for bank holding companies with $1.0 billion or more in assets, at December 31, 2015, it would have exceeded all regulatory capital requirements.

65

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(14)         Regulatory Matters, Continued

The Company and the Bank’s regulatory capital amounts and ratios were as follows as of the dates indicated:

	Actual				For Capital Adequacy				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
December 31, 2015
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	84,672	21.7	%	$	23,429	6.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	95,429		24.4	%	31,239		8.0	%	N/A		N/A
Common Equity Tier 1 Capital (To Risk Weighted Assets)	63,504		16.3	%	17,572		4.5	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	84,672		10.6	%	31,811		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,728	22.5	%	$	23,440	6.0	%	$	31,254	8.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	92,653		23.7	%	31,254		8.0	%	39,067		10.0	%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	87,728		22.5	%	17,580		4.5	%	25,394		6.5	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,728		11.0	%	31,801		4.0	%	39,751		5.0	%
December 31, 2014
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	77,746	20.6	%	$	15,073	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	89,915		23.9	%	30,147		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	77,746		9.5	%	32,778		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,222	23.2	%	$	15,062	4.0	%	$	22,593	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	91,973		24.4	%	30,123		8.0	%	37,654		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,222		10.6	%	32,792		4.0	%	40,991		5.0	%

The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution's capital level is or may become inadequate in light of particular risks or circumstances. Management of the Company and the Bank believe that, under the current regulations, the Company and the Bank will continue to meet their minimum capital requirements in the foreseeable future.

66

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(15)         Employee Benefit Plans

The Company is participating in a multiple employer defined contribution employee benefit plan covering substantially all employees with six months or more of service.  The Company matches a portion of the employees’ contributions and the plan has a discretionary profit sharing provision.  The total employer contributions were $210,000 for the year ended December 31, 2015, $186,000 for the year ended December 31, 2014 and $189,000 for the year ended December 31, 2013.

The Company has an Employee Stock Purchase Plan (“ESPP”).  The ESPP allows employees of the Company to purchase stock quarterly through a payroll deduction at a discount calculated as 15% of the market value with a floor equal to the Company’s book value.  The ESPP, which was approved by stockholders in July 2005, became effective in January 2007. Participation in the ESPP is voluntary.  Employees are limited to investing $25,000 or 5% of their annual salary, whichever is lower, during the year.  During the year ended December 31, 2015, there were no employee stock purchases within the plan.

The Company implemented an Incentive Compensation Plan (the "Plan") during the year ended December 31, 2014. Incentive awards are based on the financial and operating performance of the Company as well as other participant specific objectives. The Plan allows employees of the Company to earn up to 7.5 days of their annual salary for successfully completing specific goals established by the participants and their respective supervisors plus an additional 2.5 days of their annual salary if the Company meets an annual predetermined net operating income amount determined by the Board of Directors. The Company also implemented an Incentive Compensation Plan for executive level officers (the "Executive Plan"). Under this plan incentive awards are based on contributions to performance as measured by critical operating and financial ratios, and other participant specific objectives. The Company has to meet the annual predetermined net operating income amount determined by the Board of Directors for any incentive awards to be paid under the Executive Plan. If the Company does not meet the required net income amount, no incentives are paid regardless of the executive's performance on individual objectives or entity wide objectives. Participation in both plans is voluntary. At December 31, 2015, the Company accrued $150,000 for incentive payments, which were paid during 2016.

Certain officers of the Company participate in a supplemental retirement plan.  These benefits are not qualified under the Internal Revenue Code and they are not funded.  During the years ended December 31, 2015, 2014 and 2013, the Company incurred expenses of $205,000, $103,000, and $172,000, respectively, for this plan.

Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Prior to fiscal 2010, the Company had three stock option plans that together authorized the Company to grant 150,000 options. In 2008, the 2008 Equity Incentive Plan was approved by stockholders and implemented by the Company with the intention of replacing the previous three option plans. No additional options are to be granted under the old plans and forfeitures under the old plans are not added to the new plan as available options, however, all existing options outstanding under these plans remain in effect. The 2008 Equity Incentive Plan provides for the grant of non-qualified and incentive stock options, stock appreciation rights (“SARS”), and restricted stock awards. Under the 2008 Equity Incentive Plan, 50,000 shares of common stock are reserved for the issuance of stock options and SARS in addition to 50,000 shares subject to restricted stock awards. The plan is administered by a committee appointed by the Board of Directors. The committee determines the specific employees, amount and type of any awards granted. At December 31, 2015 and 2014, there were 50,000 shares available for issuance under this plan for stock options and SARS. Options under all plans are granted at exercise prices not less than the fair value of the Company’s common stock on the date of the grant.

67

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(15)         Employee Benefit Plans, Continued

The following is a summary of the activity under the Company’s incentive and non-qualified stock option plans for the years ended December 31, 2015, 2014 and 2013:

	For the Years Ended December 31,
	2015			2014			2013
	Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price
Balance, Beginning of Period	47,500	$	22.41	61,500	$	22.49	68,400	$	22.63
Options Granted	—	—		—	—		—	—
Options Exercised	—	—		—	—		—	—
Options Forfeited	18,000	20.55		14,000	22.74		6,900	23.87
Balance, End of Period	29,500	$	23.55	47,500	$	22.41	61,500	$	22.49
Options Exercisable	21,500	$	23.57	34,300	$	22.00	42,300	$	22.03
Weighted-Average Remaining Life Of Exercisable Options	1.4 years			1.1 years			1.3 years
Options Available For Grant	50,000			50,000			50,000

During the year ended December 31, 2015, 5,200 options with a weighted average exercise price of $23.50 vested. During the year ended December 31, 2014, 5,400 stock options with a weighted average exercise price of $23.50 vested. During the year ended December 31, 2013, 5,400 options with a weighted average exercise price of $23.50 vested. The aggregate intrinsic value of the stock options outstanding and exercisable at December 31, 2015, 2014 and 2013 amounted to $0 for all periods. Total compensation expense related to stock options was $12,700, $12,700, and -$2,600 for the years ended December 31, 2015, 2014 and 2013, respectively.  As of December 31, 2015, there was $13,067 of total unrecognized compensation cost related to non-vested stock options.  The cost is expected to be recognized over a weighted average period of three years.

There were no stock options granted by the Company during the years ended December 31, 2015, 2014 and 2013. At December 31, 2015, the Company had the following options outstanding:

Grant Date	Outstanding Options	Option Price	Expiration Date
01/01/06	3,500	$23.91	01/01/16
08/24/06	3,500	$23.03	08/24/16
05/24/07	2,000	$24.34	05/24/17
07/09/07	1,000	$24.61	07/09/17
10/01/07	2,000	$24.28	10/01/17
01/01/08	13,000	$23.49	01/01/18
05/19/08	2,500	$22.91	05/19/18
07/01/08	2,000	$22.91	07/01/18

All options granted prior to March 31, 2006 are 100% vested. Options granted after March 31, 2006 generally vest 20% per year every year beginning in the sixth year after the grant date.  Those options granted after March 31, 2006 may be exercised as they vest in years six through ten, or until the end of year ten after the grant date.

68

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(16)         Stock Warrants

In conjunction with its participation in the U.S. Department of Treasury’s (“Treasury”) Capital Purchase Program (“CPP”) in 2008, the Company sold a warrant to the Treasury to purchase 137,966 shares of the Company’s common stock. The warrant had a 10-year term and was immediately exercisable upon issuance.

On July 31, 2013, the Company repurchased its outstanding warrant at a fair market value of $50,000 from the U.S. Treasury. As a result of the transaction the warrant was canceled which reduced warrants outstanding by $400,000 and increased additional paid in capital by $350,000.

(17)         Bank Owned Life Insurance

BOLI provides key person life insurance on certain officers of the Company. During the year ended December 31, 2015 the Company purchased additional policies with a cash value of $5.0 million. The cash value of the life insurance policies are recorded as a separate line item in the accompanying balance sheets at $16.6 million and $11.2 million at December 31, 2015 and 2014, respectively.  The earnings-portion of the insurance policies grows tax deferred and helps offset the cost of the Company’s benefits programs.  The Company recorded earnings of $423,000 and $300,000 and $339,000 for the growth in the cash value of life insurance during the years ended December 31, 2015, 2014 and 2013, respectively. There were no death benefits received during the year ended December 31, 2015.

(18)         Commitments and Contingencies

In the ordinary course of business, the Company has various outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements.  In addition, the Company is a defendant in certain claims and legal actions arising in the ordinary course of business.  In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of the Company.

In conjunction with its lending activities, the Bank enters into various commitments to extend credit and issue letters of credit.  Loan commitments (unfunded loans and unused lines of credit) and letters of credit are issued to accommodate the financing needs of the Bank's customers.  Loan commitments are agreements by the Bank to lend at a future date, so long as there are no violations of any conditions established in the agreement.  Letters of credit commit the Bank to make payments on behalf of customers when certain specified events occur.

Financial instruments where the contract amount represents the Bank's credit risk include commitments under pre-approved but unused lines of credit of $51.2 million and $44.5 million, undisbursed loans in process of $2.9 million and $1.4 million, and letters of credit of $882,000 and $802,000 at December 31, 2015 and 2014, respectively.

These loan and letter of credit commitments are subject to the same credit policies and reviews as loans on the balance sheet.  Collateral, both the amount and nature, is obtained based upon management's assessment of the credit risk.  Since many of the extensions of credit are expected to expire without being drawn, the total commitment amounts do not necessarily represent future cash requirements.  Included in the loan commitments noted above were unused credit card loan commitments of $4.6 million and $4.4 million at December 31, 2015 and 2014, respectively.  The Bank had no outstanding commitments on mortgage loans not yet closed at December 31, 2015 compared to $571,000 at December 31, 2014.  These commitments, which are funded subject to certain limitations, extend over varying periods of time with the majority being funded within 45 days.  At December 31, 2015 and 2014, the Bank had outstanding commitments to sell approximately $2.5 million and $1.9 million of loans, respectively, which encompassed the Bank’s held for sale loans.  The Bank also has commitments to sell mortgage loans not yet closed, on a best efforts basis.  Best efforts means the Bank suffers no penalty if they are unable to deliver the loans to the potential buyers.  The fair value of the Bank’s commitment to originate mortgage loans at committed interest rates and to sell such loans to permanent investors is insignificant.

69

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(19)         Related Party Transactions

Certain directors, executive officers and companies with which they are affiliated are customers of, and have banking transactions with, the Bank in the ordinary course of business. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable arms-length transactions. A summary of loan transactions with directors, including their affiliates, and executive officers follows:

	For the Years Ended December 31,
	2015		2014		2013
Balance, Beginning of Period	$	202,197	$	230,722	$	273,330
New Loans	692		1,116		10,956
Less Loan Payments	21,151		29,641		53,564
Balance, End of Period	$	181,738	$	202,197	$	230,722

Loans to all employees, officers, and directors of the Company, in the aggregate constituted approximately 3.3% and 3.4% of the Company’s total shareholders' equity at December 31, 2015 and 2014, respectively.  Deposits from executive officers and directors of the Company and the Bank and their related interests in the aggregate approximated $15.1 million at both December 31, 2015 and 2014.

The Company leased office space from a related party during the year ended December 31, 2015. The lease is with a company in which the related party, who is both a director and an officer of the Company, has an ownership interest.  The Company incurred rent expenses of $81,000, $81,000, and $79,000 for the years ended December 31, 2015, 2014 and 2013, respectively, related to this lease.  Management is of the opinion that the transactions with respect to office rent were made on terms that are comparable to those which would be made with unaffiliated persons.

(20)    Stock Issuance and Exchange

The Company was approved to participate in the Treasury’s Community Development Capital Initiative (“CDCI”).  The CDCI was established by the Treasury under the Troubled Asset Relief Program to invest lower cost capital in Community Development Financial Institutions (“CDFI”), supporting their efforts to provide credit to small businesses and other qualified customers in connection with the downturn in the economy.

In connection with its participation in the CDCI, on September 29, 2010, the Company (i) exchanged all $18.0 million (aggregate liquidation preference amount) of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”), previously sold to the Treasury pursuant to the CPP, for $18.0 million (aggregate liquidation preference amount) of the Company’s newly designated Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), (ii) sold 400,000 shares of its common stock at $10.00 per share in a private offering to board members of the Company for aggregate gross proceeds of $4.0 million; and (iii) received an additional $4.0 million investment from the Treasury through the sale of an additional $4.0 million (aggregate liquidation preference amount) of its Series B Preferred Stock to the Treasury.  The additional $4.0 million investment from the Treasury was contingent upon the Company’s completion of the $4.0 million separate stock offering for the same amount, as required by the Company’s primary regulator at the time, the Office of Thrift Supervision.  The warrant sold by the Company to the Treasury in connection with the Company’s participation in Treasury’s CPP in 2008 remained outstanding after the exchange until its repurchase by the Company in 2013.

Participation in the CDCI provided the Company with $8.0 million in additional capital and lowered the cost of the capital received from the Treasury.  The annual dividend rate on the Series A Preferred Stock was 5% and was to have increased to 9% on February 15, 2014.  The annual dividend rate on the Series B Preferred Stock is 2% for the first eight years from the date of issuance, or until September 19, 2018, and 9% thereafter if still then outstanding.  The Company and the Bank must maintain eligibility as a CDFI under Treasury regulations, otherwise, the annual dividend rate on the Series B Preferred Stock will increase to 5% if such eligibility is not corrected within 180 days and will further increase to 9% if not corrected after 270 days.

In addition, on December 22, 2010, the Company sold 82,906 shares of its common stock, $0.01 par value per share, through a private placement. The purchase price was $10.00 per share and the net proceeds received from the sale of these shares was $829,060. This was the final phase in the Company’s current plan to raise additional capital. 

70

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(20)    Stock Issuance and Exchange, Continued

On July 31, 2013, the Company repurchased its outstanding warrant at a fair market value of $50,000 from the U.S. Treasury. As a result of the transaction the warrant was canceled, which reduced warrants outstanding by $400,000 and increased additional paid in capital by $350,000.

(21)    Unvested Restricted Stock Issuance

On February 12 2015, Security Federal Corporation issued 1,473 shares of restricted stock at $17.22 per share to the Company’s Chief Executive Officer (“CEO”). The issuance was in lieu of annual incentive pay for the 2014 Incentive Plan year. Based on restrictions set forth in our agreement with the U.S Department of Treasury as part of the Company’s participation in the Community Development Capital Initiative Program, the CEO is not permitted to receive cash incentive pay. The shares cliff vest at the end of two years. All dividends until that date are held in an escrow account.

71

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(22)         Security Federal Corporation Condensed Financial Statements (Parent Company Only)

The following is condensed financial information of Security Federal Corporation (Parent Company only).  The primary asset is its investment in the Bank subsidiary and the principal source of income for the Company is equity in undistributed earnings from the Bank.

Condensed Balance Sheet Data

	At December 31,
	2015		2014
Assets:
Cash	$	8,785,338	$	4,542,778
Investment Securities, Available For Sale	154,902		151,674
Investment in Security Federal Statutory Trust	155,000		155,000
Investment in Security Federal Bank	93,150,771		93,860,841
Accounts Receivable and Other Assets	5,002		8,023
Total Assets	$	102,251,013	$	98,718,316
Liabilities and Shareholders’ Equity:
Accounts Payable and Other Liabilities	$	45,890	$	45,229
Junior Subordinated Debentures	5,155,000		5,155,000
Senior Convertible Debentures	6,084,000		6,084,000
Shareholders’ Equity	90,966,123		87,434,087
Total Liabilities and Shareholders’ Equity	$	102,251,013	$	98,718,316

Condensed Statements of Income Data

	For the Years Ended December 31,
	2015			2014			2013
Income:
Equity in Earnings of Security Federal Bank	$	506,074		$	3,779,212		$	2,558,986
Dividend Income from Security Federal Bank	6,000,000			2,400,000			1,600,000
Interest Income	—			—			—
Miscellaneous Income	15,828			12,937			15,771
Total Income	6,521,902			6,192,149			4,174,757
Expenses:
Interest Expense	591,054			587,859			589,988
Other Expenses	18,822			19,382			18,223
Total Expenses	609,876			607,241			608,211
Income Before Income Taxes	5,912,026			5,584,908			3,566,546
Income Tax Benefit	(203,901		)	(225,832		)	(224,616		)
Net Income	6,115,927			5,810,740			3,791,162
Preferred Stock Dividends	440,000			440,000			440,000
Net Income Available to Common Shareholders	$	5,675,927		$	5,370,740		$	3,351,162

72

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(22)         Security Federal Corporation Condensed Financial Statements (Parent Company Only), Continued

Condensed Statements of Cash Flow Data

	For the Years Ended December 31,
	2015			2014			2013
Operating Activities:
Net Income	$	6,115,927		$	5,810,740		$	3,791,162
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Equity in Earnings of Security Federal Bank	(506,074		)	(3,779,212		)	(2,558,986		)
Stock Compensation Expense	12,676			12,676			(2,580		)
(Increase) Decrease in Accounts Receivable	825			(49		)	(15,248		)
Increase in Accounts Payable	1,758			270			132
Net Cash Provided By Operating Activities	5,625,112			2,044,425			1,214,480
Financing Activities:
Repayment of Warrant Issued in Conjunction with Preferred Stock	—			—			(50,000		)
Dividends Paid to Shareholders-Preferred Stock	(440,000		)	(440,000		)	(440,000		)
Dividends Paid to Shareholders-Common Stock	(942,552		)	(942,080		)	(942,082		)
Net Cash Used in Financing Activities	(1,382,552		)	(1,382,080		)	(1,432,082		)
Net Increase (Decrease) in Cash	4,242,560			662,345			(217,602		)
Cash at Beginning of Period	4,542,778			3,880,433			4,098,035
Cash at End of Period	$	8,785,338		$	4,542,778		$	3,880,433

(23)         Carrying Amounts and Fair Value of Financial Instruments

The Company has adopted accounting guidance which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value under generally accepted accounting principles. This guidance applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

Accounting guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

73

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Level 1	Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasuries and money market funds.
Level 2	Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bonds, corporate debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following is a description of the valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. At December 31, 2015, the Company’s investment portfolio was comprised of government and agency bonds, mortgage-backed securities issued by government agencies or GSEs, four private label CMO mortgage-backed securities, municipal securities, and two equity investments. Fair value measurement is based upon prices obtained from third party pricing services that use independent pricing models which rely on a variety of factors including reported trades, broker/dealer quotes, benchmark yields, economic and industry events and other relevant market information. As such, these securities are classified as Level 2.

Mortgage Loans Held for Sale

The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with institutional investors, are carried in the Company’s loans held for sale portfolio.  These loans are fixed rate residential loans that have been originated in the Company’s name and have closed.  Virtually all of these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with the Company’s customers.  Therefore, these loans present very little market risk for the Company.

The Company usually delivers to, and receives funding from, the investor within 30 days.  Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts" basis. The Company is not obligated to deliver a loan or pay a penalty if a loan is not delivered to the investor. As a result of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its origination. These loans are classified as Level 2.

Impaired Loans

The Company does not record loans held for investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established as necessary. 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 impairment.

74

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

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. Specifically as an example, in situations where the collateral on a nonperforming commercial real estate loan is out of the Company’s primary market area, management would typically order an independent appraisal immediately, at the earlier of the date the loan becomes nonperforming or immediately following the determination that the loan is impaired. However, as a second example, on a nonperforming commercial real estate loan where management is familiar with the property and surrounding areas and where the original appraisal value far exceeds the recorded investment in the loan, management may perform an internal analysis whereby the previous appraisal value would be reviewed and adjusted for current conditions including recent sales of similar properties in the area and any other relevant economic trends. These valuations are reviewed at a minimum on a quarterly basis.

Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2014, most of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The Company records impaired loans as nonrecurring Level 3.

As of December 31, 2015 and 2014, the recorded investment in impaired loans was $12.6 million and $20.2 million, respectively. The average recorded investment in impaired loans was $13.1 million for year ended December 31, 2015 and $22.2 million for the year ended December 31, 2014.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral less estimated selling costs. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 3. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the asset as nonrecurring Level 3.

Assets measured at fair value on a recurring basis are as follows as of December 31, 2015:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	1,932,088	$	—
FFCB Securities	—		1,987,936		—
FNMA Bonds	—		1,004,331		—
SBA Bonds	—		111,416,782		—
Tax Exempt Municipal Bonds	—		76,065,619		—
Mortgage-Backed Securities	—		182,797,212		—
Equity Securities	—		309,902		—
Total	$	—	$	375,513,870	$	—

75

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Assets measured at fair value on a recurring basis are as follows as of December 31, 2014:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	13,246,661	$	—
FFCB Securities	—		5,667,994		—
FNMA Bonds	—		1,004,381		—
SBA Bonds	—		108,126,694		—
Tax Exempt Municipal Bonds	—		62,495,423		—
Mortgage-Backed Securities	—		238,852,713		—
Equity Securities	—		306,674		—
Total	$	—	$	429,700,540	$	—

There were no liabilities measured at fair value on a recurring basis as of December 31, 2015 and 2014.

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. The table below presents assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2015 and 2014, aggregated by the level in the fair value hierarchy within which those measurements fall. 

Assets:	Level 1		Level 2		Level 3		At December 31, 2015
Mortgage Loans Held For Sale	$	—	$	2,462,559	$	—	$	2,462,559
Collateral Dependent Impaired Loans (1)	—		—		12,565,728		12,565,728
Foreclosed Assets	—		—		4,361,411		4,361,411
Total	$	—	$	2,462,559	$	16,927,139	$	19,389,698

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $81,600}

76

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Assets:	Level 1		Level 2		Level 3		At December 31, 2014
Mortgage Loans Held For Sale	$	—	$	1,864,999	$	—	$	1,864,999
Collateral Dependent Impaired Loans (1)	—		—		19,772,955		19,772,955
Foreclosed Assets	—		—		3,229,710		3,229,710
Total	$	—	$	1,864,999	$	23,002,665	$	24,867,664

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $475,000}

There were no liabilities measured at fair value on a nonrecurring basis as of December 31, 2015 and 2014.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2015, the significant unobservable inputs used in the fair value measurements were as follows:

			Valuation	Significant
	Fair Value		Technique	Unobservable Inputs	Range
Collateral Dependent Impaired Loans	$	12,565,728	Appraised Value	Discount Rates/ Discounts to Appraised Values	0% - 20%
Foreclosed Assets	4,361,411		Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	13% - 100%

For assets and liabilities not presented on the balance sheet at fair value, the following methods are used to determine fair value:

Cash and cash equivalents—The carrying amount of these financial instruments approximates fair value. All mature within 90 days and do not present unanticipated credit concerns.

Certificates of deposits with other banks—Fair value is based on market prices for similar assets.

Investment securities held to maturity—Securities held to maturity are valued at quoted market prices or dealer quotes.

Loans Receivable, Net—The fair value of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As discount rates are based on current loan rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

FHLB Stock—The fair value approximates the carrying value.

Deposits—The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities.

FHLB Advances—Fair value is estimated using discounted cash flows with current market rates for borrowings with similar terms.

Other Borrowed Money—The carrying value of these short term borrowings approximates fair value.

Senior Convertible Debentures— The fair value is estimated by discounting the future cash flows using the current rates at which similar debenture offerings with similar terms and maturities would be issued by similar institutions. As discount rates are based on current debenture rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

Junior Subordinated Debentures—The carrying value of junior subordinated debentures approximates fair value.

77

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

The following tables are a summary of the carrying value and estimated fair value of the Company’s financial instruments as of December 31, 2015 and 2014 presented in accordance with the applicable accounting guidance.

	December 31, 2015
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	8,382	$	8,382	$	8,382	$	—	$	—
Certificates of Deposits With Other Banks	3,445		3,445		—		3,445		—
Investment And Mortgage-Backed Securities	405,387		405,196		—		405,196		—
Loans Receivable, Net	330,573		327,460		—		—		327,460
FHLB Stock	2,215		2,215		2,215		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	415,975	$	415,975	$	415,975	$	—	$	—
Certificate Accounts	236,122		235,476		—		235,476		—
Advances From FHLB	34,640		35,676		—		35,676		—
Other Borrowed Money	6,412		6,412		6,412		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

	December 31, 2014
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	10,193	$	10,193	$	10,193	$	—	$	—
Certificates of Deposits With Other Banks	2,095		2,095		—		2,095		—
Investment And Mortgage-Backed Securities	429,701		429,701		—		429,701		—
Loans Receivable, Net	339,874		340,368		—		—		340,368
FHLB Stock	3,145		3,145		3,145		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	406,864	$	406,864	$	406,864	$	—	$	—
Certificate Accounts	253,251		253,300		—		253,300		—
Advances From FHLB	52,900		55,646		—		55,646		—
Other Borrowed Money	8,523		8,523		8,523		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

At December 31, 2015, the Bank had $52.1 million of off-balance sheet financial commitments.  These commitments are to originate loans and unused consumer lines of credit and credit card lines.  Because these obligations are based on current market rates, if funded, the original principal is considered to be a reasonable estimate of fair value.

Fair value estimates are made on a specific date, based on relevant market data and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale the Bank’s entire holdings of a particular financial instrument.  

78

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Because no active market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, current interest rates and prepayment trends, risk characteristics of various financial instruments, and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in any of these assumptions used in calculating fair value would also significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  For example, the Bank has significant assets and liabilities that are not considered financial assets or liabilities including deposit franchise values, loan servicing portfolios, deferred tax liabilities, and premises and equipment.

In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates. The Company has used management’s best estimate of fair value on the above assumptions.  Thus, the fair values presented may not be the amounts, which could be realized, in an immediate sale or settlement of the instrument.  In addition, any income taxes or other expenses that would be incurred in an actual sale or settlement are not taken into consideration in the fair value presented.

(24)         Quarterly Financial Data (Unaudited)

Unaudited condensed financial data by quarter for the years ended December 31, 2015 and 2014 is as follows (dollars, except per share data, in thousands):

	Quarter ended
Year Ended December 31, 2015	March 31, 2015		June 30, 2015		Sept. 30, 2015			Dec. 31, 2015
Interest Income	$	6,949	$	7,066	$	6,908		$	6,983
Interest Expense	1,173		1,068		1,001			957
Net Interest Income	5,776		5,998		5,907			6,026
Provision For Loan Losses	100		—		(200		)	100
Net Interest Income After Provision For Loan Losses	5,676		5,998		6,107			5,926
Non-interest Income	2,651		1,387		1,369			1,600
Non-interest Expense	6,255		5,335		5,130			5,811
Income Before Income Tax	2,072		2,050		2,346			1,715
Provision For Income taxes	567		527		601			371
Net Income	1,505		1,523		1,745			1,344
Preferred Stock Dividends	110		110		110			110
Net Income Available To Common Shareholders	$	1,395	$	1,413	$	1,635		$	1,234
Basic Net Income Per Common Share	$	0.47	$	0.48	$	0.56		$	0.42
Diluted Net Income Per Common Share	$	0.45	$	0.46	$	0.53		$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001			2,944,001
Diluted Weighted Average Shares Outstanding	3,248,230		3,248,249		3,248,361			3,248,415

79

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(24)         Quarterly Financial Data (Unaudited), Continued

	Quarter ended
Year Ended December 31, 2014	March 31, 2014		June 30, 2014		Sept. 30, 2014		Dec. 31, 2014
Interest Income	$	7,193	$	7,637	$	7,389	$	7,263
Interest Expense	1,550		1,507		1,385		1,370
Net Interest Income	5,643		6,130		6,004		5,893
Provision For Loan Losses	100		100		—		250
Net Interest Income After Provision For Loan Losses	5,543		6,030		6,004		5,643
Non-interest Income	1,536		1,332		1,486		1,808
Non-interest Expense	5,326		5,317		5,023		5,602
Income Before Income Tax	1,753		2,045		2,467		1,849
Provision For Income taxes	451		568		756		528
Net Income	1,302		1,477		1,711		1,321
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	1,192	$	1,367	$	1,601	$	1,211
Basic Net Income Per Common Share	$	0.41	$	0.46	$	0.54	$	0.41
Diluted Net Income Per Common Share	$	0.39	$	0.44	$	0.52	$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

(25)     Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed all events occurring through the date the financial statements were available to be issued and determined that the following subsequent events required disclosure.

During February 2016, the Bank sold a piece of OREO property in Bluffton, South Carolina which resulted in a $739,000 gain on sale of OREO.

80

SHAREHOLDERS INFORMATION

ANNUAL MEETING

The annual meeting of shareholders will be held at 11:00 a.m. on Thursday, April 21, 2016 at Newberry Hall, 117 Newberry Street SW, Aiken, South Carolina.

STOCK LISTING

The Company’s stock is traded on the Over-The-Counter-Bulletin Board under the symbol “SFDL.OB.”  The stock began trading on the Bulletin Board in October 2003.

PRICE RANGE OF COMMON STOCK

The table below shows the range of high and low bid prices.  These prices represent actual transactions and do not include retail markups, markdowns or commissions.  

	High	Low
Year Ended December 31, 2014
03/31/2014	$12.95	$11.65
06/30/2014	$15.94	$12.93
09/30/2014	$16.00	$15.25
12/31/2014	$18.00	$15.50
Year Ended December 31, 2015
03/31/2015	$17.85	$17.40
06/30/2015	$18.20	$17.42
09/30/2015	$20.00	$18.90
12/31/2015	$22.00	$19.00

As of December 31, 2015, the Company had approximately 266 shareholders of record, not including shares held in street name, and 2,945,474 outstanding shares of common stock.

DIVIDENDS

The first quarterly dividend on the stock was paid to shareholders on March 15, 1991.  Dividends will be paid upon the determination of the Board of Directors that such payment is consistent with the long-term interest of the Company.  The factors affecting this determination include the Company’s current and projected earnings, operating results, financial condition, regulatory restrictions, future growth plans, and other relevant factors. The Company has paid $0.08 per share cash dividends each quarter since the first quarter of fiscal 2009.

The ability of the Company to pay dividends depends primarily on the ability of the Bank to pay dividends to the Company.  The Bank may not declare or pay a cash dividend on its stock or repurchase shares of its stock if the offset thereof would be to cause its regulatory capital to be reduced below the amount required to meet applicable regulatory capital requirements.  South Carolina banking regulations restrict the amount of dividends that the Bank can pay to the Company, and may require prior approval before declaration and payment of any excess dividend.  Unlike the Bank, there is no regulatory restriction on the payment of dividends by the Company; however, it is subject to the requirements of South Carolina law.  South Carolina law generally prohibits the Company from paying dividends if, after giving effect to a proposed dividend: (1) the Company would be unable to pay its debts as they become due in the normal course of business, or (2) the Company’s total assets would be less than its total liabilities plus the sum that would be needed to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the dividend. In addition, payment of dividends by the Company is subject to certain limitations resulting from participation in the CPP. The Federal Reserve also has the authority to prohibit the Company from paying a dividend on its common and/or preferred stock. See Note 20 of the Notes to the Consolidated Financial Statements included herein for additional information.

CODE OF ETHICS

A copy of the Company’s Code of Ethics may be obtained at the Company’s Internet website at www.securityfederalbank.com.

81

EX-21

Exhibit 21

Subsidiaries of the Registrant

Parent	Subsidiary	State of Incorporation	Percentage of Ownership
Security Federal Corporation	Security Federal Bank	United States	100%
	Security Federal Statutory Trust	South Carolina	100%
Security Federal Bank	Security Federal Insurance, Inc.	South Carolina	100%
	Security Financial Services Corporation	South Carolina	100%

EX-23

Exhibit 23

Consent of Elliott Davis Decosimo, LLC

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Security Federal Corporation and Subsidiaries

We consent to incorporation by reference in Registration Statement No. 333-31500, 333-102337 and 333-136813 on Form S-8 of Security Federal Corporation and Subsidiaries of our report dated March 21, 2016, relating to our audit of the consolidated financial statements, which appear in this Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K of Security Federal Corporation and Subsidiaries for the year ended December 31, 2015.

/s/ Elliott Davis Decosimo, LLC

Columbia, South Carolina

March 21, 2016

EX-31.1

Exhibit 31.1

Certification Required

by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934

I, J. Chris Verenes, certify that:

1. I have reviewed this annual report on Form 10-K of Security Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 21, 2016

/s/J. Chris Verenes

J. Chris Verenes

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Required

by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934

I, Jessica T. Cummins, certify that:

1. I have reviewed this annual report on Form 10-K of Security Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 21, 2016

/s/Jessica T. Cummins

Jessica T. Cummins

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

OF SECURITY FEDERAL CORPORATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Annual Report on Form 10-K, that:

1. the report fully complies with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, and

2. the information contained in the report fairly presents, in all material respects, the company's financial condition and results of operations.

/s/J. Chris Verenes	/s/Jessica T. Cummins
J. Chris Verenes	Jessica T. Cummins
Chief Executive Officer	Chief Financial Officer

Dated: March 21, 2016

EX-99.1

Exhibit 99.1

Appendix B-IFR Section 30.15-Certification for Years following First Fiscal Year

Security Federal Corporation UST #208

I, J. Chris Verenes, the Chief Executive Officer of Security Federal Corporation certify, based on my knowledge, that:

(i)    The compensation committee of Security Federal Corporation has discussed, reviewed, and evaluated with senior risk officers at least every six months during any part of the most recently completed fiscal year that was a TARP period, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to Security Federal Corporation;

(ii)    The compensation committee of Security Federal Corporation has identified and limited during any part of the most recently completed fiscal year that was a TARP period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation and has identified any features of the employee compensation plans that pose risks to Security Federal Corporation and has limited those features to ensure that Security Federal Corporation is not unnecessarily exposed to risks;

(iii)    The compensation committee has reviewed, at least every six months during any part of the most recently completed fiscal year that was a TARP period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee, and has limited any such features;

(iv)    The compensation committee of Security Federal Corporation will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)    The compensation committee of Security Federal Corporation will provide a narrative description of how it limited during any part of the most recently completed fiscal year that was a TARP period the features in:

(A)    SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation;

(B)    Employee compensation plans that unnecessarily expose Security Federal Corporation to risks; and

(C)    Employee compensation plans that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee;

(vi)    Security Federal Corporation has required that bonus payments to SEOs or any of the next twenty most highly compensated employees, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), be subject to a recovery or "clawback" provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)    Security Federal Corporation has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(viii)    Security Federal Corporation has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during any part of the most recently completed fiscal year that was a TARP period;

(ix)    Security Federal Corporation and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA during any part of the most recently completed fiscal year that was a TARP period; and any expenses that, pursuant to the policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)    Security Federal Corporation will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during any part of the most recently completed fiscal year that was a TARP period;

(xi)    Security Federal Corporation will disclose the amount, nature, and justification for the offering, during any part of the most recently completed fiscal year that was a TARP period, of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)    Security Federal Corporation will disclose whether Security Federal Corporation, the board of directors of Security Federal Corporation, or the compensation committee of Security Federal Corporation has engaged during any part of the most recently completed fiscal year that was a TARP period a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)    Security Federal Corporation has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(xiv)    Security Federal Corporation has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Security Federal Corporation and Treasury, including any amendments;

(xv)    Security Federal Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)    I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both (See, for example, 18 USC 1001).

Date: March 21, 2016	By:	/s/J. Chris Verenes
		J. Chris Verenes
		Principal Executive Officer

EX-99.2

Exhibit 99.2

Appendix B-IFR Section 30.15-Certification for Years following First Fiscal Year

Security Federal Corporation UST #208

I, Jessica T. Cummins, the Chief Financial Officer of Security Federal Corporation certify, based on my knowledge, that:

(i)    The compensation committee of Security Federal Corporation has discussed, reviewed, and evaluated with senior risk officers at least every six months during any part of the most recently completed fiscal year that was a TARP period, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to Security Federal Corporation;

(ii)    The compensation committee of Security Federal Corporation has identified and limited during any part of the most recently completed fiscal year that was a TARP period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation and has identified any features of the employee compensation plans that pose risks to Security Federal Corporation and has limited those features to ensure that Security Federal Corporation is not unnecessarily exposed to risks;

(iii)    The compensation committee has reviewed, at least every six months during any part of the most recently completed fiscal year that was a TARP period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee, and has limited any such features;

(iv)    The compensation committee of Security Federal Corporation will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)    The compensation committee of Security Federal Corporation will provide a narrative description of how it limited during any part of the most recently completed fiscal year that was a TARP period the features in:

(A)    SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation;

(B)    Employee compensation plans that unnecessarily expose Security Federal Corporation to risks; and

(C)    Employee compensation plans that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee;

(vi)    Security Federal Corporation has required that bonus payments to SEOs or any of the next twenty most highly compensated employees, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), be subject to a recovery or "clawback" provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)    Security Federal Corporation has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(viii)    Security Federal Corporation has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during any part of the most recently completed fiscal year that was a TARP period;

(ix)    Security Federal Corporation and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA during any part of the most recently completed fiscal year that was a TARP period; and any expenses that, pursuant to the policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)    Security Federal Corporation will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during any part of the most recently completed fiscal year that was a TARP period;

(xi)    Security Federal Corporation will disclose the amount, nature, and justification for the offering, during any part of the most recently completed fiscal year that was a TARP period, of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)    Security Federal Corporation will disclose whether Security Federal Corporation, the board of directors of Security Federal Corporation, or the compensation committee of Security Federal Corporation has engaged during any part of the most recently completed fiscal year that was a TARP period a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)    Security Federal Corporation has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(xiv)    Security Federal Corporation has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Security Federal Corporation and Treasury, including any amendments;

(xv)    Security Federal Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)    I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both (See, for example, 18 USC 1001).

Date: March 21, 2016	By:	/s/Jessica T. Cummins
		Jessica T. Cummins
		Principal Financial Officer

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Mar. 18, 2016	Jun. 30, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	Security Federal Corporation
Document Type	10-K
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Entity Central Index Key	0000818677
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		2,945,474
Entity Public Float			$ 34.6
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2015	Dec. 31, 2014
ASSETS:
Cash and Cash Equivalents	$ 8,381,951	$ 10,192,702
Certificates Of Deposit With Other Banks	3,445,005	2,095,000
Investment and Mortgage-Backed Securities:
Available For Sale: (Amortized Cost of $420,876,924 and $430,241,854 at December 31, 2014 and 2013, Respectively)	375,513,870	429,700,540
Held To Maturity: (Fair Value of $69,965,869 and $34,122,925 at March 31, 2012 and 2011, Respectively)	29,873,098	0
Investments	405,386,968	429,700,540
Loans Receivable, Net:
Held For Sale	2,462,559	1,864,999
Held For Investment: (Net of Allowance of $14,615,198 and $12,501,800 at March 31, 2012 and 2011, Respectively)	328,110,170	338,009,496
Total Loans Receivable, Net	330,572,729	339,874,495
Accrued Interest Receivable:
Loans	886,968	971,569
Mortgage-Backed Securities	614,925	682,585
Investment Securities	1,523,200	1,408,924
Total Accrued Interest Receivable	3,025,093	3,063,078
Premises and Equipment, Net	20,116,918	18,233,226
Federal Home Loan Bank (FHLB) Stock, At Cost	2,214,800	3,144,600
Other Real Estate Owned (OREO)	4,361,411	3,229,710
Bank Owned Life Insurance	16,573,045	11,150,045
Goodwill	1,199,754	1,199,754
Other Assets	4,449,956	3,480,676
Total Assets	799,727,630	825,363,826
Liabilities:
Deposit Accounts	652,096,545	660,115,164
Advances From FHLB	34,640,000	52,900,000
Other Borrowings	6,411,977	8,523,348
Junior Subordinated Debentures	5,155,000	5,155,000
Advance Payments By Borrowers For Taxes and Insurance	256,730	266,352
Senior Convertible Debentures	6,084,000	6,084,000
Other Liabilities	4,115,956	4,884,577
Total Liabilities	$ 708,760,208	$ 737,928,441
Commitments (Notes 5 and 18)
Shareholders' Equity:
Serial Preferred Stock, $.01 Par Value; Authorized 200,000 Shares; Issued And Outstanding, 22,000 At March 31, 2012 And 2011, Respectively	$ 22,000,000	$ 22,000,000
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued And Outstanding Shares, 3,144,934 And 2,944,001, Respectively, At March 31, 2012 And 2011	31,464	31,449
Additional Paid-In Capital	12,028,832	11,990,813
Treasury Stock, At Cost (200,933 Shares At March 31, 2012 And 2011, Respectively)	(4,330,712)	(4,330,712)
Nonvested Restricted Stock	(25,358)
Accumulated Other Comprehensive Income	4,262,361	5,476,375
Retained Earnings	57,000,835	52,267,460
Total Shareholders' Equity	90,967,422	87,435,385
Total Liabilities and Shareholders' Equity	$ 799,727,630	$ 825,363,826

XML

Consolidated Balance Sheets (Parenthetical) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
ASSETS:
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 369,140,098	$ 420,876,924
Fair Value of Investment And Mortgage-Backed Securities Held To Maturity	29,681,280	0
Allowance For Loan Losses	$ 8,275,133	$ 8,357,496
Shareholders' Equity:
Serial Preferred Stock Par Value Per Share	$ 0.01	$ 0.01
Serial Preferred Stock Shares Authorized	200,000	200,000
Serial Preferred Stock Shares Issued	22,000	22,000
Serial Preferred Stock Shares Outstanding	22,000	22,000
Common Stock Par Value Per Share	$ 0.01	$ 0.01
Common Stock Shares Authorized	5,000,000	5,000,000
Common Stock Shares Issued	3,144,934	3,144,934
Common Stock Shares Outstanding	2,944,001	2,944,001
Treasury Stock Shares Held	200,933	200,933

XML

Consolidated Statements of Income - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Interest Income:
Loans	$ 18,428,185	$ 19,416,904	$ 21,583,028
Mortgage-Backed Securities	5,273,457	6,036,955	5,267,280
Investment Securities	4,196,609	4,017,705	3,588,794
Other	7,501	10,600	8,265
Total Interest Income	27,905,752	29,482,164	30,447,367
Interest Expense:
NOW and Money Market Accounts	429,539	568,397	813,278
Statement Savings Accounts	30,315	26,600	33,897
Certificate Accounts	1,811,651	1,990,003	2,566,220
FHLB Advances and Other Borrowings	1,336,620	2,640,197	3,529,553
Senior Convertible Debentures	486,720	486,720	486,720
Junior Subordinated Debentures	104,334	101,139	103,268
Total Interest Expense	4,199,179	5,813,056	7,532,936
Net Interest Income	23,706,573	23,669,108	22,914,431
Provision For Loan Losses		(450,000)	(2,645,381)
Net Interest Income After Provision For Loan Losses	23,706,573	23,219,108	20,269,050
Non-Interest Income:
Gain on Sale of Investment Securities	1,886,081	436,871	1,325,823
Gain on Sale of Loans	689,843	620,994	779,554
Service Fees on Deposit Accounts	1,076,102	1,176,849	1,152,875
Commissions From Insurance Agency	472,145	424,969	453,446
Trust Income	608,800	542,000	520,000
Bank Owned Life Insurance Income	423,000	554,364	339,000
Check Card Fee Income	969,710	901,998	853,027
Revenue from Grants	229,848	851,999	929,346
Other	651,720	652,739	542,733
Total Non-Interest Income	7,007,249	6,162,783	6,895,804
Non-Interest Expense:
Compensation and Employee Benefits	12,180,420	11,308,610	10,964,366
Occupancy	1,903,288	1,995,283	1,970,403
Advertising	416,322	484,056	355,678
Depreciation and Maintenance of Equipment	1,706,397	1,665,454	1,598,067
FDIC Insurance Premiums	611,157	691,937	746,389
Amortization of Intangibles	0	11,970	50,004
Net Cost of Operation of Other Real Estate Owned	524,345	541,840	1,582,168
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Repayment and Penalties	787,851	178,067	589,023
Repayments of Federal Home Loan Bank Borrowings	15,000,000	5,000,000	30,000,000
Other	4,401,016	4,390,766	4,177,210
Total Non-Interest Expense	22,530,796	21,267,983	22,033,308
Income Before Income Taxes	8,183,026	8,113,908	5,131,546
Provision For Income Taxes	2,067,099	2,303,168	1,340,384
Net Income	6,115,927	5,810,740	3,791,162
Preferred Stock Dividends	440,000	440,000	440,000
Net Income Available To Common Shareholders	$ 5,675,927	$ 5,370,740	$ 3,351,162
Net Income Per Common Share (Basic)	$ 1.93	$ 1.82	$ 1.14
Net Income Per Common Share (Diluted)	1.84	1.75	1.12
Cash Dividend Per Share On Common Stock	$ 0.32	$ 0.32	$ 0.32
Weighted Average Shares Outstanding (Basic)	2,944,001	2,944,001	2,944,001
Weighted Average Shares Outstanding (Diluted)	3,248,312	3,248,201	3,248,201

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Consolidated Statements of Comprehensive Income - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Comprehensive Income [Abstract]
Net Income	$ 6,115,927	$ 5,810,740	$ 3,791,162
Unrealized Gains On Securities:
Unrealized Holding Gains (Losses) on Securities Available For Sale, Net of Taxes of $15,023; $3,224,059 and $(4,286,481) at December 31, 2015, 2014 and 2013, Respectively	22,905	5,274,829	(7,002,827)
Reclassification Adjustment For Gains Included in Net Income, Net of Taxes of $716,710; $166,011 and $503,813 at December 31, 2015, 2014 and 2013, Respectively	(1,169,371)	(270,860)	(822,010)
Other Comprehensive Income (Loss), Transfers from Held-to-maturity to Available-for-Sale Securities, Net of Tax		0	865,933
Amortization of Unrealized Gains on AFS Securities Transferred to HTM	(67,548)
Other Comprehensive Income (Loss)	(1,214,014)	5,003,969	(6,958,904)
Comprehensive Income (Loss)	$ 4,901,913	$ 10,814,709	$ (3,167,742)

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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)	3 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2012	Dec. 31, 2015
Statement of Comprehensive Income [Abstract]
Taxes on Unrealized Holding Gains On Securities Available For Sale	$ 4,286,481	$ 3,224,059	$ 15,023
Taxes on Reclassification Adjustment For Gains Included In Net Income	$ 166,011	$ 716,711	$ 716,710

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Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income - USD ($)	Total	Preferred Stock	Warrants	Common Stock	Additional Paid-In Capital	Treasury Stock	Accumulated Other Comprehensive Income	Retained Earnings
Balance at at Dec. 31, 2012	$ 82,592,484	$ 22,000,000	$ 400,000	$ 31,449	$ 11,630,717	$ (4,330,712)	$ 7,431,310	$ 45,429,720
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	3,791,162							3,791,162
Other Comprehensive Loss, Net of Tax:	(6,958,904)						(6,958,904)
Stock Compensation Expense	(2,580)							0
Warrants and Rights Outstanding at Dec. 31, 2013	(400,000)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cash Dividends On Preferred Stock	(440,000)							(440,000)
Cash Dividends On Common Stock	(942,082)							(942,082)
Balance at at Dec. 31, 2013	77,990,080	22,000,000	$ 0	31,449	11,978,137	(4,330,712)	472,406	47,838,800
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	5,810,740
Other Comprehensive Loss, Net of Tax:	5,003,969
Stock Compensation Expense	12,676
Cash Dividends On Preferred Stock	440,000
Cash Dividends On Common Stock	942,080
Balance at at Dec. 31, 2014	87,435,385	22,000,000		31,449	11,990,813	(4,330,712)	5,476,375	52,267,460
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	6,115,927
Other Comprehensive Loss, Net of Tax:	(1,214,014)
Stock Compensation Expense	12,676
Cash Dividends On Preferred Stock	440,000
Cash Dividends On Common Stock	942,552
Balance at at Dec. 31, 2015	90,967,422	$ 22,000,000		$ 31,464	$ 12,028,832	$ (4,330,712)	$ 4,262,361	$ 57,000,835
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock Issued During Period, Value, Other	15
Stock Issued During Period, Value, Share-based Compensation, Net of Forfeitures	(25,358)
Adjustments to Additional Paid in Capital, Other	$ 25,343

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 6,115,927	$ 5,810,740	$ 3,791,162
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Depreciation Expense	1,242,378	1,214,912	1,243,839
Amortization of Intangible Assets	0	11,970	50,004
Stock Option Compensation Expense	12,676	12,676	(2,580)
Discount Accretion and Premium Amortization	4,852,140	5,180,338	7,162,479
Provisions For Losses on Loans	0	450,000	2,645,381
Income From Bank Owned Life Insurance	(423,000)	(300,000)	(339,000)
Gain on Sales of Loans	(689,843)	(620,994)	(779,554)
Gain On Sales of Mortgage-Backed Securities	(510,702)	(503,288)	(1,104,491)
(Gain) Loss on Sales of Investment Securities	(1,375,379)	66,417	(221,332)
Gain on Sale of OREO	(227,053)	(303,440)	(101,645)
Write Down on OREO	312,347	505,000	1,394,378
Gain (Loss) on Disposition of Assets	(5,647)
Amortization of Deferred Costs on Loans	64,257	6,154	6,589
Proceeds From Sale of Loans Held For Sale	24,272,860	23,607,017	33,207,780
Origination of Loans Held For Sale	(24,180,577)	(23,616,864)	(28,891,624)
(Increase) Decrease in Accrued Interest Receivable:
Loans	84,601	60,178	210,325
Mortgage-Backed Securities	67,660	49,515	169,323
Investment Securities	(114,276)	(15,768)	(261,894)
Increase (Decrease) in Advance Payments By Borrowers	(9,622)	10,988	65,940
Decrease in Prepaid FDIC Assessment	0	0	1,781,476
Other, Net	(502,072)	575,230	335,386
Net Cash Provided By Operating Activities	8,986,675	12,200,781	20,361,942
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Mortgage-Backed Securities Available For Sale (AFS)	(35,881,719)	(54,673,351)	(88,844,145)
Proceeds from Maturities, Prepayments and Calls of Mortgage Backed Securities (MBS)	28,187,696	32,752,039	56,166,594
Principal Repayments on Mortgage-Backed Securities AFS	21,151,344
Principal Repayments on Mortgage-Backed Securities Held To Maturity	2,663,303	0	942,806
Purchase of Investment Securities AFS	(78,573,124)	(64,593,473)	(72,626,491)
Maturities of Investment Securities AFS	9,707,511	21,531,825	22,028,941
Purchase of Investment Securities Held To Maturity	0	0	(1,000,000)
Maturities of Investment Securities Held To Maturity	0	0	3,501,978
Proceeds From Sale of Investment Securities AFS	44,312,795	37,842,271	21,957,851
Proceeds From Sale of Mortgage-Backed Securities AFS	27,329,862	31,762,151	40,802,371
Investment in Certificates of Deposits with Other Banks	(1,350,005)	0	(370,000)
Purchase of FHLB Stock	(5,044,000)	(5,905,180)	(4,950,606)
Redemption of FHLB Stock	5,973,800	7,777,180	6,112,706
Payments to Acquire Life Insurance Policies	(5,000,000)
Proceeds from Life Insurance Policies		624,260	0
Decrease in Loans Receivable	5,472,435	17,578,222	28,739,400
Proceeds From Sale of OREO	3,145,640	2,154,091	5,375,648
Purchase and Improvement of Premises and Equipment	(3,164,108)	(2,204,748)	(567,582)
Proceeds from Insurance Settlement, Investing Activities	43,686
Net Cash Provided By Investing Activities	18,975,116	24,645,287	17,269,471
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) in Deposit Accounts	(8,018,619)	1,418,392	(17,641,881)
Proceeds From FHLB Advances	284,804,000	253,630,000	150,800,000
Repayment of FHLB Advances	(303,064,000)	(288,470,058)	(168,317,124)
Proceeds From (Repayments of) Other Borrowings, Net	(2,111,371)	520,609	(1,314,505)
Repayment of Warrant Issued in Conjunction with Preferred Stock	0	0	(50,000)
Dividends to Preferred Stock Shareholders	(440,000)	(440,000)	(440,000)
Dividends to Common Stock Shareholders	(942,552)	(942,080)	(942,082)
Net Cash Used By Financing Activities	(29,772,542)	(34,283,137)	(37,905,592)
Net Increase (Decrease) in Cash and Cash Equivalents	(1,810,751)	2,562,931	(274,179)
Cash and Cash Equivalents at Beginning of Year	10,192,702	7,629,771	7,903,950
Cash And Cash Equivalents At End Of Year	8,381,951	10,192,702	7,629,771
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest	4,384,109	5,969,581	7,728,772
Income Taxes	2,258,388	1,464,350	448,419
Supplemental Schedule of Non Cash Transactions:
Transfers from Loans Receivable to OREO	4,362,635	1,638,135	3,861,182
Transfers of Held to Maturity Investmets to Available For Sale			49,907,323
Transfers of Held to Maturity Mortgage Baked Securities to Available For Sale			22,100,000
Transfers of Available For Sale Securities to Held To Maturity	32,811,452
Increase (Decrease) in Unrealized Gains on Securities AFS, Net of Taxes	$ (1,214,014)	$ 5,003,969	$ (6,958,904)

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Significant Accounting Policies

e following is a description of the more significant accounting and reporting policies used in the preparation and presentation of the accompanying consolidated financial statements.  All significant intercompany transactions have been eliminated in consolidation.

(a) Basis of Consolidation and Nature of Operations

The accompanying consolidated financial statements include the accounts of Security Federal Corporation (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”).  Security Federal Corporation 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 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.  SFINS was formed during fiscal 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, 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 was formed in 1975 and is currently inactive.

(b) Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing balances in other banks, and federal funds sold.  Cash equivalents have original maturities of three months or less.

(c) Investment and Mortgage-Backed Securities

Investment securities, including mortgage-backed securities, are classified in one of three categories: held to maturity, available for sale, or trading.  Management determines the appropriate classification of debt securities at the time of purchase. Investment securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity.  These securities are recorded at cost and adjusted for amortization of premiums and accretion of discounts over the estimated life of the security using a method that approximates a level yield.  Prepayment assumptions on mortgage-backed securities are anticipated.

Management classifies investment securities that are not considered to be held to maturity as available for sale.  This type of investment is stated at fair value with unrealized gains and losses, net of tax, reported in a separate component of shareholders' equity (“accumulated other comprehensive income”).  Gains and losses from sales of investment and mortgage-backed securities available for sale are determined using the specific identification method.  The Company had no investment in trading securities.

(d) Loans Receivable Held for Investment

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest is recognized over the term of the loan based on the outstanding loan balance. Fees charged for originating loans, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees are recognized as yield adjustments by applying the interest method.

(1) Significant Accounting Policies, Continued

(e) Allowance for Loan Losses

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. 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 bank regulatory agencies 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 less estimated selling costs.  In accordance with our policy, non-accrual commercial loans with a balance less than $200,000 and non-accrual consumer loans with a balance less than $100,000 are deemed immaterial and therefore excluded from the individual impairment review. 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.

(f) Loans Receivable Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate.  Net unrealized losses are provided for in a valuation allowance by charges to operations.

(g) Other Real Estate Owned

Other real estate owned represents real estate and other assets acquired through foreclosure or repossession and are initially recorded at the estimated fair value less costs to sell.  Subsequent improvements are capitalized.  Costs of holding real estate, such as property taxes, insurance, general maintenance and interest expense, are expensed as a period cost.  Fair values are reviewed regularly and allowances for possible losses are established when the carrying value of the asset owned exceeds the fair value less estimated costs to sell.  Fair values are generally determined by reference to an outside appraisal.

(h) Premises and Equipment

Premises and equipment are carried at cost, net of accumulated depreciation.  Depreciation of premises and equipment is amortized on a straight-line method over the estimated useful life of the related asset.  Estimated lives are seven to 40 years for buildings and improvements and generally three to 10 years for furniture, fixtures and equipment.  Maintenance and repairs are charged to current expense.  The cost of major renewals and improvements are capitalized.

(i) Intangible Assets and Goodwill

The goodwill is a result of the excess of the cost over the fair value of net assets resulting from the Collier Jennings acquisition in July 2006.

(1) Significant Accounting Policies, Continued

Intangible assets are amortized over their estimated economic lives using methods that reflect the pattern in which the economic benefits are utilized.  The intangible assets which consisted of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation, were fully amortized during the year ended December 31, 2015. Goodwill is reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

(j) Income Taxes

Income tax expense or benefit is recognized for the net change during the year in the deferred tax liability or asset.  That amount together with income taxes currently payable is the total amount of income tax expense or benefit for the year.  Deferred taxes are provided for by the differences in financial reporting bases for assets and liabilities compared with their tax bases.  Generally, a current tax liability or asset is established for taxes presently payable or refundable and a deferred tax liability or asset is established for future tax items.  A valuation allowance, if applicable, is established for deferred tax assets that may not be realized.  Tax bad debt reserves in excess of the base year amount (established as taxable years ending March 31, 1988 or later) would create a deferred tax liability.  Deferred income taxes are provided for in differences between the provision for loan losses for financial statement purposes and those allowed for income tax purposes.

The Company adopted accounting guidance which prescribes a threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosures.

There have been no gross amounts of unrecognized tax benefits or interest or penalties related to uncertain tax positions since adoption. There are no unrecognized tax benefits that would, if recognized, affect the effective tax rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. Years prior to March 31, 2012 are closed for federal, state and local income tax matters.

(k) Loan Fees and Costs Associated with Originating Loans

Loan fees received, net of direct incremental costs of originating loans, are deferred and amortized over the contractual life of the related loan.  The net fees are recognized as yield adjustments by applying the interest method.  Prepayments are not anticipated.

(l) Interest Income

Interest on loans is accrued and credited to income monthly based on the principal balance outstanding and the contractual rate on the loan.  The Company places loans on non-accrual status when they become greater than 90 days delinquent or when, in the opinion of management, full collection of principal or interest is unlikely.  When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received first to principal and then to interest income. The loans are returned to an accrual status when full collection of principal and interest appears likely.

(m) Advertising Expense

Advertising and public relations costs are generally expensed as incurred.  External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent.  Advertising and public relations costs of$416,000, $484,000, and $356,000 were included in the Company’s results of operations for the years ended December 31, 2015, 2014 and 2013, respectively.

(n) Stock-Based Compensation

The Company accounts for compensation costs under its stock option plans using the fair value method. This method requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is recognized in the income statement over the vesting period of the award.

(1) Significant Accounting Policies, Continued

(o) Net Income Per Common Share

Accounting guidance specifies computation and presentation requirements for both basic net income per common share ("EPS") and, for entities with complex capital structures, diluted EPS.  Basic EPS is computed by dividing net income available to common shareholders 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 potential common shares had been issued.  The dilutive effect of options and warrants outstanding is reflected in diluted earnings per share by application of the treasury stock method.

Net income available to common shareholders represents consolidated net income adjusted for preferred dividends declared, accretion of discounts and amortization of premiums on preferred stock issuances and cumulative dividends related to the current dividend period that have not been declared as of period end.

The following table provides a reconciliation of net income to net income available to common shareholders for the periods presented:

	For the Years Ended December 31,
	2015		2014		2013
Earnings Available To Common Shareholders
Net Income	$	6,115,927	$	5,810,740	$	3,791,162
Preferred Stock Dividends	440,000		440,000		440,000
Net Income Available To Common Shareholders	$	5,675,927	$	5,370,740	$	3,351,162

The following tables show the effect of dilutive options and warrants on the Company’s net income per common share for the periods indicated:

	For the Year Ended December 31, 2015
	Income		Shares	Per Share Amounts
Basic EPS	$	5,675,927	2,944,001	$	1.93
Effect of Dilutive Securities:
Senior Convertible Debentures	301,766		304,200	(0.09		)
Unvested Restricted Stock	—		111	—
Diluted EPS	$	5,977,693	3,248,312	$	1.84

	For the Year Ended December 31, 2014
	Income		Shares	Per Share Amounts
Basic EPS	$	5,370,740	2,944,001	$	1.82
Effect of Dilutive Securities:
Senior Convertible Debentures	301,766		304,200	(0.07		)
Diluted EPS	$	5,672,506	3,248,201	$	1.75

	For the Year Ended December 31, 2013
	Income		Shares	Per Share Amounts
Basic EPS	$	3,351,162	2,944,001	$	1.14
Effect of Dilutive Securities:
Senior Convertible Debentures	301,766		304,200	(0.02		)
Diluted EPS	$	3,652,928	3,248,201	$	1.12

(1) Significant Accounting Policies, Continued

The average market price used in calculating the assumed number of dilutive shares issued for the years ended December 31, 2015, 2014 and 2013 was $18.61, $14.56, and $11.37 respectively. As a result of the average stock price being less than the exercise price of all options in the years ended December 31, 2015, 2014 and 2013, the options were not dilutive in calculating diluted earnings per share for those periods.

(p) Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of income and expenses during the reporting periods.  Actual results could differ from those estimates.

(q) Recently Issued Accounting Standards

The following is a summary of recent authoritative pronouncements that could affect accounting, reporting, and disclosure of financial information by the Company:

In January 2014, the FASB amended the Investments-Equity Method and Joint Ventures topic of the Accounting Standards Codification ("ASC") to address accounting for investments in qualified affordable housing projects. If certain conditions are met, the amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects by amortizing the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizing the net investment performance in the income statement as a component of income tax expense (benefit). If those conditions are not met, the investment should be accounted for as an equity method investment or a cost method investment in accordance with existing accounting guidance. The amendments were effective for the Company for interim and annual reporting periods beginning after December 15, 2014 and were applied retrospectively for all periods presented. The amendments did not have a material effect on the Company's financial statements.

In January 2014, the FASB amended the Receivables topic of the ASC. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned, or OREO. In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The amendments were effective for the Company for annual and interim periods beginning after December 15, 2014. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company applied the amendments prospectively. These amendments did not have a material effect on the Company's consolidated financial statements.

In May 2014 and August 2015, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments were effective for the Company on January 1, 2015. These amendments did not have a material effect on the Company's consolidated financial statements.

(1) Significant Accounting Policies, Continued

In June 2014, the FASB issued guidance which clarifies that performance targets associated with stock compensation should be treated as a performance condition and should not be reflected in the grant date fair value of the stock award. The amendments will be effective for the Company for fiscal years that begin after December 15, 2015. The Company will apply the guidance to all stock awards granted or modified after the amendments are effective. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In February 2015, the FASB issued guidance which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all of its previous consolidation conclusions. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In November 2015, the FASB voted to amend the current lease accounting standard to bring most leases on the balance sheet. The new lease standard will be implemented using a modified retrospective approach. Under this approach, lessees and lessors will compute lease assets and liabilities based on the remaining payments for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements (the date of initial application). In addition, a lessee may elect specified transition relief provisions. The final ASU is expected to be published in early 2016 and will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption willl be permitted. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the ASC to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting authorities are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

(r) Risks and Uncertainties

In the normal course of its business, the Company encounters two significant types of risk: economic and regulatory.  There are three main components of economic risk: interest rate risk, credit risk, and market risk.  The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different bases, than its interest-earning assets.  Credit risk is the risk of default on the Company’s loan portfolio that results from borrowers’ inability or unwillingness to make contractually required payments.  Market risk reflects changes in the value of collateral underlying loans receivable, the valuation of real estate held by the Company, and the valuation of loans held for sale and mortgage-backed securities available for sale.  The Company is subject to the regulations of various government agencies.  These regulations can and do change significantly from period to period.  The Company also undergoes periodic examinations by the bank regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances, and operating restrictions, resulting from the regulators’ judgments based on information available to them at the time of their examination.

(s) Reclassifications

Certain amounts in prior years’ consolidated financial statements have been reclassified to conform to current period classifications.

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Investment and Mortgage-Backed Securities, Available for Sale

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Investment and Mortgage-Backed Securities, Available for Sale

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 are as follows:

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	2,000,000	$	—	$	67,912	$	1,932,088
Federal Farm Credit Bank ("FFCB") Securities	2,000,000		—		12,064		1,987,936
Federal National Mortgage Association ("FNMA") Bonds	997,564		6,767		—		1,004,331
Small Business Administration (“SBA”) Bonds	110,195,113		1,415,464		193,795		111,416,782
Tax Exempt Municipal Bonds	73,499,636		2,770,115		204,132		76,065,619
Mortgage-Backed Securities	180,197,347		3,281,116		681,251		182,797,212
Equity Securities	250,438		59,464		—		309,902
	$	369,140,098	$	7,532,926	$	1,159,154	$	375,513,870
	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,317,462	$	83,691	$	154,492	$	13,246,661
FFCB Securities	5,750,000		—		82,006		5,667,994
FNMA Bonds	996,822		7,559		—		1,004,381
SBA Bonds	106,637,400		1,796,943		307,649		108,126,694
Tax Exempt Municipal Bonds	59,960,960		2,579,543		45,080		62,495,423
Mortgage-Backed Securities	233,963,842		5,704,855		815,984		238,852,713
Equity Securities	250,438		56,236		—		306,674
	$	420,876,924	$	10,228,827	$	1,405,211	$	429,700,540

FHLB securities, FFCB securities, FNMA bonds, and FNMA and FHLMC mortgage-backed securities are issued by government-sponsored enterprises (“GSEs”).  GSEs are not backed by the full faith and credit of the United States government.  SBA bonds are 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 December 31, 2015, the Bank held an amortized cost and fair value of $116.8 million and $118.5 million, respectively, in GNMA mortgage-backed securities, which are included in mortgage-backed securities in the tables above, compared to an amortized cost and fair value of $156.8 million and $160.6 million, respectively, at December 31, 2014. Also included in mortgage-backed securities in the tables above and below are four private label collateralized mortgage obligation ("CMO") securities purchased by the Bank during the year ended December 31, 2015. These securities are issued by non-governmental real estate mortgage investment conduits, which are not backed by the full faith and credit of the United States government.  At December 31, 2015 the Bank held both an amortized cost and fair value of $3.8 million in private label CMO mortgage-backed securities, which are included in mortgage-backed securities in the tables above. There were no private label mortgage-backed securities held at December 31, 2014.

(2)         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 December 31, 2015 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 the maturity groupings below.

	Amortized Cost		Fair Value
Less Than One Year	$	421,237	$	420,631
One – Five Years	13,898,304		14,144,321
Five – Ten Years	57,135,325		58,129,443
After Ten Years	117,487,885		120,022,263
Mortgage-Backed Securities	180,197,347		182,797,212
	$	369,140,098	$	375,513,870

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 $81.0 million and $83.2 million, respectively, at December 31, 2015 and $120.7 million and $124.4 million, respectively, at December 31, 2014.

The Bank received $71.6 million, $69.6 million and $62.8 million in gross proceeds from sales of available for sale securities during the years ended December 31, 2015, 2014 and 2013, respectively. As a result, the Bank recognized $2.0 million in gross gains and $72,000 in gross losses for the year ended December 31, 2015, $1.1 million in gross gains and $623,000 in gross losses for the year ended December 31, 2014, and $1.6 million in gross gains and $279,000 in gross losses for the year ended December 31, 2013.

The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that individual available for sale securities have been in a continuous unrealized loss position for the periods indicated.

	December 31, 2015
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	—	$	—	$	1,932,088	$	67,912	$	1,932,088	$	67,912
FFCB Securities	1,987,936		12,064		—		—		1,987,936		12,064
SBA Bonds	25,090,453		119,533		7,982,777		74,262		33,073,230		193,795
Tax Exempt Municipal Bonds	13,668,473		175,020		709,800		29,112		14,378,273		204,132
Mortgage-Backed Securities	63,273,417		648,862		1,706,086		32,389		64,979,503		681,251
	$	104,020,279	$	955,479	$	12,330,751	$	203,675	$	116,351,030	$	1,159,154

(2)         Investment and Mortgage-Backed Securities, Available For Sale, Continued

	December 31, 2014
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	994,818	$	5,182	$	3,850,690	$	149,310	$	4,845,508	$	154,492
FFCB Securities	—		—		5,667,994		82,006		5,667,994		82,006
SBA Bonds	27,859,461		223,070		4,920,631		84,579		32,780,092		307,649
Tax Exempt Municipal Bonds	3,605,319		16,039		1,710,586		29,041		5,315,905		45,080
Mortgage-Backed Securities	34,840,832		208,242		30,899,075		607,742		65,739,907		815,984
	$	67,300,430	$	452,533	$	47,048,976	$	952,678	$	114,349,406	$	1,405,211

Securities classified as available-for-sale are recorded at fair market value.  At December 31, 2015, 17.6% of the unrealized losses, or nine individual securities, consisted of securities in a continuous loss position for 12 months or more.  At December 31, 2014, 67.8% of the unrealized losses, or 24 individual securities, 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 a portion may be recognized 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 years ended December 31, 2015, 2014 and 2013.

FHLB securities, FFCB securities, FNMA bonds, and FNMA and FHLMC mortgage-backed securities are issued by government-sponsored enterprises (“GSEs”).  GSEs are not backed by the full faith and credit of the United States government.  SBA bonds are 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 December 31, 2015, the Bank held an amortized cost and fair value of $116.8 million and $118.5 million, respectively, in GNMA mortgage-backed securities, which are included in mortgage-backed securities in the tables above, compared to an amortized cost and fair value of $156.8 million and $160.6 million, respectively, at December 31, 2014. Also included in mortgage-backed securities in the tables above and below are four private label collateralized mortgage obligation ("CMO") securities purchased by the Bank during the year ended December 31, 2015. These securities are issued by non-governmental real estate mortgage investment conduits, which are not backed by the full faith and credit of the United States government.  At December 31, 2015 the Bank held both an amortized cost and fair value of $3.8 million in private label CMO mortgage-backed securities, which are included in mortgage-backed securities in the tables above. There were no private label mortgage-backed securities held at December 31, 2014.

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Investment and Mortgage-Backed Securities, Held to Maturity

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Investment and Mortgage-Backed Securities, Held to Maturity

Investment and Mortgage-Backed Securities, Held to Maturity

During the year ended December 31, 2015 the Company transferred 22 mortgage-backed securities classified as available for sale to its held to maturity portfolio. Management expects interest rates to rise in 2016 and elected to transfer these securities in an effort to reduce volatility in equity. At the date of the transfer these securities had a fair value $32.8 million, which resulted in an unrealized gain of $602,000 that is reported in accumulated other comprehensive income and will be amortized over the remaining life of the securities. The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of held to maturity securities at December 31, 2015 are as follows:

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Mortgage-Backed Securities (1)	$	29,873,098	$	22,600	$	214,418	$	29,681,280
Total Held To Maturity	$	29,873,098	$	22,600	$	214,418	$	29,681,280

^{(1) COMPRISED OF GSES OR GNMA MORTGAGE-BACKED SECURITIES} 

Other than the mortgage-backed securities included in the table above, there were no other investment securities classified as held to maturity at December 31, 2015. There were no investment or mortgage-backed securities classified as held to maturity at December 31, 2014.

At December 31, 2015, the Bank held GNMA mortgage-backed securities that had an amortized cost and fair value of $20.5 million and $20.4 million, respectively. The Company has not invested in any private label mortgage-backed securities classified as held to maturity.

At December 31, 2015, the amortized cost and fair value of mortgage-backed securities held to maturity pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $26.0 million and $25.8 million, respectively.

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 December 31, 2015.

Insert Title Here
	December 31, 2015
	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)	$	25,484,972	$	214,418	$	—	$	—	$	25,484,972	$	214,418
	$	25,484,972	$	214,418	$	—	$	—	$	25,484,972	$	214,418

^{(1) COMPRISED OF GNMA MORTGAGE-BACKED SECURITIES} 

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.

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Loans Receivable, Net

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Loans Receivable, Net

Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates shown:

	December 31, 2015		December 31, 2014
Residential Real Estate Loans	$	76,373,071	$	77,282,817
Consumer Loans	50,380,289		50,391,224
Commercial Business	12,514,133		10,564,467
Commercial Real Estate	200,083,125		209,530,209
Total Loans Held For Investment	339,350,618		347,768,717
Loans Held For Sale	2,462,559		1,864,999
Total Loans Receivable, Gross	341,813,177		349,633,716
Less:
Allowance For Loan Losses	8,275,133		8,357,496
Loans In Process	2,902,849		1,379,114
Deferred Loan Fees	62,466		22,611
	11,240,448		9,759,221
Total Loans Receivable, Net	$	330,572,729	$	339,874,495

Changes in the allowance for loan losses for the years ended December 31, 2015, 2014 and 2013 are summarized as follows:

	2015			2014			2013
Balance At Beginning Of Period	$	8,357,496		$	10,241,970		$	11,318,371
Provision For Loan Losses	—			450,000			2,645,381
Charge Offs	(1,516,468		)	(3,114,833		)	(5,209,830		)
Recoveries	1,434,105			780,359			1,488,048
Total Allowance For Loan Losses	$	8,275,133		$	8,357,496		$	10,241,970

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 60 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 possess weaknesses that do not currently expose the Company to sufficient risk to warrant adverse classification.

(4)      Loans Receivable, Net, Continued

The following tables list the loan grades used by the Company as credit quality indicators and the balance in each category at the dates presented, excluding loans held for sale.

	Credit Quality Measures
December 31, 2015	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	67,605,311	$	1,264,415	$	607,336	$	6,896,009	$	76,373,071
Consumer	46,344,056		2,510,519		81,617		1,444,097		50,380,289
Commercial Business	10,519,123		1,465,136		102,046		427,828		12,514,133
Commercial Real Estate	129,242,390		43,863,659		17,304,431		9,672,645		200,083,125
Total	$	253,710,880	$	49,103,729	$	18,095,430	$	18,440,579	$	339,350,618

	Credit Quality Measures
December 31, 2014	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	69,163,911	$	956,976	$	639,638	$	6,522,292	$	77,282,817
Consumer	48,283,560		1,046,624		128,033		933,007		50,391,224
Commercial Business	9,691,685		340,706		202,895		329,181		10,564,467
Commercial Real Estate	125,339,273		32,549,335		35,169,358		16,472,243		209,530,209
Total	$	252,478,429	$	34,893,641	$	36,139,924	$	24,256,723	$	347,768,717

The following table presents an age analysis of past due balances by category at December 31, 2015.

	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	$	—	$	1,144,381	$	3,306,675	$	4,451,056	$	71,922,015	$	76,373,071
Consumer	710,881		282,314		575,866		1,569,061		48,811,228		50,380,289
Commercial Business	101,201		—		178,076		279,277		12,234,856		12,514,133
Commercial Real Estate	3,309,287		929,819		2,973,135		7,212,241		192,870,884		200,083,125
Total	$	4,121,369	$	2,356,514	$	7,033,752	$	13,511,635	$	325,838,983	$	339,350,618

The following table presents an age analysis of past due balances by category at December 31, 2014.

	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	$	—	$	1,087,299	$	3,061,339	$	4,148,638	$	73,134,179	$	77,282,817
Consumer	1,868,787		91,223		573,644		2,533,654		47,857,570		50,391,224
Commercial Business	162,481		99,784		246,977		509,242		10,055,225		10,564,467
Commercial Real Estate	4,544,813		1,094,701		9,859,689		15,499,203		194,031,006		209,530,209
Total	$	6,576,081	$	2,373,007	$	13,741,649	$	22,690,737	$	325,077,980	$	347,768,717

(4)      Loans Receivable, Net, Continued

At December 31, 2015 and 2014, 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 December 31, 2015 compared to 2014.

	At December 31, 2015				At December 31, 2014				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	3,306,675	1.0	%	$	3,061,339	0.9	%	$	245,336		8.0	%
Commercial Business	178,076		0.1		246,977		0.1		(68,901		)	(27.9	)
Commercial Real Estate	2,973,135		0.8		9,859,689		2.8		(6,886,554		)	(69.8	)
Consumer	575,866		0.2		573,644		0.2		2,222			0.4
Total Non- accrual Loans	$	7,033,752	2.1	%	$	13,741,649	4.0	%	$	(6,707,897	)	(48.8	)%

^{(1) PERCENT OF GROSS LOANS RECEIVABLE 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 periods indicated.

	For the Year Ended December 31, 2015
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,392,065		$	886,716		$	159,353		$	5,919,362		$	8,357,496
Provision	53,694			549,462			617,658			(1,220,814		)	—
Charge-Offs	(216,525		)	(527,055		)	(10,947		)	(761,941		)	(1,516,468		)
Recoveries	93,949			154,030			7,884			1,178,242			1,434,105
Ending Balance	$	1,323,183		$	1,063,153		$	773,948		$	5,114,849		$	8,275,133

	For the Year Ended December 31, 2014
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,706,643		$	847,777		$	426,658		$	7,260,892		$	10,241,970
Provision	(91,991		)	352,305			(53,435		)	243,121			450,000
Charge-Offs	(359,021		)	(372,460		)	(328,094		)	(2,055,258		)	(3,114,833		)
Recoveries	136,434			59,094			114,224			470,607			780,359
Ending Balance	$	1,392,065		$	886,716		$	159,353		$	5,919,362		$	8,357,496

	For the Year Ended December 31, 2013
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,521,559		$	1,001,271		$	618,919		$	8,176,622		$	11,318,371
Provision	1,030,237			(5,306		)	(187,377		)	1,807,827			2,645,381
Charge-Offs	(1,118,168		)	(207,230		)	(31,831		)	(3,852,601		)	(5,209,830		)
Recoveries	273,015			59,042			26,947			1,129,044			1,488,048
Ending Balance	$	1,706,643		$	847,777		$	426,658		$	7,260,892		$	10,241,970

(4)      Loans Receivable, Net, Continued

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses as of the dates indicated.

	Allowance For Loan Losses
December 31, 2015	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,323,183	$	1,323,183
Consumer	32,300		1,030,853		1,063,153
Commercial Business	—		773,948		773,948
Commercial Real Estate	49,300		5,065,549		5,114,849
Total	$	81,600	$	8,193,533	$	8,275,133

	Allowance For Loan Losses
December 31, 2014	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,392,065	$	1,392,065
Consumer	2,600		884,116		886,716
Commercial Business	—		159,353		159,353
Commercial Real Estate	472,400		5,446,962		5,919,362
Total	$	475,000	$	7,882,496	$	8,357,496

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in loans receivable as of the dates indicated.

	Loans Receivable
December 31, 2015	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,922,105	$	73,450,966	$	76,373,071
Consumer	372,382		50,007,907		50,380,289
Commercial Business	162,201		12,351,932		12,514,133
Commercial Real Estate	9,190,640		190,892,485		200,083,125
Total	$	12,647,328	$	326,703,290	$	339,350,618

	Loans Receivable
December 31, 2014	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,519,814	$	74,763,003	$	77,282,817
Consumer	218,232		50,172,992		50,391,224
Commercial Business	236,030		10,328,437		10,564,467
Commercial Real Estate	17,273,879		192,256,330		209,530,209
Total	$	20,247,955	$	327,520,762	$	347,768,717

(4)       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 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 sale, 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 total impaired loans was $13.1 million for year ended December 31, 2015 compared to $22.2 million for the year ended December 31, 2014.

The following tables are a summary of information related to impaired loans as of and for the years ended December 31, 2015, 2014 and 2013.

	December 31, 2015
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	2,922,105	$	3,033,735	$	—	$	3,014,807	$	13,909
Consumer	120,889		129,188		—		130,202		—
Commercial Business	162,201		362,201		—		190,562		—
Commercial Real Estate	8,620,301		10,969,642		—		8,952,868		245,197
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	251,493		256,923		32,300		254,611		4,789
Commercial Business	—		—		—		—		—
Commercial Real Estate	570,339		577,139		49,300		579,418		31,684
Total
Residential Real Estate	2,922,105		3,033,735		—		3,014,807		13,909
Consumer	372,382		386,111		32,300		384,813		4,789
Commercial Business	162,201		362,201		—		190,562		—
Commercial Real Estate	9,190,640		11,546,781		49,300		9,532,286		276,881
Total	$	12,647,328	$	15,328,828	$	81,600	$	13,122,468	$	295,579

(4)       Loans Receivable, Net, Continued

	December 31, 2014
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	2,519,814	$	2,618,003	$	—	$	2,642,156	$	—
Consumer	152,029		159,529		—		155,602		1,510
Commercial Business	236,030		436,030		—		413,653		—
Commercial Real Estate	13,721,964		18,088,149		—		14,980,690		297,839
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	66,203		66,203		2,600		67,522		4,867
Commercial Business	—		—		—		—		—
Commercial Real Estate	3,551,915		3,582,465		472,400		3,952,066		60,207
Total
Residential Real Estate	2,519,814		2,618,003		—		2,642,156		—
Consumer	218,232		225,732		2,600		223,124		6,377
Commercial Business	236,030		436,030		—		413,653		—
Commercial Real Estate	17,273,879		21,670,614		472,400		18,932,756		358,046
Total	$	20,247,955	$	24,950,379	$	475,000	$	22,211,689	$	364,423

	December 31, 2013
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	3,936,316	$	4,588,645	$	—	$	4,044,142	$	31,704
Consumer	106,197		106,198		—		104,539		953
Commercial Business	19,775		19,775		—		19,896		389
Commercial Real Estate	21,810,347		26,775,853		—		23,618,648		886,737
With An Allowance Recorded:
Residential Real Estate	901,920		901,920		158,791		909,473		—
Consumer	169,294		169,294		103,109		170,499		5,173
Commercial Business	—		—		—		—		—
Commercial Real Estate	4,410,965		4,954,058		840,658		4,707,658		251,505
Total
Residential Real Estate	4,838,236		5,490,565		158,791		4,953,615		31,704
Consumer	275,491		275,492		103,109		275,038		6,126
Commercial Business	19,775		19,775		—		19,896		389
Commercial Real Estate	26,221,312		31,729,911		840,658		28,326,306		1,138,242
Total	$	31,354,814	$	37,515,743	$	1,102,558	$	33,574,855	$	1,176,461

(4)       Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (FASB ASC Topic 310-40).  The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.  All TDRs are included in impaired loans at December 31, 2015 and 2014 and amounted to $6.7 million and $9.6 million, respectively.

Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of concession are initially classified as accruing TDRs if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the concession date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. Nonaccrual TDRs are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower's financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six months).

The following table is a summary of loans restructured as TDRs during the periods indicated:

	For the Year Ended December 31, 2015
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—
Consumer Loans	1	36,460		36,460
Commercial Business	—	—		—
Commercial Real Estate	6	922,000		922,000
Total	7	958,460		958,460

	For the Year Ended December 31, 2014					For the Year Ended December 31, 2013
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—	—	$	—	$	—
Consumer Loans	—	—		—		—	—		—
Commercial Business	—	—		—		1	32,850		32,850
Commercial Real Estate	2	186,188		186,188		4	1,409,693		1,409,693
Total	2	186,188		186,188		5	1,442,543		1,442,543

(4)       Loans Receivable, Net, Continued

During the year ended December 31, 2015, the Bank modified seven loans that were considered to be TDRs.The Bank lowered the interest rate on three of the loans to allow the borrowers to begin making monthly principal and interest payments on the loans and changed the monthly payment to an interest only payment for an agreed upon period for the other four loans. During the year ended December 31, 2014, the Bank modified two loans that were considered TDRs by lowering the interest rate on both loans. During the year ended December 31, 2013, the Bank modified five loans that were considered to be TDRs. The Bank lowered the interest rate on each of these loans and changed the payment to interest only on for an agreed upon period on three of these loans.

The following table is a summary of TDRs restructured during the periods indicated that subsequently defaulted during the same period:

	For the Year Ended December 31,
	2015			2014			2013
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential Real Estate	—	$	—	—	$	—	—	$	—
Consumer Loans	—	—		—	—		—	—
Commercial Business	—	—		—	—		—	—
Commercial Real Estate	2	30,713		1	66,138		1	146,267
Total	2	$	30,713	1	$	66,138	1	$	146,267

At December 31, 2015, six previously restructured loans were in default, including two which had been restructured in the last 12 months. At December 31, 2014, seven loans that had been previously restructured were in default, including one which had been restructured within the last 12 months. At December 31, 2013, five previously restructured loans were in default, including one which had been restructured during the same period. The Bank considers any loan 30 days or more past due to be in default.

Our policy with respect to accrual of interest on loans restructured in a TDR follows relevant supervisory guidance.  That is, if a borrower has demonstrated performance under the previous loan terms and shows capacity to perform under the restructured loan terms, continued accrual of interest at the restructured interest rate is likely.  If a borrower was materially delinquent on payments prior to the restructuring but shows capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual going forward.  Lastly, if the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status.

We will continue to closely monitor these loans and will cease accruing interest on them if management believes that the borrowers may not continue performing based on the restructured note terms.  If, after previously being classified as a TDR, a loan is restructured a second time, then that loan is automatically placed on nonaccrual status.  Our policy with respect to nonperforming loans requires the borrower to become current and then make a minimum of six consecutive payments in accordance with the loan terms before that loan can be placed back on accrual status.  Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status.

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Premises and Equipment, Net

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Premises and Equipment, Net

Premises and Equipment, Net

Premises and equipment, net, are summarized as follows at the dates indicated:

	December 31,
	2015			2014
Land	$	6,693,927		$	6,729,097
Buildings and Improvements	20,040,102			17,796,209
Furniture and Equipment	11,142,428			11,068,028
Construction in Progress	236,019			184,040
Total Premises and Equipment	38,112,476			35,777,374
Less Accumulated Depreciation	(17,995,558		)	(17,544,148		)
Total Premises and Equipment, Net	$	20,116,918		$	18,233,226

Depreciation expense was $1.2 million for each of the years ended December 31, 2015, 2014 and 2013. The Bank has entered into non-cancelable operating leases related to buildings and land.  At December 31, 2015, future minimum payments under non-cancelable operating leases with initial or remaining terms of one year or more are as follows (by fiscal year):

2016	$	356,440
2017	326,000
2018	223,029
2019	214,458
2020	214,458
Thereafter	1,211,468
Total Future Minimum Payments	$	2,545,853

Total rental expense amounted to $417,000, $424,000, and $415,000 for the years ended December 31, 2015, 2014 and 2013, respectively.  Five lease agreements with monthly expenses of $6,737, $800, $7,889, $8,571, and $9,075 have multiple renewal options totaling 30, 10, 15, 45, and 20 years, respectively.

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Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Intangible assets and goodwill are the result of the Collier Jennings acquisition in July 2006.  Changes in intangible assets and goodwill for periods indicated consisted of the following:

	December 31,
	2015		2014
Customer List
Balance At Beginning Of Year	$	—	$	11,970
Amortization	—		11,970
Balance At End Of Year	—		—
Total Intangibles	—		—
Goodwill	1,199,754		1,199,754
Total	$	1,199,754	$	1,199,754

In accordance with accounting guidance, the Company evaluates its goodwill on an annual basis. The evaluations were performed as of September 30, 2015 and September 30, 2014 for fiscal years ended December 31, 2015 and 2014, respectively. At the time of the evaluations the Company determined that no impairment existed. Therefore, there was no write-down of goodwill for the years ended December 31, 2015 and 2014.

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FHLB Stock

12 Months Ended

Dec. 31, 2015

Federal Home Loan Banks [Abstract]

FHLB Stock

FHLB Stock

The Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to a membership component, which was 0.09% and 0.15% of total assets at December 31, 2015 and 2014, respectively, plus a transaction component equal to 4.25% and 4.50% of outstanding advances (borrowings) from the FHLB of Atlanta at December 31, 2015 and 2014, respectively.  The Bank is in compliance with this requirement with an investment in FHLB of Atlanta stock of $2.2 million and $3.1 million at December 31, 2015 and 2014, respectively. No readily available market exists for this stock and it has no quoted fair value.  However, because redemption of this stock has historically been at par, it is carried at cost.

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Repossessed Assets Acquired In Settlement Of Loans

12 Months Ended

Dec. 31, 2015

Other Real Estate, Foreclosed Assets, and Repossessed Assets [Abstract]

Repossessed Assets Acquired in Settlement of Loans

Other Real Estate Owned

The Bank owned $4.4 million and $3.2 million in OREO at December 31, 2015 and 2014, respectively. Transactions in OREO for the years ended December 31, 2015, 2014 and 2013 are summarized below.

	2015			2014			2013
Balance, Beginning Of Period	$	3,229,710		$	3,947,226		$	6,754,425
Additions	4,362,635			1,638,135			3,861,182
Sales	(2,918,587		)	(1,850,651		)	(5,274,003		)
Write Downs	(312,347		)	(505,000		)	(1,394,378		)
Balance, End Of Period	$	4,361,411		$	3,229,710		$	3,947,226

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Deposits

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Deposits

Deposits

Deposits outstanding by type of account are summarized as follows:

	At December 31, 2015				At December 31, 2014
	Balance		Weighted Rate	Interest Rate Range	Balance		Weighted Rate	Interest Rate Range
Checking Accounts	$	155,765,968	0.03%	0.00-0.20%	$	143,422,150	0.03%	0.00-0.15%
Money Market Accounts	229,016,993		0.16%	0.10-0.17%	234,819,052		0.19%	0.10-0.20%
Statement Savings Accounts	31,191,828		0.10%	0.00-0.10%	28,622,933		0.10%	0.00-0.10%
Total	$	415,974,789	0.11%	0.00-0.20%	$	406,864,135	0.13%	0.00-0.20%
Certificate Accounts:
0.00 – 0.99%	$	175,755,511			$	185,458,344
1.00 – 1.99%	51,479,431				42,014,738
2.00 – 2.99%	8,886,814				25,605,349
3.00 – 3.99%	—				172,598
Total	$	236,121,756	0.69%	0.04-2.52%	$	253,251,029	0.79%	0.05-3.01%
Total Deposits	$	652,096,545	0.32%	0.00-2.52%	$	660,115,164	0.38%	0.00-3.01%

Included in the certificates above were $42.5 million and $38.8 million in brokered deposits at December 31, 2015 and 2014, respectively, with a weighted average interest rate of 0.94% and 1.14%, respectively. Of the $42.5 million in brokered deposits at December 31, 2015, $11.5 million mature within one year.

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $132.0 million and $140.0 million at December 31, 2015 and 2014, respectively.

Certificate of deposits that met or exceeded the FDIC insurance limit of $250,000 were $71.3 million and $69.6 million at December 31, 2015 and 2014, respectively.

The amounts and scheduled maturities of all certificates of deposit are as follows:

	At December 31,
	2015		2014
Within 1 Year	$	141,385,500	$	142,490,027
After 1 Year, Within 2 Years	56,022,488		57,481,254
After 2 Years, Within 3 Years	23,139,815		22,273,310
After 3 Years, Within 4 Years	9,179,894		18,114,738
After 4 Years, Within 5 Years	6,394,059		12,891,700
	$	236,121,756	$	253,251,029

At December 31, 2015 and 2014, the Bank had $46,000 and $132,000, respectively, in overdrafts that were reclassified to loans.

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Advances From Federal Home Loan Bank (FHLB) And Other Borrowings

Advances From Federal Home Loan Bank And Other Borrowings

Advances from the FHLB are summarized by year of maturity and weighted average interest rate at December 31, 2015 below:

	Amount		Weighted Rate
2016	$	16,740,000	1.51	%
2017	12,900,000		4.38	%
2018	5,000,000		3.39	%
Total	$	34,640,000	3.87	%

These advances are secured by a blanket collateral agreement with the FHLB by pledging the Bank’s portfolio of residential first mortgage loans and investment securities with an amortized cost and fair value of $77.8 million and $74.7 million, respectively, at December 31, 2015 and $99.9 million and $99.3 million, respectively, at December 31, 2014. Advances are subject to prepayment penalties.

The following table shows callable FHLB advances at December 31, 2015. These advances are also included in the above table.  All callable advances are callable at the option of the FHLB.  If an advance is called, the Bank has the option to pay off the advance without penalty, re-borrow funds on different terms, or convert the advance to a three-month floating rate advance tied to LIBOR.

Borrow Date	Maturity Date	Amount	Int. Rate	Type	Call Dates
11/29/06	11/29/16	$5,000,000	4.03%	Multi-Call	05/29/08 and quarterly thereafter
05/24/07	05/24/17	$7,900,000	4.38%	Multi-Call	05/24/08 and quarterly thereafter
07/25/07	07/25/17	$5,000,000	4.40%	Multi-Call	07/25/08 and quarterly thereafter

During the year ended December 31, 2015, the Bank prepaid three FHLB advances totaling $15.0 million and incurred $788,000 in prepayment penalties. During the year ended December 31, 2014, the Bank prepaid one FHLB advance totaling $5.0 million and incurred $178,000 in prepayment penalties. During the year ended December 31, 2013, the Bank prepaid six FHLB advances totaling $30.0 million and incurred $589,000 in prepayment penalties.

At December 31, 2015 and 2014, the Bank had $240.2 million and $195.7 million in additional borrowing capacity, respectively, at the FHLB.

The Bank had $6.4 million and $8.5 million in other borrowings at December 31, 2015 and 2014, respectively.  These borrowings consist of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. The repurchase agreements typically mature within one to three days and the interest rate paid on these borrowings floats monthly with money market type rates. At both December 31, 2015 and 2014, the interest rate paid on the repurchase agreements was 0.15%. The maximum amount outstanding at any one month end during the year ended December 31, 2015 was $10.3 million compared to $10.8 million during the year ended December 31, 2014. The Bank had pledged as collateral for these repurchase agreements investment and mortgage-backed securities with amortized costs and fair values of $14.3 million and $14.6 million, respectively, at December 31, 2015 and $17.3 million and $18.0 million, respectively, at December 31, 2014.

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Junior Subordinated Debentures

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Junior Subordinated Debentures

Junior Subordinated Debentures

On September 21, 2006, Security Federal Statutory Trust (the “Trust”), a wholly-owned subsidiary of the Company, issued and sold fixed and floating rate capital securities of the Trust (the “Capital Securities”), which are reported on the consolidated balance sheet as junior subordinated debentures, generating proceeds of $5.2 million. The Trust loaned these proceeds to the Company to use for general corporate purposes, primarily to provide capital to the Bank.

The Capital Securities accrue and pay distributions quarterly at a floating rate of three month LIBOR plus 170 basis points which was a rate per annum equal to 2.21% and 1.94% at December 31, 2015 and 2014, respectively. The distribution rate payable on the Capital Securities is cumulative and payable quarterly in arrears.

(11)         Junior Subordinated Debentures, Continued

The Company has the right, subject to events of default, to defer payments of interest on the Capital Securities for a period not to exceed 20 consecutive quarterly periods, provided that no extension period may extend beyond the maturity date of December 15, 2036. The Company has no current intention to exercise its right to defer payments of interest on the Capital Securities.

The Capital Securities mature or are mandatorily redeemable upon maturity on December 15, 2036, or upon earlier optional redemption as provided in the indenture. The Company has had the right to redeem the Capital Securities in whole or in part since September 15, 2011.

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Senior Convertible Debentures

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Senior Convertible Debentures

Senior Convertible Debentures

Effective December 1, 2009, the Company issued $6.1 million in convertible senior debentures. These debentures will mature on December 1, 2029 and accrue interest at the rate of 8.0% per annum until maturity or earlier redemption, repayment, or conversion into common stock. Interest on the debentures is payable on June 1 and December 1 of each year, and commenced June 1, 2010. These debentures are convertible into the Company’s common stock at a conversion price of $20 per share at the option of the holder at any time prior to maturity.

The convertible senior debentures are redeemable, in whole or in part, at the option of the Company at any time on or after December 1, 2019, at a price equal to 100% of the principal amount of the debentures to be purchased plus any accrued and unpaid interest to, but excluding, the date of redemption. These debentures are unsecured general obligations of the Company ranking equal in right of payment to all of our present and future unsecured indebtedness that is not expressly subordinated.

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Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense was comprised of the following for the dates indicated below:

	For the Years Ended December 31,
	2015		2014		2013
Current:
Federal	$	1,056,002	$	1,833,069	$	380,143
State	285,699		267,904		164,491
Total Current Tax Expense	1,341,701		2,100,973		544,634
Deferred:
Federal	722,699		192,051		784,814
State	2,699		10,144		10,936
Total Deferred Tax Expense	725,398		202,195		795,750
Total Income Tax Expense	$	2,067,099	$	2,303,168	$	1,340,384

The Company's income taxes differ from those computed at the statutory federal income tax rate, as follows:

	For the Years Ended December 31,
	2015			2014			2013
Tax at Statutory Income Tax Rate	$	2,782,229		$	2,758,729		$	1,744,725
State Tax and Other	(41,986		)	66,738			45,761
Tax Exempt Interest	(684,708		)	(534,325		)	(425,450		)
Valuation Allowance	11,564			12,026			(24,652		)
Total Income Tax Expense	$	2,067,099		$	2,303,168		$	1,340,384

(13)         Income Taxes, Continued

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2015 and 2014 are presented below.

	At December 31,
	2015			2014
Deferred Tax Assets:
Deferred Compensation	$	558,870		$	521,256
Provision For Loan Losses	2,846,867			2,872,552
Other Real Estate Owned	1,004,332			1,194,141
Net Fees Deferred For Financial Reporting	112,782			114,924
Non-accrual Interest	—			431,696
Net Operating Losses	231,775			220,211
Other	205,009			207,423
Total Gross Deferred Tax Assets	4,959,635			5,562,203
Less: Valuation Allowance	(231,775		)	(220,211		)
Net Deferred Tax Assets	4,727,860			5,341,992
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,630			114,510
Depreciation	420,568			288,157
Other	42,271			63,536
Unrealized Gain on Securities Available for Sale	2,604,222			3,347,240
Total Gross Deferred Tax Liability	3,181,691			3,813,443
Net Deferred Tax Asset	$	1,546,169		$	1,528,549

Deferred tax assets represent the future tax benefit of deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. As of December 31, 2015, management has determined that it is more likely than not that the total deferred tax asset will be realized except for the deferred tax asset associated with State net operating loss carryforwards, and, accordingly, has established a valuation allowance only for this item. The change in the valuation allowance was $11,564. Net deferred tax assets are included in other assets at December 31, 2015 and 2014. The Company had state net operating losses attributable to the non-bank entities of $7.0 million and $6.7 million for the years ended December 31, 2015 and 2014, respectively.

Retained earnings at December 31, 2015 included tax bad debt reserves of $2.2 million, for which no provision for federal income tax has been made. If, in the future, these amounts are used for any purpose other than to absorb bad debt losses, including dividends, stock redemptions, or distributions in liquidation, or the Company ceases to be qualified as a bank holding company, they may be subject to federal income tax at the prevailing corporate tax rate.  

As of December 31, 2015, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company's policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

Tax returns for 2012 and subsequent years are subject to examination by taxing authorities.

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Regulatory Matters

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Regulatory Matters

Regulatory Matters

As a state-chartered, federally insured commercial bank, the Bank is subject to the capital requirements established by the FDIC. Under the FDIC’s capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Effective January 1, 2015 (with some changes transitioned into full effectiveness over two to four years), the Bank became subject to new capital adequacy requirements. The capital adequacy requirements are quantitative measures established by regulation that require the Bank to maintain minimum amounts and ratios of capital.

The Bank is now subject to new capital requirements adopted by the FDIC, which create a new required ratio for common equity Tier 1 ("CET1") capital, increases the leverage and Tier 1 capital ratios, changes the risk-weightings of certain assets for purposes of the risk-based capital ratios, creates an additional capital conservation buffer over the required capital ratios and changes what qualifies as capital for purpose of meeting these various capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by bank regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. The Bank is required to maintain additional levels of Tier 1 common equity over the minimum risk-based capital levels before it may pay dividends, repurchase shares or pay discretionary bonuses.

The new minimum requirements are a ratio of CET1 capital to total risk-weighted assets (the "CET1 risk-based ratio") of 4.5%, a Tier 1 capital ratio of 6.0%, a total capital ratio of 8.0%, and a leverage ratio of 4.0%. In addition to the minimum CET1, Tier 1 and total capital ratios, the Bank will have to maintain a capital conservation buffer consisting of additional CET1 capital equal to 2.5% of risk-weighted assets above the required minimum levels in order to avoid limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses based on percentages of eligible retained income that could be utilized for such actions. This new capital conservation buffer requirement is to be phased in beginning in January 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented in January 2019.

In addition to the capital requirements, there are a number of changes in what constitutes regulatory capital, subject to transition periods. These changes include the phasing-out of certain instruments as qualifying capital. Mortgage servicing rights and deferred tax assets over designated percentages of CET1 will be deducted from capital, subject to a four-year transition period. CET1 will consist of Tier 1 capital less all capital components that are not considered common equity. In addition, Tier 1 capital will include accumulated other comprehensive income (loss), which includes all unrealized gains and losses on available for sale debt and equity securities, subject to a four-year transition period. Because of the Bank's asset size, it was not considered an advanced approaches banking organization and elected in the first quarter of calendar year 2015 to take the one-time option of deciding to permanently opt-out of the inclusion of unrealized gains and losses on available for sale debt and equity securities in its capital calculations. The new requirements also include changes in the risk-weighting of assets to better reflect credit risk and other risk exposure. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and for non-residential mortgage loans that are 90 days or more past due or otherwise on non-accrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; and a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital.

Under the new standards, in order to be considered well-capitalized, the Bank must have a CET1 risk-based capital ratio of 6.5% (new), a Tier 1 risk-based capital ratio of 8.0% (increased from 6.0%), a total risk-based capital ratio of 10.0% (unchanged) and a Tier 1 leverage capital ratio of 5.0% (unchanged).

Bank holding companies are subject to capital adequacy requirements of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve. For a bank holding company with less than $1.0 billion in assets, the capital guidelines apply on a bank only basis and the Federal Reserve expects the holding company's subsidiary banks to be well-capitalized under the prompt corrective action regulations. If Security Federal Corporation was subject to regulatory guidelines for bank holding companies with $1.0 billion or more in assets, at December 31, 2015, it would have exceeded all regulatory capital requirements.

(14)         Regulatory Matters, Continued

The Company and the Bank’s regulatory capital amounts and ratios were as follows as of the dates indicated:

	Actual				For Capital Adequacy				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
December 31, 2015
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	84,672	21.7	%	$	23,429	6.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	95,429		24.4	%	31,239		8.0	%	N/A		N/A
Common Equity Tier 1 Capital (To Risk Weighted Assets)	63,504		16.3	%	17,572		4.5	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	84,672		10.6	%	31,811		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,728	22.5	%	$	23,440	6.0	%	$	31,254	8.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	92,653		23.7	%	31,254		8.0	%	39,067		10.0	%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	87,728		22.5	%	17,580		4.5	%	25,394		6.5	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,728		11.0	%	31,801		4.0	%	39,751		5.0	%
December 31, 2014
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	77,746	20.6	%	$	15,073	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	89,915		23.9	%	30,147		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	77,746		9.5	%	32,778		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,222	23.2	%	$	15,062	4.0	%	$	22,593	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	91,973		24.4	%	30,123		8.0	%	37,654		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,222		10.6	%	32,792		4.0	%	40,991		5.0	%

The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution's capital level is or may become inadequate in light of particular risks or circumstances. Management of the Company and the Bank believe that, under the current regulations, the Company and the Bank will continue to meet their minimum capital requirements in the foreseeable future.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2015

Postemployment Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

The Company is participating in a multiple employer defined contribution employee benefit plan covering substantially all employees with six months or more of service.  The Company matches a portion of the employees’ contributions and the plan has a discretionary profit sharing provision.  The total employer contributions were $210,000 for the year ended December 31, 2015, $186,000 for the year ended December 31, 2014 and $189,000 for the year ended December 31, 2013.

The Company has an Employee Stock Purchase Plan (“ESPP”).  The ESPP allows employees of the Company to purchase stock quarterly through a payroll deduction at a discount calculated as 15% of the market value with a floor equal to the Company’s book value.  The ESPP, which was approved by stockholders in July 2005, became effective in January 2007. Participation in the ESPP is voluntary.  Employees are limited to investing $25,000 or 5% of their annual salary, whichever is lower, during the year.  During the year ended December 31, 2015, there were no employee stock purchases within the plan.

The Company implemented an Incentive Compensation Plan (the "Plan") during the year ended December 31, 2014. Incentive awards are based on the financial and operating performance of the Company as well as other participant specific objectives. The Plan allows employees of the Company to earn up to 7.5 days of their annual salary for successfully completing specific goals established by the participants and their respective supervisors plus an additional 2.5 days of their annual salary if the Company meets an annual predetermined net operating income amount determined by the Board of Directors. The Company also implemented an Incentive Compensation Plan for executive level officers (the "Executive Plan"). Under this plan incentive awards are based on contributions to performance as measured by critical operating and financial ratios, and other participant specific objectives. The Company has to meet the annual predetermined net operating income amount determined by the Board of Directors for any incentive awards to be paid under the Executive Plan. If the Company does not meet the required net income amount, no incentives are paid regardless of the executive's performance on individual objectives or entity wide objectives. Participation in both plans is voluntary. At December 31, 2015, the Company accrued $150,000 for incentive payments, which were paid during 2016.

Certain officers of the Company participate in a supplemental retirement plan.  These benefits are not qualified under the Internal Revenue Code and they are not funded.  During the years ended December 31, 2015, 2014 and 2013, the Company incurred expenses of $205,000, $103,000, and $172,000, respectively, for this plan.

Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Prior to fiscal 2010, the Company had three stock option plans that together authorized the Company to grant 150,000 options. In 2008, the 2008 Equity Incentive Plan was approved by stockholders and implemented by the Company with the intention of replacing the previous three option plans. No additional options are to be granted under the old plans and forfeitures under the old plans are not added to the new plan as available options, however, all existing options outstanding under these plans remain in effect. The 2008 Equity Incentive Plan provides for the grant of non-qualified and incentive stock options, stock appreciation rights (“SARS”), and restricted stock awards. Under the 2008 Equity Incentive Plan, 50,000 shares of common stock are reserved for the issuance of stock options and SARS in addition to 50,000 shares subject to restricted stock awards. The plan is administered by a committee appointed by the Board of Directors. The committee determines the specific employees, amount and type of any awards granted. At December 31, 2015 and 2014, there were 50,000 shares available for issuance under this plan for stock options and SARS. Options under all plans are granted at exercise prices not less than the fair value of the Company’s common stock on the date of the grant.

(15)         Employee Benefit Plans, Continued

The following is a summary of the activity under the Company’s incentive and non-qualified stock option plans for the years ended December 31, 2015, 2014 and 2013:

	For the Years Ended December 31,
	2015			2014			2013
	Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price
Balance, Beginning of Period	47,500	$	22.41	61,500	$	22.49	68,400	$	22.63
Options Granted	—	—		—	—		—	—
Options Exercised	—	—		—	—		—	—
Options Forfeited	18,000	20.55		14,000	22.74		6,900	23.87
Balance, End of Period	29,500	$	23.55	47,500	$	22.41	61,500	$	22.49
Options Exercisable	21,500	$	23.57	34,300	$	22.00	42,300	$	22.03
Weighted-Average Remaining Life Of Exercisable Options	1.4 years			1.1 years			1.3 years
Options Available For Grant	50,000			50,000			50,000

During the year ended December 31, 2015, 5,200 options with a weighted average exercise price of $23.50 vested. During the year ended December 31, 2014, 5,400 stock options with a weighted average exercise price of $23.50 vested. During the year ended December 31, 2013, 5,400 options with a weighted average exercise price of $23.50 vested. The aggregate intrinsic value of the stock options outstanding and exercisable at December 31, 2015, 2014 and 2013 amounted to $0 for all periods. Total compensation expense related to stock options was $12,700, $12,700, and -$2,600 for the years ended December 31, 2015, 2014 and 2013, respectively.  As of December 31, 2015, there was $13,067 of total unrecognized compensation cost related to non-vested stock options.  The cost is expected to be recognized over a weighted average period of three years.

There were no stock options granted by the Company during the years ended December 31, 2015, 2014 and 2013. At December 31, 2015, the Company had the following options outstanding:

Grant Date	Outstanding Options	Option Price	Expiration Date
01/01/06	3,500	$23.91	01/01/16
08/24/06	3,500	$23.03	08/24/16
05/24/07	2,000	$24.34	05/24/17
07/09/07	1,000	$24.61	07/09/17
10/01/07	2,000	$24.28	10/01/17
01/01/08	13,000	$23.49	01/01/18
05/19/08	2,500	$22.91	05/19/18
07/01/08	2,000	$22.91	07/01/18

All options granted prior to March 31, 2006 are 100% vested. Options granted after March 31, 2006 generally vest 20% per year every year beginning in the sixth year after the grant date.  Those options granted after March 31, 2006 may be exercised as they vest in years six through ten, or until the end of year ten after the grant date.

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Stock Warrants

12 Months Ended

Dec. 31, 2015

Other Liabilities Disclosure [Abstract]

Stock Warrants

Stock Warrants

In conjunction with its participation in the U.S. Department of Treasury’s (“Treasury”) Capital Purchase Program (“CPP”) in 2008, the Company sold a warrant to the Treasury to purchase 137,966 shares of the Company’s common stock. The warrant had a 10-year term and was immediately exercisable upon issuance.

On July 31, 2013, the Company repurchased its outstanding warrant at a fair market value of $50,000 from the U.S. Treasury. As a result of the transaction the warrant was canceled which reduced warrants outstanding by $400,000 and increased additional paid in capital by $350,000.

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Bank Owned Life Insurance

12 Months Ended

Dec. 31, 2015

Investments, All Other Investments [Abstract]

Bank Owned Life Insurance

Bank Owned Life Insurance

BOLI provides key person life insurance on certain officers of the Company. During the year ended December 31, 2015 the Company purchased additional policies with a cash value of $5.0 million. The cash value of the life insurance policies are recorded as a separate line item in the accompanying balance sheets at $16.6 million and $11.2 million at December 31, 2015 and 2014, respectively.  The earnings-portion of the insurance policies grows tax deferred and helps offset the cost of the Company’s benefits programs.  The Company recorded earnings of $423,000 and $300,000 and $339,000 for the growth in the cash value of life insurance during the years ended December 31, 2015, 2014 and 2013, respectively. There were no death benefits received during the year ended December 31, 2015.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

In the ordinary course of business, the Company has various outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements.  In addition, the Company is a defendant in certain claims and legal actions arising in the ordinary course of business.  In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the consolidated financial condition of the Company.

In conjunction with its lending activities, the Bank enters into various commitments to extend credit and issue letters of credit.  Loan commitments (unfunded loans and unused lines of credit) and letters of credit are issued to accommodate the financing needs of the Bank's customers.  Loan commitments are agreements by the Bank to lend at a future date, so long as there are no violations of any conditions established in the agreement.  Letters of credit commit the Bank to make payments on behalf of customers when certain specified events occur.

Financial instruments where the contract amount represents the Bank's credit risk include commitments under pre-approved but unused lines of credit of $51.2 million and $44.5 million, undisbursed loans in process of $2.9 million and $1.4 million, and letters of credit of $882,000 and $802,000 at December 31, 2015 and 2014, respectively.

These loan and letter of credit commitments are subject to the same credit policies and reviews as loans on the balance sheet.  Collateral, both the amount and nature, is obtained based upon management's assessment of the credit risk.  Since many of the extensions of credit are expected to expire without being drawn, the total commitment amounts do not necessarily represent future cash requirements.  Included in the loan commitments noted above were unused credit card loan commitments of $4.6 million and $4.4 million at December 31, 2015 and 2014, respectively.  The Bank had no outstanding commitments on mortgage loans not yet closed at December 31, 2015 compared to $571,000 at December 31, 2014.  These commitments, which are funded subject to certain limitations, extend over varying periods of time with the majority being funded within 45 days.  At December 31, 2015 and 2014, the Bank had outstanding commitments to sell approximately $2.5 million and $1.9 million of loans, respectively, which encompassed the Bank’s held for sale loans.  The Bank also has commitments to sell mortgage loans not yet closed, on a best efforts basis.  Best efforts means the Bank suffers no penalty if they are unable to deliver the loans to the potential buyers.  The fair value of the Bank’s commitment to originate mortgage loans at committed interest rates and to sell such loans to permanent investors is insignificant.

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Related Party Transactions

12 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Certain directors, executive officers and companies with which they are affiliated are customers of, and have banking transactions with, the Bank in the ordinary course of business. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable arms-length transactions. A summary of loan transactions with directors, including their affiliates, and executive officers follows:

	For the Years Ended December 31,
	2015		2014		2013
Balance, Beginning of Period	$	202,197	$	230,722	$	273,330
New Loans	692		1,116		10,956
Less Loan Payments	21,151		29,641		53,564
Balance, End of Period	$	181,738	$	202,197	$	230,722

Loans to all employees, officers, and directors of the Company, in the aggregate constituted approximately 3.3% and 3.4% of the Company’s total shareholders' equity at December 31, 2015 and 2014, respectively.  Deposits from executive officers and directors of the Company and the Bank and their related interests in the aggregate approximated $15.1 million at both December 31, 2015 and 2014.

The Company leased office space from a related party during the year ended December 31, 2015. The lease is with a company in which the related party, who is both a director and an officer of the Company, has an ownership interest.  The Company incurred rent expenses of $81,000, $81,000, and $79,000 for the years ended December 31, 2015, 2014 and 2013, respectively, related to this lease.  Management is of the opinion that the transactions with respect to office rent were made on terms that are comparable to those which would be made with unaffiliated persons.

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Stock Issuance and Exchange

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Stock Issuance and Exchange

Stock Issuance and Exchange

The Company was approved to participate in the Treasury’s Community Development Capital Initiative (“CDCI”).  The CDCI was established by the Treasury under the Troubled Asset Relief Program to invest lower cost capital in Community Development Financial Institutions (“CDFI”), supporting their efforts to provide credit to small businesses and other qualified customers in connection with the downturn in the economy.

In connection with its participation in the CDCI, on September 29, 2010, the Company (i) exchanged all $18.0 million (aggregate liquidation preference amount) of its Fixed Rate Cumulative Perpetual Preferred Stock, Series A (“Series A Preferred Stock”), previously sold to the Treasury pursuant to the CPP, for $18.0 million (aggregate liquidation preference amount) of the Company’s newly designated Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), (ii) sold 400,000 shares of its common stock at $10.00 per share in a private offering to board members of the Company for aggregate gross proceeds of $4.0 million; and (iii) received an additional $4.0 million investment from the Treasury through the sale of an additional $4.0 million (aggregate liquidation preference amount) of its Series B Preferred Stock to the Treasury.  The additional $4.0 million investment from the Treasury was contingent upon the Company’s completion of the $4.0 million separate stock offering for the same amount, as required by the Company’s primary regulator at the time, the Office of Thrift Supervision.  The warrant sold by the Company to the Treasury in connection with the Company’s participation in Treasury’s CPP in 2008 remained outstanding after the exchange until its repurchase by the Company in 2013.

Participation in the CDCI provided the Company with $8.0 million in additional capital and lowered the cost of the capital received from the Treasury.  The annual dividend rate on the Series A Preferred Stock was 5% and was to have increased to 9% on February 15, 2014.  The annual dividend rate on the Series B Preferred Stock is 2% for the first eight years from the date of issuance, or until September 19, 2018, and 9% thereafter if still then outstanding.  The Company and the Bank must maintain eligibility as a CDFI under Treasury regulations, otherwise, the annual dividend rate on the Series B Preferred Stock will increase to 5% if such eligibility is not corrected within 180 days and will further increase to 9% if not corrected after 270 days.

In addition, on December 22, 2010, the Company sold 82,906 shares of its common stock, $0.01 par value per share, through a private placement. The purchase price was $10.00 per share and the net proceeds received from the sale of these shares was $829,060. This was the final phase in the Company’s current plan to raise additional capital. 

(20)    Stock Issuance and Exchange, Continued

On July 31, 2013, the Company repurchased its outstanding warrant at a fair market value of $50,000 from the U.S. Treasury. As a result of the transaction the warrant was canceled, which reduced warrants outstanding by $400,000 and increased additional paid in capital by $350,000.

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Unvested Restricted Stock (Notes)

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Unvested Restricted Stock [Text Block]

(21)    Unvested Restricted Stock Issuance

On February 12 2015, Security Federal Corporation issued 1,473 shares of restricted stock at $17.22 per share to the Company’s Chief Executive Officer (“CEO”). The issuance was in lieu of annual incentive pay for the 2014 Incentive Plan year. Based on restrictions set forth in our agreement with the U.S Department of Treasury as part of the Company’s participation in the Community Development Capital Initiative Program, the CEO is not permitted to receive cash incentive pay. The shares cliff vest at the end of two years. All dividends until that date are held in an escrow account.

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Security Federal Corporation Condensed Financial Statements (Parent Company Only)

12 Months Ended

Dec. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Security Federal Corporation Condensed Financial Statements (Parent Company Only)

Security Federal Corporation Condensed Financial Statements (Parent Company Only)

The following is condensed financial information of Security Federal Corporation (Parent Company only).  The primary asset is its investment in the Bank subsidiary and the principal source of income for the Company is equity in undistributed earnings from the Bank.

Condensed Balance Sheet Data

	At December 31,
	2015		2014
Assets:
Cash	$	8,785,338	$	4,542,778
Investment Securities, Available For Sale	154,902		151,674
Investment in Security Federal Statutory Trust	155,000		155,000
Investment in Security Federal Bank	93,150,771		93,860,841
Accounts Receivable and Other Assets	5,002		8,023
Total Assets	$	102,251,013	$	98,718,316
Liabilities and Shareholders’ Equity:
Accounts Payable and Other Liabilities	$	45,890	$	45,229
Junior Subordinated Debentures	5,155,000		5,155,000
Senior Convertible Debentures	6,084,000		6,084,000
Shareholders’ Equity	90,966,123		87,434,087
Total Liabilities and Shareholders’ Equity	$	102,251,013	$	98,718,316

Condensed Statements of Income Data

	For the Years Ended December 31,
	2015			2014			2013
Income:
Equity in Earnings of Security Federal Bank	$	506,074		$	3,779,212		$	2,558,986
Dividend Income from Security Federal Bank	6,000,000			2,400,000			1,600,000
Interest Income	—			—			—
Miscellaneous Income	15,828			12,937			15,771
Total Income	6,521,902			6,192,149			4,174,757
Expenses:
Interest Expense	591,054			587,859			589,988
Other Expenses	18,822			19,382			18,223
Total Expenses	609,876			607,241			608,211
Income Before Income Taxes	5,912,026			5,584,908			3,566,546
Income Tax Benefit	(203,901		)	(225,832		)	(224,616		)
Net Income	6,115,927			5,810,740			3,791,162
Preferred Stock Dividends	440,000			440,000			440,000
Net Income Available to Common Shareholders	$	5,675,927		$	5,370,740		$	3,351,162

(22)         Security Federal Corporation Condensed Financial Statements (Parent Company Only), Continued

Condensed Statements of Cash Flow Data

	For the Years Ended December 31,
	2015			2014			2013
Operating Activities:
Net Income	$	6,115,927		$	5,810,740		$	3,791,162
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Equity in Earnings of Security Federal Bank	(506,074		)	(3,779,212		)	(2,558,986		)
Stock Compensation Expense	12,676			12,676			(2,580		)
(Increase) Decrease in Accounts Receivable	825			(49		)	(15,248		)
Increase in Accounts Payable	1,758			270			132
Net Cash Provided By Operating Activities	5,625,112			2,044,425			1,214,480
Financing Activities:
Repayment of Warrant Issued in Conjunction with Preferred Stock	—			—			(50,000		)
Dividends Paid to Shareholders-Preferred Stock	(440,000		)	(440,000		)	(440,000		)
Dividends Paid to Shareholders-Common Stock	(942,552		)	(942,080		)	(942,082		)
Net Cash Used in Financing Activities	(1,382,552		)	(1,382,080		)	(1,432,082		)
Net Increase (Decrease) in Cash	4,242,560			662,345			(217,602		)
Cash at Beginning of Period	4,542,778			3,880,433			4,098,035
Cash at End of Period	$	8,785,338		$	4,542,778		$	3,880,433

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Carrying Amounts and Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Carrying Amounts and Fair Value of Financial Instruments

Carrying Amounts and Fair Value of Financial Instruments

The Company has adopted accounting guidance which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value under generally accepted accounting principles. This guidance applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

Accounting guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Level 1	Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasuries and money market funds.
Level 2	Valuation is based upon quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, mortgage-backed securities, municipal bonds, corporate debt securities and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain derivative contracts.
Level 3	Valuation is generated from model-based techniques that use at least one significant assumption based on unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following is a description of the valuation methodologies used for assets and liabilities recorded at fair value.

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. At December 31, 2015, the Company’s investment portfolio was comprised of government and agency bonds, mortgage-backed securities issued by government agencies or GSEs, four private label CMO mortgage-backed securities, municipal securities, and two equity investments. Fair value measurement is based upon prices obtained from third party pricing services that use independent pricing models which rely on a variety of factors including reported trades, broker/dealer quotes, benchmark yields, economic and industry events and other relevant market information. As such, these securities are classified as Level 2.

Mortgage Loans Held for Sale

The Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with institutional investors, are carried in the Company’s loans held for sale portfolio.  These loans are fixed rate residential loans that have been originated in the Company’s name and have closed.  Virtually all of these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with the Company’s customers.  Therefore, these loans present very little market risk for the Company.

The Company usually delivers to, and receives funding from, the investor within 30 days.  Commitments to sell these loans to the investor are considered derivative contracts and are sold to investors on a “best efforts" basis. The Company is not obligated to deliver a loan or pay a penalty if a loan is not delivered to the investor. As a result of the short-term nature of these derivative contracts, the fair value of the mortgage loans held for sale in most cases is the same as the value of the loan amount at its origination. These loans are classified as Level 2.

Impaired Loans

The Company does not record loans held for investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established as necessary. 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 impairment.

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

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. Specifically as an example, in situations where the collateral on a nonperforming commercial real estate loan is out of the Company’s primary market area, management would typically order an independent appraisal immediately, at the earlier of the date the loan becomes nonperforming or immediately following the determination that the loan is impaired. However, as a second example, on a nonperforming commercial real estate loan where management is familiar with the property and surrounding areas and where the original appraisal value far exceeds the recorded investment in the loan, management may perform an internal analysis whereby the previous appraisal value would be reviewed and adjusted for current conditions including recent sales of similar properties in the area and any other relevant economic trends. These valuations are reviewed at a minimum on a quarterly basis.

Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2014, most of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The Company records impaired loans as nonrecurring Level 3.

As of December 31, 2015 and 2014, the recorded investment in impaired loans was $12.6 million and $20.2 million, respectively. The average recorded investment in impaired loans was $13.1 million for year ended December 31, 2015 and $22.2 million for the year ended December 31, 2014.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral less estimated selling costs. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 3. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the asset as nonrecurring Level 3.

Assets measured at fair value on a recurring basis are as follows as of December 31, 2015:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	1,932,088	$	—
FFCB Securities	—		1,987,936		—
FNMA Bonds	—		1,004,331		—
SBA Bonds	—		111,416,782		—
Tax Exempt Municipal Bonds	—		76,065,619		—
Mortgage-Backed Securities	—		182,797,212		—
Equity Securities	—		309,902		—
Total	$	—	$	375,513,870	$	—

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Assets measured at fair value on a recurring basis are as follows as of December 31, 2014:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	13,246,661	$	—
FFCB Securities	—		5,667,994		—
FNMA Bonds	—		1,004,381		—
SBA Bonds	—		108,126,694		—
Tax Exempt Municipal Bonds	—		62,495,423		—
Mortgage-Backed Securities	—		238,852,713		—
Equity Securities	—		306,674		—
Total	$	—	$	429,700,540	$	—

There were no liabilities measured at fair value on a recurring basis as of December 31, 2015 and 2014.

The Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. The table below presents assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2015 and 2014, aggregated by the level in the fair value hierarchy within which those measurements fall. 

Assets:	Level 1		Level 2		Level 3		At December 31, 2015
Mortgage Loans Held For Sale	$	—	$	2,462,559	$	—	$	2,462,559
Collateral Dependent Impaired Loans (1)	—		—		12,565,728		12,565,728
Foreclosed Assets	—		—		4,361,411		4,361,411
Total	$	—	$	2,462,559	$	16,927,139	$	19,389,698

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $81,600}

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Assets:	Level 1		Level 2		Level 3		At December 31, 2014
Mortgage Loans Held For Sale	$	—	$	1,864,999	$	—	$	1,864,999
Collateral Dependent Impaired Loans (1)	—		—		19,772,955		19,772,955
Foreclosed Assets	—		—		3,229,710		3,229,710
Total	$	—	$	1,864,999	$	23,002,665	$	24,867,664

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $475,000}

There were no liabilities measured at fair value on a nonrecurring basis as of December 31, 2015 and 2014.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2015, the significant unobservable inputs used in the fair value measurements were as follows:

			Valuation	Significant
	Fair Value		Technique	Unobservable Inputs	Range
Collateral Dependent Impaired Loans	$	12,565,728	Appraised Value	Discount Rates/ Discounts to Appraised Values	0% - 20%
Foreclosed Assets	4,361,411		Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	13% - 100%

For assets and liabilities not presented on the balance sheet at fair value, the following methods are used to determine fair value:

Cash and cash equivalents—The carrying amount of these financial instruments approximates fair value. All mature within 90 days and do not present unanticipated credit concerns.

Certificates of deposits with other banks—Fair value is based on market prices for similar assets.

Investment securities held to maturity—Securities held to maturity are valued at quoted market prices or dealer quotes.

Loans Receivable, Net—The fair value of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As discount rates are based on current loan rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

FHLB Stock—The fair value approximates the carrying value.

Deposits—The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities.

FHLB Advances—Fair value is estimated using discounted cash flows with current market rates for borrowings with similar terms.

Other Borrowed Money—The carrying value of these short term borrowings approximates fair value.

Senior Convertible Debentures— The fair value is estimated by discounting the future cash flows using the current rates at which similar debenture offerings with similar terms and maturities would be issued by similar institutions. As discount rates are based on current debenture rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

Junior Subordinated Debentures—The carrying value of junior subordinated debentures approximates fair value.

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

The following tables are a summary of the carrying value and estimated fair value of the Company’s financial instruments as of December 31, 2015 and 2014 presented in accordance with the applicable accounting guidance.

	December 31, 2015
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	8,382	$	8,382	$	8,382	$	—	$	—
Certificates of Deposits With Other Banks	3,445		3,445		—		3,445		—
Investment And Mortgage-Backed Securities	405,387		405,196		—		405,196		—
Loans Receivable, Net	330,573		327,460		—		—		327,460
FHLB Stock	2,215		2,215		2,215		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	415,975	$	415,975	$	415,975	$	—	$	—
Certificate Accounts	236,122		235,476		—		235,476		—
Advances From FHLB	34,640		35,676		—		35,676		—
Other Borrowed Money	6,412		6,412		6,412		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

	December 31, 2014
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	10,193	$	10,193	$	10,193	$	—	$	—
Certificates of Deposits With Other Banks	2,095		2,095		—		2,095		—
Investment And Mortgage-Backed Securities	429,701		429,701		—		429,701		—
Loans Receivable, Net	339,874		340,368		—		—		340,368
FHLB Stock	3,145		3,145		3,145		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	406,864	$	406,864	$	406,864	$	—	$	—
Certificate Accounts	253,251		253,300		—		253,300		—
Advances From FHLB	52,900		55,646		—		55,646		—
Other Borrowed Money	8,523		8,523		8,523		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

At December 31, 2015, the Bank had $52.1 million of off-balance sheet financial commitments.  These commitments are to originate loans and unused consumer lines of credit and credit card lines.  Because these obligations are based on current market rates, if funded, the original principal is considered to be a reasonable estimate of fair value.

Fair value estimates are made on a specific date, based on relevant market data and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale the Bank’s entire holdings of a particular financial instrument.  

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Because no active market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, current interest rates and prepayment trends, risk characteristics of various financial instruments, and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in any of these assumptions used in calculating fair value would also significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  For example, the Bank has significant assets and liabilities that are not considered financial assets or liabilities including deposit franchise values, loan servicing portfolios, deferred tax liabilities, and premises and equipment.

In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates. The Company has used management’s best estimate of fair value on the above assumptions.  Thus, the fair values presented may not be the amounts, which could be realized, in an immediate sale or settlement of the instrument.  In addition, any income taxes or other expenses that would be incurred in an actual sale or settlement are not taken into consideration in the fair value presented.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

24)         Quarterly Financial Data (Unaudited)

Unaudited condensed financial data by quarter for the years ended December 31, 2015 and 2014 is as follows (dollars, except per share data, in thousands):

	Quarter ended
Year Ended December 31, 2015	March 31, 2015		June 30, 2015		Sept. 30, 2015			Dec. 31, 2015
Interest Income	$	6,949	$	7,066	$	6,908		$	6,983
Interest Expense	1,173		1,068		1,001			957
Net Interest Income	5,776		5,998		5,907			6,026
Provision For Loan Losses	100		—		(200		)	100
Net Interest Income After Provision For Loan Losses	5,676		5,998		6,107			5,926
Non-interest Income	2,651		1,387		1,369			1,600
Non-interest Expense	6,255		5,335		5,130			5,811
Income Before Income Tax	2,072		2,050		2,346			1,715
Provision For Income taxes	567		527		601			371
Net Income	1,505		1,523		1,745			1,344
Preferred Stock Dividends	110		110		110			110
Net Income Available To Common Shareholders	$	1,395	$	1,413	$	1,635		$	1,234
Basic Net Income Per Common Share	$	0.47	$	0.48	$	0.56		$	0.42
Diluted Net Income Per Common Share	$	0.45	$	0.46	$	0.53		$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001			2,944,001
Diluted Weighted Average Shares Outstanding	3,248,230		3,248,249		3,248,361			3,248,415

(24)         Quarterly Financial Data (Unaudited), Continued

	Quarter ended
Year Ended December 31, 2014	March 31, 2014		June 30, 2014		Sept. 30, 2014		Dec. 31, 2014
Interest Income	$	7,193	$	7,637	$	7,389	$	7,263
Interest Expense	1,550		1,507		1,385		1,370
Net Interest Income	5,643		6,130		6,004		5,893
Provision For Loan Losses	100		100		—		250
Net Interest Income After Provision For Loan Losses	5,543		6,030		6,004		5,643
Non-interest Income	1,536		1,332		1,486		1,808
Non-interest Expense	5,326		5,317		5,023		5,602
Income Before Income Tax	1,753		2,045		2,467		1,849
Provision For Income taxes	451		568		756		528
Net Income	1,302		1,477		1,711		1,321
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	1,192	$	1,367	$	1,601	$	1,211
Basic Net Income Per Common Share	$	0.41	$	0.46	$	0.54	$	0.41
Diluted Net Income Per Common Share	$	0.39	$	0.44	$	0.52	$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

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Subsequent Events

12 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed all events occurring through the date the financial statements were available to be issued and determined that the following subsequent events required disclosure.

During February 2016, the Bank sold a piece of OREO property in Bluffton, South Carolina which resulted in a $739,000 gain on sale of OREO.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Basis of Consolidation and Nature of Operations

Basis of Consolidation and Nature of Operations

The accompanying consolidated financial statements include the accounts of Security Federal Corporation (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”).  Security Federal Corporation 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 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.  SFINS was formed during fiscal 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, 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 was formed in 1975 and is currently inactive

Change in Fiscal Year

e

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, interest-bearing balances in other banks, and federal funds sold.  Cash equivalents have original maturities of three months or les

Investment and Mortgage-Backed Securities

Investment and Mortgage-Backed Securities

Investment securities, including mortgage-backed securities, are classified in one of three categories: held to maturity, available for sale, or trading.  Management determines the appropriate classification of debt securities at the time of purchase. Investment securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity.  These securities are recorded at cost and adjusted for amortization of premiums and accretion of discounts over the estimated life of the security using a method that approximates a level yield.  Prepayment assumptions on mortgage-backed securities are anticipated.

Management classifies investment securities that are not considered to be held to maturity as available for sale.  This type of investment is stated at fair value with unrealized gains and losses, net of tax, reported in a separate component of shareholders' equity (“accumulated other comprehensive income”).  Gains and losses from sales of investment and mortgage-backed securities available for sale are determined using the specific identification method.  The Company had no investment in trading securitie

Loans Receivable Held for Investment

Loans Receivable Held for Investment

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest is recognized over the term of the loan based on the outstanding loan balance. Fees charged for originating loans, if any, are deferred and offset by the deferral of certain direct expenses associated with loans originated. The net deferred fees are recognized as yield adjustments by applying the interest method.

(1) Significant Accounting Policies, Conti

Allowance for Loan Losses

(e) Allowance for Loan Losses

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. 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 bank regulatory agencies 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 less estimated selling costs.  In accordance with our policy, non-accrual commercial loans with a balance less than $200,000 and non-accrual consumer loans with a balance less than $100,000 are deemed immaterial and therefore excluded from the individual impairment review. 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 charge

Loans Receivable Held for Sale

.

(f) Loans Receivable Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate.  Net unrealized losses are provided for in a valuation allowance by charges to oper

Repossessed Assets Acquired in Settlement of Loans

te Owned

Other real estate owned represents real estate and other assets acquired through foreclosure or repossession and are initially recorded at the estimated fair value less costs to sell.  Subsequent improvements are capitalized.  Costs of holding real estate, such as property taxes, insurance, general maintenance and interest expense, are expensed as a period cost.  Fair values are reviewed regularly and allowances for possible losses are established when the carrying value of the asset owned exceeds the fair value less estimated costs to sell.  Fair values are generally determined by reference to an outside ap

Premises and Equipment

al.

(h) Premises and Equipment

Premises and equipment are carried at cost, net of accumulated depreciation.  Depreciation of premises and equipment is amortized on a straight-line method over the estimated useful life of the related asset.  Estimated lives are seven to 40 years for buildings and improvements and generally three to 10 years for furniture, fixtures and equipment.  Maintenance and repairs are charged to current expense.  The cost of major renewals and improvements are capi

Intangible Assets and Goodwill

zed.

(i) Intangible Assets and Goodwill

The goodwill is a result of the excess of the cost over the fair value of net assets resulting from the Collier Jennings acquisition in July 2006.

(1) Significant Accounting Policies, Continued

Intangible assets are amortized over their estimated economic lives using methods that reflect the pattern in which the economic benefits are utilized.  The intangible assets which consisted of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation, were fully amortized during the year ended December 31, 2015. Goodwill is reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be r

Income Taxes

rable.

(j) Income Taxes

Income tax expense or benefit is recognized for the net change during the year in the deferred tax liability or asset.  That amount together with income taxes currently payable is the total amount of income tax expense or benefit for the year.  Deferred taxes are provided for by the differences in financial reporting bases for assets and liabilities compared with their tax bases.  Generally, a current tax liability or asset is established for taxes presently payable or refundable and a deferred tax liability or asset is established for future tax items.  A valuation allowance, if applicable, is established for deferred tax assets that may not be realized.  Tax bad debt reserves in excess of the base year amount (established as taxable years ending March 31, 1988 or later) would create a deferred tax liability.  Deferred income taxes are provided for in differences between the provision for loan losses for financial statement purposes and those allowed for income tax purposes.

The Company adopted accounting guidance which prescribes a threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosures.

There have been no gross amounts of unrecognized tax benefits or interest or penalties related to uncertain tax positions since adoption. There are no unrecognized tax benefits that would, if recognized, affect the effective tax rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. Years prior to March 31, 2012 are closed for federal, state and local income

Loan Fees and Costs Associated with Originating Loans

tters.

(k) Loan Fees and Costs Associated with Originating Loans

Loan fees received, net of direct incremental costs of originating loans, are deferred and amortized over the contractual life of the related loan.  The net fees are recognized as yield adjustments by applying the interest method.  Prepayments are not

Interest Income

cipated.

(l) Interest Income

Interest on loans is accrued and credited to income monthly based on the principal balance outstanding and the contractual rate on the loan.  The Company places loans on non-accrual status when they become greater than 90 days delinquent or when, in the opinion of management, full collection of principal or interest is unlikely.  When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received first to principal and then to interest income. The loans are returned to an accrual status when full collection of principal and interest ap

Advertising Expense

s likely.

(m) Advertising Expense

Advertising and public relations costs are generally expensed as incurred.  External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent.  Advertising and public relations costs of$416,000, $484,000, and $356,000 were included in the Company’s results of operations for the years ended December 31, 2015, 2014 and 2013

Stock-Based Compensation

pectively.

(n) Stock-Based Compensation

The Company accounts for compensation costs under its stock option plans using the fair value method. This method requires the measurement of the cost of employee services received in exchange for an award of equity instruments based upon the fair value of the award on the grant date. The cost of the award is recognized in the income statement over the vesting perio

Earnings Per Share

Continued

(o) Net Income Per Common Share

Accounting guidance specifies computation and presentation requirements for both basic net income per common share ("EPS") and, for entities with complex capital structures, diluted EPS.  Basic EPS is computed by dividing net income available to common shareholders 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 potential common shares had been issued.  The dilutive effect of options and warrants outstanding is reflected in diluted earnings per share by application of the treasury stock method.

Net income available to common shareholders represents consolidated net income adjusted for preferred dividends declared, accretion of discounts and amortization of premiums on preferred stock issuances and cumulative dividends related to the current dividend period that have not been declared as

Use of Estimates

e periods.

(p) Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of income and expenses during the reporting periods.  Actual results could differ from

Recently Issued Accounting Standards

estimates.

(q) Recently Issued Accounting Standards

The following is a summary of recent authoritative pronouncements that could affect accounting, reporting, and disclosure of financial information by the Company:

In January 2014, the FASB amended the Investments-Equity Method and Joint Ventures topic of the Accounting Standards Codification ("ASC") to address accounting for investments in qualified affordable housing projects. If certain conditions are met, the amendments permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects by amortizing the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizing the net investment performance in the income statement as a component of income tax expense (benefit). If those conditions are not met, the investment should be accounted for as an equity method investment or a cost method investment in accordance with existing accounting guidance. The amendments were effective for the Company for interim and annual reporting periods beginning after December 15, 2014 and were applied retrospectively for all periods presented. The amendments did not have a material effect on the Company's financial statements.

In January 2014, the FASB amended the Receivables topic of the ASC. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned, or OREO. In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The amendments were effective for the Company for annual and interim periods beginning after December 15, 2014. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company applied the amendments prospectively. These amendments did not have a material effect on the Company's consolidated financial statements.

In May 2014 and August 2015, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments were effective for the Company on January 1, 2015. These amendments did not have a material effect on the Company's consolidated financial statements.

(1) Significant Accounting Policies, Continued

In June 2014, the FASB issued guidance which clarifies that performance targets associated with stock compensation should be treated as a performance condition and should not be reflected in the grant date fair value of the stock award. The amendments will be effective for the Company for fiscal years that begin after December 15, 2015. The Company will apply the guidance to all stock awards granted or modified after the amendments are effective. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In February 2015, the FASB issued guidance which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all of its previous consolidation conclusions. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In November 2015, the FASB voted to amend the current lease accounting standard to bring most leases on the balance sheet. The new lease standard will be implemented using a modified retrospective approach. Under this approach, lessees and lessors will compute lease assets and liabilities based on the remaining payments for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements (the date of initial application). In addition, a lessee may elect specified transition relief provisions. The final ASU is expected to be published in early 2016 and will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption willl be permitted. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the ASC to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting authorities are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Risks and Uncertainties

(r) Risks and Uncertainties

In the normal course of its business, the Company encounters two significant types of risk: economic and regulatory.  There are three main components of economic risk: interest rate risk, credit risk, and market risk.  The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different speeds, or on different bases, than its interest-earning assets.  Credit risk is the risk of default on the Company’s loan portfolio that results from borrowers’ inability or unwillingness to make contractually required payments.  Market risk reflects changes in the value of collateral underlying loans receivable, the valuation of real estate held by the Company, and the valuation of loans held for sale and mortgage-backed securities available for sale.  The Company is subject to the regulations of various government agencies.  These regulations can and do change significantly from period to period.  The Company also undergoes periodic examinations by the bank regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances, and operating restrictions, resulting from the regulators’ judgments based on information available to them at the time of the

Reclassifications

amination.

(s) Reclassifications

Certain amounts in prior years’ consolidated financial statements have been reclassified to conform to current period

XML

Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Comparative transition period condensed financial information

e

Reconciliation of net income to net income available to common shareholders

f period end.

The following table provides a reconciliation of net income to net income available to common shareholders for the peri

s presented:

	For the Years Ended December 31,
	2015		2014		2013
Earnings Available To Common Shareholders
Net Income	$	6,115,927	$	5,810,740	$	3,791,162
Preferred Stock Dividends	440,000		440,000		440,000
Net Income Available To Common Shareholders	$	5,675,927	$	5,370,740	$	3,351,162

The following tables show the effect of dilutive options and warrants on the Company’s net income per common share for the periods

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Investment and Mortgage-Backed Securities, Available for Sale (Tables)

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of Available for Sale Securities

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 are as follows:

	December 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	2,000,000	$	—	$	67,912	$	1,932,088
Federal Farm Credit Bank ("FFCB") Securities	2,000,000		—		12,064		1,987,936
Federal National Mortgage Association ("FNMA") Bonds	997,564		6,767		—		1,004,331
Small Business Administration (“SBA”) Bonds	110,195,113		1,415,464		193,795		111,416,782
Tax Exempt Municipal Bonds	73,499,636		2,770,115		204,132		76,065,619
Mortgage-Backed Securities	180,197,347		3,281,116		681,251		182,797,212
Equity Securities	250,438		59,464		—		309,902
	$	369,140,098	$	7,532,926	$	1,159,154	$	375,513,870
	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,317,462	$	83,691	$	154,492	$	13,246,661
FFCB Securities	5,750,000		—		82,006		5,667,994
FNMA Bonds	996,822		7,559		—		1,004,381
SBA Bonds	106,637,400		1,796,943		307,649		108,126,694
Tax Exempt Municipal Bonds	59,960,960		2,579,543		45,080		62,495,423
Mortgage-Backed Securities	233,963,842		5,704,855		815,984		238,852,713
Equity Securities	250,438		56,236		—		306,674
	$	420,876,924	$	10,228,827	$	1,405,211	$	429,700,540

Schedule of Available For Sale Securities, Contractual Maturities

	Amortized Cost		Fair Value
Less Than One Year	$	421,237	$	420,631
One – Five Years	13,898,304		14,144,321
Five – Ten Years	57,135,325		58,129,443
After Ten Years	117,487,885		120,022,263
Mortgage-Backed Securities	180,197,347		182,797,212
	$	369,140,098	$	375,513,870

Schedule of Temporarily Impaired Securities, Fair Value and Unrealized Losses

The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that individual available for sale securities have been in a continuous unrealized loss position for the periods indicated.

	December 31, 2015
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	—	$	—	$	1,932,088	$	67,912	$	1,932,088	$	67,912
FFCB Securities	1,987,936		12,064		—		—		1,987,936		12,064
SBA Bonds	25,090,453		119,533		7,982,777		74,262		33,073,230		193,795
Tax Exempt Municipal Bonds	13,668,473		175,020		709,800		29,112		14,378,273		204,132
Mortgage-Backed Securities	63,273,417		648,862		1,706,086		32,389		64,979,503		681,251
	$	104,020,279	$	955,479	$	12,330,751	$	203,675	$	116,351,030	$	1,159,154

(2)         Investment and Mortgage-Backed Securities, Available For Sale, Continued

	December 31, 2014
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	994,818	$	5,182	$	3,850,690	$	149,310	$	4,845,508	$	154,492
FFCB Securities	—		—		5,667,994		82,006		5,667,994		82,006
SBA Bonds	27,859,461		223,070		4,920,631		84,579		32,780,092		307,649
Tax Exempt Municipal Bonds	3,605,319		16,039		1,710,586		29,041		5,315,905		45,080
Mortgage-Backed Securities	34,840,832		208,242		30,899,075		607,742		65,739,907		815,984
	$	67,300,430	$	452,533	$	47,048,976	$	952,678	$	114,349,406	$	1,405,211

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Loans Receivable, Net (Tables)

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Loans receivable, net, consisted of the following as of the dates shown:

	December 31, 2015		December 31, 2014
Residential Real Estate Loans	$	76,373,071	$	77,282,817
Consumer Loans	50,380,289		50,391,224
Commercial Business	12,514,133		10,564,467
Commercial Real Estate	200,083,125		209,530,209
Total Loans Held For Investment	339,350,618		347,768,717
Loans Held For Sale	2,462,559		1,864,999
Total Loans Receivable, Gross	341,813,177		349,633,716
Less:
Allowance For Loan Losses	8,275,133		8,357,496
Loans In Process	2,902,849		1,379,114
Deferred Loan Fees	62,466		22,611
	11,240,448		9,759,221
Total Loans Receivable, Net	$	330,572,729	$	339,874,495

Schedule of Allowance for Loan Losses

Changes in the allowance for loan losses for the years ended December 31, 2015, 2014 and 2013 are summarized as follows:

	2015			2014			2013
Balance At Beginning Of Period	$	8,357,496		$	10,241,970		$	11,318,371
Provision For Loan Losses	—			450,000			2,645,381
Charge Offs	(1,516,468		)	(3,114,833		)	(5,209,830		)
Recoveries	1,434,105			780,359			1,488,048
Total Allowance For Loan Losses	$	8,275,133		$	8,357,496		$	10,241,970

Financing Receivable Credit Quality Indicators

The following tables list the loan grades used by the Company as credit quality indicators and the balance in each category at the dates presented, excluding loans held for sale.

	Credit Quality Measures
December 31, 2015	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	67,605,311	$	1,264,415	$	607,336	$	6,896,009	$	76,373,071
Consumer	46,344,056		2,510,519		81,617		1,444,097		50,380,289
Commercial Business	10,519,123		1,465,136		102,046		427,828		12,514,133
Commercial Real Estate	129,242,390		43,863,659		17,304,431		9,672,645		200,083,125
Total	$	253,710,880	$	49,103,729	$	18,095,430	$	18,440,579	$	339,350,618

	Credit Quality Measures
December 31, 2014	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	69,163,911	$	956,976	$	639,638	$	6,522,292	$	77,282,817
Consumer	48,283,560		1,046,624		128,033		933,007		50,391,224
Commercial Business	9,691,685		340,706		202,895		329,181		10,564,467
Commercial Real Estate	125,339,273		32,549,335		35,169,358		16,472,243		209,530,209
Total	$	252,478,429	$	34,893,641	$	36,139,924	$	24,256,723	$	347,768,717

Past Due Financing Receivables

The following table presents an age analysis of past due balances by category at December 31, 2015.

	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	$	—	$	1,144,381	$	3,306,675	$	4,451,056	$	71,922,015	$	76,373,071
Consumer	710,881		282,314		575,866		1,569,061		48,811,228		50,380,289
Commercial Business	101,201		—		178,076		279,277		12,234,856		12,514,133
Commercial Real Estate	3,309,287		929,819		2,973,135		7,212,241		192,870,884		200,083,125
Total	$	4,121,369	$	2,356,514	$	7,033,752	$	13,511,635	$	325,838,983	$	339,350,618

The following table presents an age analysis of past due balances by category at December 31, 2014.

	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	$	—	$	1,087,299	$	3,061,339	$	4,148,638	$	73,134,179	$	77,282,817
Consumer	1,868,787		91,223		573,644		2,533,654		47,857,570		50,391,224
Commercial Business	162,481		99,784		246,977		509,242		10,055,225		10,564,467
Commercial Real Estate	4,544,813		1,094,701		9,859,689		15,499,203		194,031,006		209,530,209
Total	$	6,576,081	$	2,373,007	$	13,741,649	$	22,690,737	$	325,077,980	$	347,768,717

Schedule of Financing Receivables, Non Accrual Status

The following table shows non-accrual loans by category at December 31, 2015 compared to 2014.

	At December 31, 2015				At December 31, 2014				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	3,306,675	1.0	%	$	3,061,339	0.9	%	$	245,336		8.0	%
Commercial Business	178,076		0.1		246,977		0.1		(68,901		)	(27.9	)
Commercial Real Estate	2,973,135		0.8		9,859,689		2.8		(6,886,554		)	(69.8	)
Consumer	575,866		0.2		573,644		0.2		2,222			0.4
Total Non- accrual Loans	$	7,033,752	2.1	%	$	13,741,649	4.0	%	$	(6,707,897	)	(48.8	)%

^{(1) PERCENT OF GROSS LOANS RECEIVABLE HELD FOR INVESTMENT, NET OF DEFERRED FEES AND LOANS IN PROCESS.}

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent

The following tables show the activity in the allowance for loan losses by category for the periods indicated.

	For the Year Ended December 31, 2015
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,392,065		$	886,716		$	159,353		$	5,919,362		$	8,357,496
Provision	53,694			549,462			617,658			(1,220,814		)	—
Charge-Offs	(216,525		)	(527,055		)	(10,947		)	(761,941		)	(1,516,468		)
Recoveries	93,949			154,030			7,884			1,178,242			1,434,105
Ending Balance	$	1,323,183		$	1,063,153		$	773,948		$	5,114,849		$	8,275,133

	For the Year Ended December 31, 2014
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,706,643		$	847,777		$	426,658		$	7,260,892		$	10,241,970
Provision	(91,991		)	352,305			(53,435		)	243,121			450,000
Charge-Offs	(359,021		)	(372,460		)	(328,094		)	(2,055,258		)	(3,114,833		)
Recoveries	136,434			59,094			114,224			470,607			780,359
Ending Balance	$	1,392,065		$	886,716		$	159,353		$	5,919,362		$	8,357,496

	For the Year Ended December 31, 2013
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,521,559		$	1,001,271		$	618,919		$	8,176,622		$	11,318,371
Provision	1,030,237			(5,306		)	(187,377		)	1,807,827			2,645,381
Charge-Offs	(1,118,168		)	(207,230		)	(31,831		)	(3,852,601		)	(5,209,830		)
Recoveries	273,015			59,042			26,947			1,129,044			1,488,048
Ending Balance	$	1,706,643		$	847,777		$	426,658		$	7,260,892		$	10,241,970

Allowance for Credit Losses on Financing Receivables

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in loans receivable as of the dates indicated.

	Loans Receivable
December 31, 2015	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,922,105	$	73,450,966	$	76,373,071
Consumer	372,382		50,007,907		50,380,289
Commercial Business	162,201		12,351,932		12,514,133
Commercial Real Estate	9,190,640		190,892,485		200,083,125
Total	$	12,647,328	$	326,703,290	$	339,350,618

	Loans Receivable
December 31, 2014	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	2,519,814	$	74,763,003	$	77,282,817
Consumer	218,232		50,172,992		50,391,224
Commercial Business	236,030		10,328,437		10,564,467
Commercial Real Estate	17,273,879		192,256,330		209,530,209
Total	$	20,247,955	$	327,520,762	$	347,768,717

The following tables present information related to impaired loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses as of the dates indicated.

	Allowance For Loan Losses
December 31, 2015	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,323,183	$	1,323,183
Consumer	32,300		1,030,853		1,063,153
Commercial Business	—		773,948		773,948
Commercial Real Estate	49,300		5,065,549		5,114,849
Total	$	81,600	$	8,193,533	$	8,275,133

	Allowance For Loan Losses
December 31, 2014	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,392,065	$	1,392,065
Consumer	2,600		884,116		886,716
Commercial Business	—		159,353		159,353
Commercial Real Estate	472,400		5,446,962		5,919,362
Total	$	475,000	$	7,882,496	$	8,357,496

Impaired Financing Receivables

The following tables are a summary of information related to impaired loans as of and for the years ended December 31, 2015, 2014 and 2013.

	December 31, 2015
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	2,922,105	$	3,033,735	$	—	$	3,014,807	$	13,909
Consumer	120,889		129,188		—		130,202		—
Commercial Business	162,201		362,201		—		190,562		—
Commercial Real Estate	8,620,301		10,969,642		—		8,952,868		245,197
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	251,493		256,923		32,300		254,611		4,789
Commercial Business	—		—		—		—		—
Commercial Real Estate	570,339		577,139		49,300		579,418		31,684
Total
Residential Real Estate	2,922,105		3,033,735		—		3,014,807		13,909
Consumer	372,382		386,111		32,300		384,813		4,789
Commercial Business	162,201		362,201		—		190,562		—
Commercial Real Estate	9,190,640		11,546,781		49,300		9,532,286		276,881
Total	$	12,647,328	$	15,328,828	$	81,600	$	13,122,468	$	295,579

(4)       Loans Receivable, Net, Continued

	December 31, 2014
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	2,519,814	$	2,618,003	$	—	$	2,642,156	$	—
Consumer	152,029		159,529		—		155,602		1,510
Commercial Business	236,030		436,030		—		413,653		—
Commercial Real Estate	13,721,964		18,088,149		—		14,980,690		297,839
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	66,203		66,203		2,600		67,522		4,867
Commercial Business	—		—		—		—		—
Commercial Real Estate	3,551,915		3,582,465		472,400		3,952,066		60,207
Total
Residential Real Estate	2,519,814		2,618,003		—		2,642,156		—
Consumer	218,232		225,732		2,600		223,124		6,377
Commercial Business	236,030		436,030		—		413,653		—
Commercial Real Estate	17,273,879		21,670,614		472,400		18,932,756		358,046
Total	$	20,247,955	$	24,950,379	$	475,000	$	22,211,689	$	364,423

	December 31, 2013
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	3,936,316	$	4,588,645	$	—	$	4,044,142	$	31,704
Consumer	106,197		106,198		—		104,539		953
Commercial Business	19,775		19,775		—		19,896		389
Commercial Real Estate	21,810,347		26,775,853		—		23,618,648		886,737
With An Allowance Recorded:
Residential Real Estate	901,920		901,920		158,791		909,473		—
Consumer	169,294		169,294		103,109		170,499		5,173
Commercial Business	—		—		—		—		—
Commercial Real Estate	4,410,965		4,954,058		840,658		4,707,658		251,505
Total
Residential Real Estate	4,838,236		5,490,565		158,791		4,953,615		31,704
Consumer	275,491		275,492		103,109		275,038		6,126
Commercial Business	19,775		19,775		—		19,896		389
Commercial Real Estate	26,221,312		31,729,911		840,658		28,326,306		1,138,242
Total	$	31,354,814	$	37,515,743	$	1,102,558	$	33,574,855	$	1,176,461

Troubled Debt Restructurings on Financing Receivables

The following table is a summary of TDRs restructured during the periods indicated that subsequently defaulted during the same period:

	For the Year Ended December 31,
	2015			2014			2013
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential Real Estate	—	$	—	—	$	—	—	$	—
Consumer Loans	—	—		—	—		—	—
Commercial Business	—	—		—	—		—	—
Commercial Real Estate	2	30,713		1	66,138		1	146,267
Total	2	$	30,713	1	$	66,138	1	$	146,267

The following table is a summary of loans restructured as TDRs during the periods indicated:

	For the Year Ended December 31, 2015
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—
Consumer Loans	1	36,460		36,460
Commercial Business	—	—		—
Commercial Real Estate	6	922,000		922,000
Total	7	958,460		958,460

	For the Year Ended December 31, 2014					For the Year Ended December 31, 2013
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—	—	$	—	$	—
Consumer Loans	—	—		—		—	—		—
Commercial Business	—	—		—		1	32,850		32,850
Commercial Real Estate	2	186,188		186,188		4	1,409,693		1,409,693
Total	2	186,188		186,188		5	1,442,543		1,442,543

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Premises and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Premises and equipment, net

Premises and equipment, net, are summarized as follows at the dates indicated:

	December 31,
	2015			2014
Land	$	6,693,927		$	6,729,097
Buildings and Improvements	20,040,102			17,796,209
Furniture and Equipment	11,142,428			11,068,028
Construction in Progress	236,019			184,040
Total Premises and Equipment	38,112,476			35,777,374
Less Accumulated Depreciation	(17,995,558		)	(17,544,148		)
Total Premises and Equipment, Net	$	20,116,918		$	18,233,226

Future minimum payments under non-cancelable operating leases

The Bank has entered into non-cancelable operating leases related to buildings and land.  At December 31, 2015, future minimum payments under non-cancelable operating leases with initial or remaining terms of one year or more are as follows (by fiscal year):

2016	$	356,440
2017	326,000
2018	223,029
2019	214,458
2020	214,458
Thereafter	1,211,468
Total Future Minimum Payments	$	2,545,853

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Intangible Assets and Goodwill (Tables)

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in intangible assets and goodwill

Changes in intangible assets and goodwill for periods indicated consisted of the following:

	December 31,
	2015		2014
Customer List
Balance At Beginning Of Year	$	—	$	11,970
Amortization	—		11,970
Balance At End Of Year	—		—
Total Intangibles	—		—
Goodwill	1,199,754		1,199,754
Total	$	1,199,754	$	1,199,754

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Repossessed Assets Acquired In Settlement Of Loans (Tables)

12 Months Ended

Dec. 31, 2015

Other Real Estate, Foreclosed Assets, and Repossessed Assets [Abstract]

Transactions in repossessed assets

Transactions in OREO for the years ended December 31, 2015, 2014 and 2013 are summarized below.

	2015			2014			2013
Balance, Beginning Of Period	$	3,229,710		$	3,947,226		$	6,754,425
Additions	4,362,635			1,638,135			3,861,182
Sales	(2,918,587		)	(1,850,651		)	(5,274,003		)
Write Downs	(312,347		)	(505,000		)	(1,394,378		)
Balance, End Of Period	$	4,361,411		$	3,229,710		$	3,947,226

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Deposits (Tables)

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Deposits outstanding by type

Deposits outstanding by type of account are summarized as follows:

	At December 31, 2015				At December 31, 2014
	Balance		Weighted Rate	Interest Rate Range	Balance		Weighted Rate	Interest Rate Range
Checking Accounts	$	155,765,968	0.03%	0.00-0.20%	$	143,422,150	0.03%	0.00-0.15%
Money Market Accounts	229,016,993		0.16%	0.10-0.17%	234,819,052		0.19%	0.10-0.20%
Statement Savings Accounts	31,191,828		0.10%	0.00-0.10%	28,622,933		0.10%	0.00-0.10%
Total	$	415,974,789	0.11%	0.00-0.20%	$	406,864,135	0.13%	0.00-0.20%
Certificate Accounts:
0.00 – 0.99%	$	175,755,511			$	185,458,344
1.00 – 1.99%	51,479,431				42,014,738
2.00 – 2.99%	8,886,814				25,605,349
3.00 – 3.99%	—				172,598
Total	$	236,121,756	0.69%	0.04-2.52%	$	253,251,029	0.79%	0.05-3.01%
Total Deposits	$	652,096,545	0.32%	0.00-2.52%	$	660,115,164	0.38%	0.00-3.01%

Amounts and scheduled maturities of all certificates of deposit

The amounts and scheduled maturities of all certificates of deposit are as follows:

	At December 31,
	2015		2014
Within 1 Year	$	141,385,500	$	142,490,027
After 1 Year, Within 2 Years	56,022,488		57,481,254
After 2 Years, Within 3 Years	23,139,815		22,273,310
After 3 Years, Within 4 Years	9,179,894		18,114,738
After 4 Years, Within 5 Years	6,394,059		12,891,700
	$	236,121,756	$	253,251,029

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Tables)

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Advances from the FHLB summarized by year of maturity and weighted average interest rate

Advances from the FHLB are summarized by year of maturity and weighted average interest rate at December 31, 2015 below:

	Amount		Weighted Rate
2016	$	16,740,000	1.51	%
2017	12,900,000		4.38	%
2018	5,000,000		3.39	%
Total	$	34,640,000	3.87	%

Callable FHLB advances

Borrow Date	Maturity Date	Amount	Int. Rate	Type	Call Dates
11/29/06	11/29/16	$5,000,000	4.03%	Multi-Call	05/29/08 and quarterly thereafter
05/24/07	05/24/17	$7,900,000	4.38%	Multi-Call	05/24/08 and quarterly thereafter
07/25/07	07/25/17	$5,000,000	4.40%	Multi-Call	07/25/08 and quarterly thereafter

During the year ended December 31, 2015, the Bank prepaid three FHLB advances totaling $15.0 million and incurred $788,000 in prepayment penalties. During the year ended December 31, 2014, the Bank prepaid one FHLB advance totaling $5.0 million and incurred $178,000 in prepayment penalties. During the year ended December 31, 2013, the Bank prepaid six FHLB advances totaling $30.0 million and incurred $589,000 in prepayment penalties.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income tax expense

Income tax expense was comprised of the following for the dates indicated below:

	For the Years Ended December 31,
	2015		2014		2013
Current:
Federal	$	1,056,002	$	1,833,069	$	380,143
State	285,699		267,904		164,491
Total Current Tax Expense	1,341,701		2,100,973		544,634
Deferred:
Federal	722,699		192,051		784,814
State	2,699		10,144		10,936
Total Deferred Tax Expense	725,398		202,195		795,750
Total Income Tax Expense	$	2,067,099	$	2,303,168	$	1,340,384

Income tax reconciliation

The Company's income taxes differ from those computed at the statutory federal income tax rate, as follows:

	For the Years Ended December 31,
	2015			2014			2013
Tax at Statutory Income Tax Rate	$	2,782,229		$	2,758,729		$	1,744,725
State Tax and Other	(41,986		)	66,738			45,761
Tax Exempt Interest	(684,708		)	(534,325		)	(425,450		)
Valuation Allowance	11,564			12,026			(24,652		)
Total Income Tax Expense	$	2,067,099		$	2,303,168		$	1,340,384

Deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2015 and 2014 are presented below.

	At December 31,
	2015			2014
Deferred Tax Assets:
Deferred Compensation	$	558,870		$	521,256
Provision For Loan Losses	2,846,867			2,872,552
Other Real Estate Owned	1,004,332			1,194,141
Net Fees Deferred For Financial Reporting	112,782			114,924
Non-accrual Interest	—			431,696
Net Operating Losses	231,775			220,211
Other	205,009			207,423
Total Gross Deferred Tax Assets	4,959,635			5,562,203
Less: Valuation Allowance	(231,775		)	(220,211		)
Net Deferred Tax Assets	4,727,860			5,341,992
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,630			114,510
Depreciation	420,568			288,157
Other	42,271			63,536
Unrealized Gain on Securities Available for Sale	2,604,222			3,347,240
Total Gross Deferred Tax Liability	3,181,691			3,813,443
Net Deferred Tax Asset	$	1,546,169		$	1,528,549

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Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2015

Banking and Thrift [Abstract]

Regulatory capital amounts and ratios

The Company and the Bank’s regulatory capital amounts and ratios were as follows as of the dates indicated:

	Actual				For Capital Adequacy				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
December 31, 2015
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	84,672	21.7	%	$	23,429	6.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	95,429		24.4	%	31,239		8.0	%	N/A		N/A
Common Equity Tier 1 Capital (To Risk Weighted Assets)	63,504		16.3	%	17,572		4.5	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	84,672		10.6	%	31,811		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,728	22.5	%	$	23,440	6.0	%	$	31,254	8.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	92,653		23.7	%	31,254		8.0	%	39,067		10.0	%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	87,728		22.5	%	17,580		4.5	%	25,394		6.5	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,728		11.0	%	31,801		4.0	%	39,751		5.0	%
December 31, 2014
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	77,746	20.6	%	$	15,073	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	89,915		23.9	%	30,147		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	77,746		9.5	%	32,778		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,222	23.2	%	$	15,062	4.0	%	$	22,593	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	91,973		24.4	%	30,123		8.0	%	37,654		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,222		10.6	%	32,792		4.0	%	40,991		5.0	%

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2015

Postemployment Benefits [Abstract]

Activity under the incentive and non-qualified stock option plans

The following is a summary of the activity under the Company’s incentive and non-qualified stock option plans for the years ended December 31, 2015, 2014 and 2013:

	For the Years Ended December 31,
	2015			2014			2013
	Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price
Balance, Beginning of Period	47,500	$	22.41	61,500	$	22.49	68,400	$	22.63
Options Granted	—	—		—	—		—	—
Options Exercised	—	—		—	—		—	—
Options Forfeited	18,000	20.55		14,000	22.74		6,900	23.87
Balance, End of Period	29,500	$	23.55	47,500	$	22.41	61,500	$	22.49
Options Exercisable	21,500	$	23.57	34,300	$	22.00	42,300	$	22.03
Weighted-Average Remaining Life Of Exercisable Options	1.4 years			1.1 years			1.3 years
Options Available For Grant	50,000			50,000			50,000

Options outstanding

At December 31, 2015, the Company had the following options outstanding:

Grant Date	Outstanding Options	Option Price	Expiration Date
01/01/06	3,500	$23.91	01/01/16
08/24/06	3,500	$23.03	08/24/16
05/24/07	2,000	$24.34	05/24/17
07/09/07	1,000	$24.61	07/09/17
10/01/07	2,000	$24.28	10/01/17
01/01/08	13,000	$23.49	01/01/18
05/19/08	2,500	$22.91	05/19/18
07/01/08	2,000	$22.91	07/01/18

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2015

Related Party Transactions [Abstract]

Loan transactions with directors, including their affiliates, and executive officers

A summary of loan transactions with directors, including their affiliates, and executive officers follows:

	For the Years Ended December 31,
	2015		2014		2013
Balance, Beginning of Period	$	202,197	$	230,722	$	273,330
New Loans	692		1,116		10,956
Less Loan Payments	21,151		29,641		53,564
Balance, End of Period	$	181,738	$	202,197	$	230,722

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Security Federal Corporation Condensed Financial Statements (Parent Company Only) (Tables)

12 Months Ended

Dec. 31, 2015

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheet Data

Condensed Balance Sheet Data

	At December 31,
	2015		2014
Assets:
Cash	$	8,785,338	$	4,542,778
Investment Securities, Available For Sale	154,902		151,674
Investment in Security Federal Statutory Trust	155,000		155,000
Investment in Security Federal Bank	93,150,771		93,860,841
Accounts Receivable and Other Assets	5,002		8,023
Total Assets	$	102,251,013	$	98,718,316
Liabilities and Shareholders’ Equity:
Accounts Payable and Other Liabilities	$	45,890	$	45,229
Junior Subordinated Debentures	5,155,000		5,155,000
Senior Convertible Debentures	6,084,000		6,084,000
Shareholders’ Equity	90,966,123		87,434,087
Total Liabilities and Shareholders’ Equity	$	102,251,013	$	98,718,316

Condensed Statements of Income Data

Condensed Statements of Income Data

	For the Years Ended December 31,
	2015			2014			2013
Income:
Equity in Earnings of Security Federal Bank	$	506,074		$	3,779,212		$	2,558,986
Dividend Income from Security Federal Bank	6,000,000			2,400,000			1,600,000
Interest Income	—			—			—
Miscellaneous Income	15,828			12,937			15,771
Total Income	6,521,902			6,192,149			4,174,757
Expenses:
Interest Expense	591,054			587,859			589,988
Other Expenses	18,822			19,382			18,223
Total Expenses	609,876			607,241			608,211
Income Before Income Taxes	5,912,026			5,584,908			3,566,546
Income Tax Benefit	(203,901		)	(225,832		)	(224,616		)
Net Income	6,115,927			5,810,740			3,791,162
Preferred Stock Dividends	440,000			440,000			440,000
Net Income Available to Common Shareholders	$	5,675,927		$	5,370,740		$	3,351,162

Condensed Statements of Cash Flow Data

Condensed Statements of Cash Flow Data

	For the Years Ended December 31,
	2015			2014			2013
Operating Activities:
Net Income	$	6,115,927		$	5,810,740		$	3,791,162
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Equity in Earnings of Security Federal Bank	(506,074		)	(3,779,212		)	(2,558,986		)
Stock Compensation Expense	12,676			12,676			(2,580		)
(Increase) Decrease in Accounts Receivable	825			(49		)	(15,248		)
Increase in Accounts Payable	1,758			270			132
Net Cash Provided By Operating Activities	5,625,112			2,044,425			1,214,480
Financing Activities:
Repayment of Warrant Issued in Conjunction with Preferred Stock	—			—			(50,000		)
Dividends Paid to Shareholders-Preferred Stock	(440,000		)	(440,000		)	(440,000		)
Dividends Paid to Shareholders-Common Stock	(942,552		)	(942,080		)	(942,082		)
Net Cash Used in Financing Activities	(1,382,552		)	(1,382,080		)	(1,432,082		)
Net Increase (Decrease) in Cash	4,242,560			662,345			(217,602		)
Cash at Beginning of Period	4,542,778			3,880,433			4,098,035
Cash at End of Period	$	8,785,338		$	4,542,778		$	3,880,433

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Carrying Amounts and Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair value measurements, recurring basis

Assets measured at fair value on a recurring basis are as follows as of December 31, 2015:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	1,932,088	$	—
FFCB Securities	—		1,987,936		—
FNMA Bonds	—		1,004,331		—
SBA Bonds	—		111,416,782		—
Tax Exempt Municipal Bonds	—		76,065,619		—
Mortgage-Backed Securities	—		182,797,212		—
Equity Securities	—		309,902		—
Total	$	—	$	375,513,870	$	—

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Assets measured at fair value on a recurring basis are as follows as of December 31, 2014:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	13,246,661	$	—
FFCB Securities	—		5,667,994		—
FNMA Bonds	—		1,004,381		—
SBA Bonds	—		108,126,694		—
Tax Exempt Municipal Bonds	—		62,495,423		—
Mortgage-Backed Securities	—		238,852,713		—
Equity Securities	—		306,674		—
Total	$	—	$	429,700,540	$	—

Fair value measurements, nonrecurring basis

The table below presents assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2015 and 2014, aggregated by the level in the fair value hierarchy within which those measurements fall. 

Assets:	Level 1		Level 2		Level 3		At December 31, 2015
Mortgage Loans Held For Sale	$	—	$	2,462,559	$	—	$	2,462,559
Collateral Dependent Impaired Loans (1)	—		—		12,565,728		12,565,728
Foreclosed Assets	—		—		4,361,411		4,361,411
Total	$	—	$	2,462,559	$	16,927,139	$	19,389,698

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $81,600}

(23)         Carrying Amounts and Fair Value of Financial Instruments, Continued

Assets:	Level 1		Level 2		Level 3		At December 31, 2014
Mortgage Loans Held For Sale	$	—	$	1,864,999	$	—	$	1,864,999
Collateral Dependent Impaired Loans (1)	—		—		19,772,955		19,772,955
Foreclosed Assets	—		—		3,229,710		3,229,710
Total	$	—	$	1,864,999	$	23,002,665	$	24,867,664

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF}

Significant unobservable inputs used in the fair value measurements

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2015, the significant unobservable inputs used in the fair value measurements were as follows:

			Valuation	Significant
	Fair Value		Technique	Unobservable Inputs	Range
Collateral Dependent Impaired Loans	$	12,565,728	Appraised Value	Discount Rates/ Discounts to Appraised Values	0% - 20%
Foreclosed Assets	4,361,411		Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	13% - 100%

Summary of the carrying value and estimated fair value of financial instruments

The following tables are a summary of the carrying value and estimated fair value of the Company’s financial instruments as of December 31, 2015 and 2014 presented in accordance with the applicable accounting guidance.

	December 31, 2015
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	8,382	$	8,382	$	8,382	$	—	$	—
Certificates of Deposits With Other Banks	3,445		3,445		—		3,445		—
Investment And Mortgage-Backed Securities	405,387		405,196		—		405,196		—
Loans Receivable, Net	330,573		327,460		—		—		327,460
FHLB Stock	2,215		2,215		2,215		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	415,975	$	415,975	$	415,975	$	—	$	—
Certificate Accounts	236,122		235,476		—		235,476		—
Advances From FHLB	34,640		35,676		—		35,676		—
Other Borrowed Money	6,412		6,412		6,412		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Unaudited condensed financial data by quarter

Unaudited condensed financial data by quarter for the years ended December 31, 2015 and 2014 is as follows (dollars, except per share data, in thousands):

	Quarter ended
Year Ended December 31, 2015	March 31, 2015		June 30, 2015		Sept. 30, 2015			Dec. 31, 2015
Interest Income	$	6,949	$	7,066	$	6,908		$	6,983
Interest Expense	1,173		1,068		1,001			957
Net Interest Income	5,776		5,998		5,907			6,026
Provision For Loan Losses	100		—		(200		)	100
Net Interest Income After Provision For Loan Losses	5,676		5,998		6,107			5,926
Non-interest Income	2,651		1,387		1,369			1,600
Non-interest Expense	6,255		5,335		5,130			5,811
Income Before Income Tax	2,072		2,050		2,346			1,715
Provision For Income taxes	567		527		601			371
Net Income	1,505		1,523		1,745			1,344
Preferred Stock Dividends	110		110		110			110
Net Income Available To Common Shareholders	$	1,395	$	1,413	$	1,635		$	1,234
Basic Net Income Per Common Share	$	0.47	$	0.48	$	0.56		$	0.42
Diluted Net Income Per Common Share	$	0.45	$	0.46	$	0.53		$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001			2,944,001
Diluted Weighted Average Shares Outstanding	3,248,230		3,248,249		3,248,361			3,248,415

(24)         Quarterly Financial Data (Unaudited), Continued

	Quarter ended
Year Ended December 31, 2014	March 31, 2014		June 30, 2014		Sept. 30, 2014		Dec. 31, 2014
Interest Income	$	7,193	$	7,637	$	7,389	$	7,263
Interest Expense	1,550		1,507		1,385		1,370
Net Interest Income	5,643		6,130		6,004		5,893
Provision For Loan Losses	100		100		—		250
Net Interest Income After Provision For Loan Losses	5,543		6,030		6,004		5,643
Non-interest Income	1,536		1,332		1,486		1,808
Non-interest Expense	5,326		5,317		5,023		5,602
Income Before Income Tax	1,753		2,045		2,467		1,849
Provision For Income taxes	451		568		756		528
Net Income	1,302		1,477		1,711		1,321
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	1,192	$	1,367	$	1,601	$	1,211
Basic Net Income Per Common Share	$	0.41	$	0.46	$	0.54	$	0.41
Diluted Net Income Per Common Share	$	0.39	$	0.44	$	0.52	$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

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Significant Accounting Policies (Change in Fiscal Year) (Details) - USD ($)	3 Months Ended								9 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Accounting Policies [Abstract]
Interest Income	$ 6,983,000	$ 6,908,000	$ 7,066,000	$ 6,949,000	$ 7,263,000	$ 7,389,000	$ 7,637,000	$ 7,193,000		$ 27,905,752	$ 29,482,164	$ 30,447,367
Interest Expense	957,000	1,001,000	1,068,000	1,173,000	1,370,000	1,385,000	1,507,000	1,550,000		4,199,179	5,813,056	7,532,936
Net Interest Income	6,026,000	5,907,000	5,998,000	5,776,000	5,893,000	6,004,000	6,130,000	5,643,000		23,706,573	23,669,108	22,914,431
Provision For Loan Losses	100,000	(200,000)	0	100,000	250,000	0	100,000	100,000			450,000	2,645,381
Net Interest Income After Provision For Loan Losses	5,926,000	6,107,000	5,998,000	5,676,000	5,643,000	6,004,000	6,030,000	5,543,000		23,706,573	23,219,108	20,269,050
Non-Interest Income	1,600,000	1,369,000	1,387,000	2,651,000	1,808,000	1,486,000	1,332,000	1,536,000		7,007,249	6,162,783	6,895,804
General And Administrative Expenses	5,811,000	5,130,000	5,335,000	6,255,000	5,602,000	5,023,000	5,317,000	5,326,000		22,530,796	21,267,983	22,033,308
Income Before Income Taxes	1,715,000	2,346,000	2,050,000	2,072,000	1,849,000	2,467,000	2,045,000	1,753,000		8,183,026	8,113,908	5,131,546
Provision For Income Taxes	371,000	601,000	527,000	567,000	528,000	756,000	568,000	451,000	$ 1,340,384	2,067,099	2,303,168	1,340,384
Net Income	1,344,000	1,745,000	1,523,000	1,505,000	1,321,000	1,711,000	1,477,000	1,302,000		6,115,927	5,810,740	3,791,162
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000		440,000	440,000	440,000
Net Income Available To Common Shareholders	$ 1,234,000	$ 1,635,000	$ 1,413,000	$ 1,395,000	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000		$ 5,675,927	$ 5,370,740	$ 3,351,162
Net Income Per Common Share (Basic)	$ 0.42	$ 0.56	$ 0.48	$ 0.47	$ 0.41	$ 0.54	$ 0.46	$ 0.41		$ 1.93	$ 1.82	$ 1.14
Net Income Per Common Share (Diluted)	$ 0.40	$ 0.53	$ 0.46	$ 0.45	$ 0.40	$ 0.52	$ 0.44	$ 0.39		1.84	1.75	1.12
Cash Dividend Per Share On Common Stock										$ 0.32	$ 0.32	$ 0.32

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Significant Accounting Policies (Premises and Equipment) (Details)	12 Months Ended
	Dec. 31, 2015
Building and Improvements [Member] | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	40 years
Building and Improvements [Member] | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	7 years
Furniture and Equipment [Member] | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Furniture and Equipment [Member] | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years

XML

Significant Accounting Policies (Earnings Per Share - Reconciliation of net income to net income available to common shareholders) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Earnings Available To Common Shareholders
Net Income	$ 1,344,000	$ 1,745,000	$ 1,523,000	$ 1,505,000	$ 1,321,000	$ 1,711,000	$ 1,477,000	$ 1,302,000	$ 6,115,927	$ 5,810,740	$ 3,791,162
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000	440,000	440,000	440,000
Income	$ 1,234,000	$ 1,635,000	$ 1,413,000	$ 1,395,000	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000	$ 5,675,927	$ 5,370,740	$ 3,351,162

XML

Significant Accounting Policies (Earnings Per Share - Effects of dilutive options and warrants) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Basic EPS
Income	$ 1,234,000	$ 1,635,000	$ 1,413,000	$ 1,395,000	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000	$ 5,675,927	$ 5,370,740	$ 3,351,162
Shares	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001
Per Share Amounts	$ 0.42	$ 0.56	$ 0.48	$ 0.47	$ 0.41	$ 0.54	$ 0.46	$ 0.41	$ 1.93	$ 1.82	$ 1.14
Effect of Diluted Securities:
Senior Convertible Debentures									304,200	304,200	304,200
Senior Convertible Debentures (per Share)									$ (0.09)	$ (0.07)	$ (0.02)
Weighted Average Number of Shares, Restricted Stock									111
Diluted EPS
Income									$ 5,977,693	$ 5,672,506	$ 3,652,928
Shares	3,248,415	3,248,361	3,248,249	3,248,230	3,248,201	3,248,201	3,248,201	3,248,201	3,248,312	3,248,201	3,248,201
Per Share Amounts	$ 0.40	$ 0.53	$ 0.46	$ 0.45	$ 0.40	$ 0.52	$ 0.44	$ 0.39	$ 1.84	$ 1.75	$ 1.12
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities									$ 301,766	$ 301,766	$ 301,766
Weighted Average [Member]
Diluted EPS
Share Price	$ 18.61				$ 14.56			$ 11.37	$ 18.61	$ 14.56

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Significant Accounting Policies (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Accounting Policies [Abstract]
Cash Equivalents, Original Maturity Period, Maximum	3 months
Loans and Leases Receivable, Placed on Nonaccrual Status, Period Delinquent	90 days
Advertising	$ 416,322	$ 484,056	$ 355,678

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Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Available for Sale Securities) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 369,140,098	$ 420,876,924
Available-for-sale Securities, Gross Unrealized Gains	7,532,926	10,228,827
Available-for-sale Securities, Gross Unrealized Losses	1,159,154	1,405,211
Available-for-sale Securities, Fair Value Disclosure	375,513,870	429,700,540
Proceeds From Sale of Available For Sale Securities Including Mortgage Backed Securities	71,600,000	69,600,000	$ 63,000,000
Available For Sale Securities Pledged as Collateral, Amortized Cost Basis	81,000,000	120,700,000
Available-for-sale Securities Pledged as Collateral, Fair Value	83,200,000	124,400,000
Available-for-sale Securities, Gross Realized Gains	1,958,100	1,058,000	1,605,000
Available-for-sale Securities, Gross Realized Losses	72,000	623,000	$ 279,000
FHLB Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	2,000,000	13,317,462
Available-for-sale Securities, Gross Unrealized Gains	0	83,691
Available-for-sale Securities, Gross Unrealized Losses	67,912	154,492
Available-for-sale Securities, Fair Value Disclosure	1,932,088	13,246,661
US Government-sponsored Enterprises Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	2,000,000	5,750,000
Available-for-sale Securities, Gross Unrealized Gains	0	0
Available-for-sale Securities, Gross Unrealized Losses	12,064	82,006
Available-for-sale Securities, Fair Value Disclosure	1,987,936	5,667,994
FNMA and FHLMC Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	997,564	996,822
Available-for-sale Securities, Gross Unrealized Gains	6,767	7,559
Available-for-sale Securities, Gross Unrealized Losses	0	0
Available-for-sale Securities, Fair Value Disclosure	1,004,331	1,004,381
SBA Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	110,195,113	106,637,400
Available-for-sale Securities, Gross Unrealized Gains	1,415,464	1,796,943
Available-for-sale Securities, Gross Unrealized Losses	193,795	307,649
Available-for-sale Securities, Fair Value Disclosure	111,416,782	108,126,694
Tax Exempt Municipal Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	73,499,636	59,960,960
Available-for-sale Securities, Gross Unrealized Gains	2,770,115	2,579,543
Available-for-sale Securities, Gross Unrealized Losses	204,132	45,080
Available-for-sale Securities, Fair Value Disclosure	76,065,619	62,495,423
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	180,197,347	233,963,842
Available-for-sale Securities, Gross Unrealized Gains	3,281,116	5,704,855
Available-for-sale Securities, Gross Unrealized Losses	681,251	815,984
Available-for-sale Securities, Fair Value Disclosure	182,797,212	238,852,713
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	250,438	250,438
Available-for-sale Securities, Gross Unrealized Gains	59,464	56,236
Available-for-sale Securities, Gross Unrealized Losses	0	0
Available-for-sale Securities, Fair Value Disclosure	309,902	306,674
GNMA Mortgage-Backed Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	116,800,000	156,800,000
Available-for-sale Securities, Fair Value Disclosure	118,500,000	$ 160,600,000
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 3,800,000

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Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Held to Maturity Securities, Contractual Maturities) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Less Than One Year, Amortized Cost	$ 421,237
One – Five Years, Amortized Cost	13,898,304
Five – Ten Years, Amortized Cost	57,135,325
After Ten Years, Amortized Cost	117,487,885
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	369,140,098	$ 420,876,924
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	369,140,098
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Less Than One Year, Fair Value	420,631
One – Five Years, Fair Value	14,144,321
Five – Ten Years, Fair Value	58,129,443
After Ten Years, Fair Value	120,022,263
Available-for-sale Securities, Fair Value Disclosure	375,513,870	429,700,540
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	375,513,870
Equity Securities
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	180,197,347	233,963,842
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Available-for-sale Securities, Fair Value Disclosure	$ 182,797,212	$ 238,852,713

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Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Temporarily Impaired Securities, Fair Value and Unrealized losses) (Details)	12 Months Ended
	Dec. 31, 2015 USD ($) security	Dec. 31, 2014 USD ($) security
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 369,140,098	$ 420,876,924
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	104,020,279	67,300,430
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	12,330,751	47,048,976
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	116,351,030	114,349,406
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	955,479	452,533
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	203,675	952,678
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	$ 1,159,154	$ 1,405,211
Number of individual securities available for sale that are in unrealized continuous loss positions for twelve months or more | security	9	24
Percent of unrealized losses for securities in a continuous loss position for 12 months or more	17.60%	67.80%
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 3,800,000
GNMA Mortgage-Backed Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	116,800,000	$ 156,800,000
FHLB Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	2,000,000	13,317,462
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	994,818
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,932,088	3,850,690
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	1,932,088	4,845,508
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	0	5,182
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	67,912	149,310
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	67,912	154,492
Federal Farm Credit Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	1,987,936	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	5,667,994
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	1,987,936	5,667,994
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	12,064	0
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	0	82,006
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	12,064	82,006
FNMA and FHLMC Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	997,564	996,822
SBA Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	110,195,113	106,637,400
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	25,090,453	27,859,461
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	7,982,777	4,920,631
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	33,073,230	32,780,092
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	119,533	223,070
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	74,262	84,579
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	193,795	307,649
Tax Exempt Municipal Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	73,499,636	59,960,960
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	13,668,473	3,605,319
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	709,800	1,710,586
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	14,378,273	5,315,905
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	175,020	16,039
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	29,112	29,041
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	204,132	45,080
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	180,197,347	233,963,842
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	63,273,417	34,840,832
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,706,086	30,899,075
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	64,979,503	65,739,907
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	648,862	208,242
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	32,389	607,742
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	681,251	815,984
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 250,438	$ 250,438

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Investment and Mortgage-Backed Securities, Held to Maturity (Schedule of investment and mortgage-backed securities held to maturity) (Details)	12 Months Ended
	Dec. 31, 2015 USD ($)	May. 29, 2015 USD ($) investment	Dec. 31, 2014 USD ($)
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 25,484,972
Held to maturity, gross unrealized gains	22,600
Held to maturity, gross unrealized losses	214,418
Held to Maturity, Number of securities transferred from AFS | investment		22
Held To Maturity, Amortized Cost	29,873,098		$ 0
Fair Value of Investment And Mortgage-Backed Securities Held To Maturity	29,681,280	$ 32,800,000	$ 0
Held to maturity, unrealized gain	602,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	214,418
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	25,484,972
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	214,418
Held-to-maturity Securities Pledged as Collateral	26,000,000
Held to maturity pledged as collateral, fair value	25,800,000
US Government Agencies Debt Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Fair Value of Investment And Mortgage-Backed Securities Held To Maturity	20,400,000
Held-to-maturity Securities	20,500,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	25,484,972
Held to maturity, gross unrealized gains	22,600
Held to maturity, gross unrealized losses	214,418
Fair Value of Investment And Mortgage-Backed Securities Held To Maturity	29,681,280
Held-to-maturity Securities	29,873,098
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	214,418
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Fair Value	25,484,972
Held-to-maturity Securities, Continuous Unrealized Loss Position, Aggregate Loss	$ 214,418

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Loans Receivable, Net (Schedule of Accounts, Notes, Loans and Financing Receivable) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 339,350,618	$ 347,768,717
Loans Held For Sale	2,462,559	1,864,999
Total Loans Receivable, Gross	341,813,177	349,633,716
Allowance For Loan Losses	8,275,133	8,357,496
Loans In Process	2,902,849	1,379,114
Deferred Loan Fees	62,466	22,611
Loans, Allowances, and Fees	11,240,448	9,759,221
Total Loans Receivable, Net	330,572,729	339,874,495
Residential Real Estate Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	76,373,071	77,282,817
Consumer Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	50,380,289	50,391,224
Commercial Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	12,514,133	10,564,467
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 200,083,125	$ 209,530,209

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Loans Receivable, Net (Financing Receivable Credit Quality Indicators) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Total	$ 339,350,618	$ 347,768,717
Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	76,373,071	77,282,817
Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	50,380,289	50,391,224
Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	12,514,133	10,564,467
Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	200,083,125	209,530,209
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	253,710,880	252,478,429
Pass [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	67,605,311	69,163,911
Pass [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	46,344,056	48,283,560
Pass [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	10,519,123	9,691,685
Pass [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	129,242,390	125,339,273
Caution [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	49,103,729	34,893,641
Caution [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	1,264,415	956,976
Caution [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	2,510,519	1,046,624
Caution [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	1,465,136	340,706
Caution [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	43,863,659	32,549,335
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	18,095,430	36,139,924
Special Mention [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	607,336	639,638
Special Mention [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	81,617	128,033
Special Mention [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	102,046	202,895
Special Mention [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	17,304,431	35,169,358
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	18,440,579	24,256,723
Substandard [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	6,896,009	6,522,292
Substandard [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	1,444,097	933,007
Substandard [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	427,828	329,181
Substandard [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	$ 9,672,645	$ 16,472,243

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Loans Receivable, Net (Schedule of Allowance for Loan Losses) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	$ 8,357,496	$ 10,241,970	$ 11,318,371
Provision For Loan Losses	0	450,000	2,645,381
Charge-Offs	(1,516,468)	(3,114,833)	(5,209,830)
Recoveries	1,434,105	780,359	1,488,048
Ending Balance	8,275,133	8,357,496	10,241,970
Residential Real Estate
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	1,392,065	1,706,643	1,521,559
Provision For Loan Losses	53,694	(91,991)	1,030,237
Charge-Offs	(216,525)	(359,021)	(1,118,168)
Recoveries	93,949	136,434	273,015
Ending Balance	1,323,183	1,392,065	1,706,643
Consumer
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	886,716	847,777	1,001,271
Provision For Loan Losses	549,462	352,305	(5,306)
Charge-Offs	(527,055)	(372,460)	(207,230)
Recoveries	154,030	59,094	59,042
Ending Balance	1,063,153	886,716	847,777
Commercial Business
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	159,353	426,658	618,919
Provision For Loan Losses	617,658	(53,435)	(187,377)
Charge-Offs	(10,947)	(328,094)	(31,831)
Recoveries	7,884	114,224	26,947
Ending Balance	773,948	159,353	426,658
Commercial Real Estate 1 [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	5,919,362	7,260,892	8,176,622
Provision For Loan Losses	(1,220,814)	243,121	1,807,827
Charge-Offs	(761,941)	(2,055,258)	(3,852,601)
Recoveries	1,178,242	470,607	1,129,044
Ending Balance	$ 5,114,849	$ 5,919,362	$ 7,260,892

XML

Loans Receivable, Net (Past Due Financing Receivables) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 13,511,635	$ 22,690,737
Current	325,838,983	325,077,980
Total	339,350,618	347,768,717
Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	4,451,056	4,148,638
Current	71,922,015	73,134,179
Total	76,373,071	77,282,817
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,569,061	2,533,654
Current	48,811,228	47,857,570
Total	50,380,289	50,391,224
Commercial Business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	279,277	509,242
Current	12,234,856	10,055,225
Total	12,514,133	10,564,467
Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	7,212,241	15,499,203
Current	192,870,884	194,031,006
Total	200,083,125	209,530,209
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	4,121,369	6,576,081
Financing Receivables, 30 to 59 Days Past Due [Member] | Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	0
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	710,881	1,868,787
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	101,201	162,481
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3,309,287	4,544,813
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	2,356,514	2,373,007
Financing Receivables, 60 to 89 Days Past Due [Member] | Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	1,144,381	1,087,299
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	282,314	91,223
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	0	99,784
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	929,819	1,094,701
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	7,033,752	13,741,649
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	3,306,675	3,061,339
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	575,866	573,644
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	178,076	246,977
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 2,973,135	$ 9,859,689

XML

Loans Receivable, Net (Schedule of non-accrual loans by category) (Details) - USD ($)		12 Months Ended
		Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount		$ 7,033,752	$ 13,741,649
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	[1]	2.10%	4.00%
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)		$ (6,707,897)
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)		(48.80%)
Financing Receivable, Recorded Investment, Past Due		$ 13,511,635	$ 22,690,737
Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			$ 3,061,339
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	[1]	1.00%	0.90%
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)		$ 245,336
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)		8.00%
Financing Receivable, Recorded Investment, Past Due		$ 4,451,056	$ 4,148,638
Commercial Business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			$ 246,977
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	[1]	0.10%	0.10%
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)		$ (68,901)
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)		(27.90%)
Financing Receivable, Recorded Investment, Past Due		$ 279,277	$ 509,242
Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			$ 9,859,689
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	[1]	0.80%	2.80%
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)		$ (6,886,554)
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)		(69.80%)
Financing Receivable, Recorded Investment, Past Due		$ 7,212,241	$ 15,499,203
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			$ 573,644
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	[1]	0.20%	0.20%
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)		$ 2,222
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)		0.40%
Financing Receivable, Recorded Investment, Past Due		$ 1,569,061	$ 2,533,654

[1] PERCENT OF GROSS LOANS RECEIVABLE HELD FOR INVESTMENT, NET OF DEFERRED FEES AND LOANS IN PROCESS.

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Loans Receivable, Net (Schedule of loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	$ 81,600	$ 475,000
Collectively Evaluated For Impairment	8,193,533	7,882,496
Total	8,275,133	8,357,496
Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	0	0
Collectively Evaluated For Impairment	1,323,183	1,392,065
Total	1,323,183	1,392,065
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	32,300	2,600
Collectively Evaluated For Impairment	1,030,853	884,116
Total	1,063,153	886,716
Commercial Business
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	0	0
Collectively Evaluated For Impairment	773,948	159,353
Total	773,948	159,353
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	49,300	472,400
Collectively Evaluated For Impairment	5,065,549	5,446,962
Total	$ 5,114,849	$ 5,919,362

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Loans Receivable, Net (Schedule of loans evaluated individually for impairment and collectively evaluated for impairment in loans receivable) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	$ 12,647,328	$ 20,247,955
Collectively Evaluated For Impairment	326,703,290	327,520,762
Total	339,350,618	347,768,717
Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	2,922,105	2,519,814
Collectively Evaluated For Impairment	73,450,966	74,763,003
Total	76,373,071	77,282,817
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	372,382	218,232
Collectively Evaluated For Impairment	50,007,907	50,172,992
Total	50,380,289	50,391,224
Commercial Business
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	162,201	236,030
Collectively Evaluated For Impairment	12,351,932	10,328,437
Total	12,514,133	10,564,467
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	9,190,640	17,273,879
Collectively Evaluated For Impairment	190,892,485	192,256,330
Total	$ 200,083,125	$ 209,530,209

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Loans Receivable, Net (Impaired Financing Receivables) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, related allowance	$ 81,600	$ 475,000	$ 1,102,558
Impaired financing receivable, recorded investment	12,647,328	20,247,955	31,354,814
Impaired financing receivable, unpaid principal balance	15,328,828	24,950,379	37,515,743
Impaired financing receivable, average recorded investment	13,122,468	22,211,689	33,574,855
Impaired financing receivable, interest income, accrual method	295,579	364,423	1,176,461
Residential Real Estate
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	2,922,105	2,519,814	3,936,316
Impaired financing receivable, with no related allowance, unpaid principal balance	3,033,735	2,618,003	4,588,645
Impaired financing receivable, with no related allowance, average recorded investment	3,014,807	2,642,156	4,044,142
Impaired financing receivable, with no related allowance, interest income, accrual method	13,909	0	31,704
Impaired financing receivable, with related allowance, recorded investment	0	0	901,920
Impaired financing receivable, with related allowance, unpaid principal balance	0	0	901,920
Impaired financing receivable, related allowance	0	0	158,791
Impaired financing receivable, with related allowance, average recorded investment	0	0	909,473
Impaired financing receivable, with related allowance, interest income, accrual method	0	0	0
Impaired financing receivable, recorded investment	2,922,105	2,519,814	4,838,236
Impaired financing receivable, unpaid principal balance	3,033,735	2,618,003	5,490,565
Impaired financing receivable, average recorded investment	3,014,807	2,642,156	4,953,615
Impaired financing receivable, interest income, accrual method	13,909	0	31,704
Consumer Loans
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	120,889	152,029	106,197
Impaired financing receivable, with no related allowance, unpaid principal balance	129,188	159,529	106,198
Impaired financing receivable, with no related allowance, average recorded investment	130,202	155,602	104,539
Impaired financing receivable, with no related allowance, interest income, accrual method	0	1,510	953
Impaired financing receivable, with related allowance, recorded investment	251,493	66,203	169,294
Impaired financing receivable, with related allowance, unpaid principal balance	256,923	66,203	169,294
Impaired financing receivable, related allowance	32,300	2,600	103,109
Impaired financing receivable, with related allowance, average recorded investment	254,611	67,522	170,499
Impaired financing receivable, with related allowance, interest income, accrual method	4,789	4,867	5,173
Impaired financing receivable, recorded investment	372,382	218,232	275,491
Impaired financing receivable, unpaid principal balance	386,111	225,732	275,492
Impaired financing receivable, average recorded investment	384,813	223,124	275,038
Impaired financing receivable, interest income, accrual method	4,789	6,377	6,126
Commercial Business
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	162,201	236,030	19,775
Impaired financing receivable, with no related allowance, unpaid principal balance	362,201	436,030	19,775
Impaired financing receivable, with no related allowance, average recorded investment	190,562	413,653	19,896
Impaired financing receivable, with no related allowance, interest income, accrual method	0	0	389
Impaired financing receivable, with related allowance, recorded investment	0	0	0
Impaired financing receivable, with related allowance, unpaid principal balance	0	0	0
Impaired financing receivable, related allowance	0	0	0
Impaired financing receivable, with related allowance, average recorded investment	0	0	0
Impaired financing receivable, with related allowance, interest income, accrual method	0	0	0
Impaired financing receivable, recorded investment	162,201	236,030	19,775
Impaired financing receivable, unpaid principal balance	362,201	436,030	19,775
Impaired financing receivable, average recorded investment	190,562	413,653	19,896
Impaired financing receivable, interest income, accrual method	0	0	389
Commercial Real Estate
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	8,620,301	13,721,964	21,810,347
Impaired financing receivable, with no related allowance, unpaid principal balance	10,969,642	18,088,149	26,775,853
Impaired financing receivable, with no related allowance, average recorded investment	8,952,868	14,980,690	23,618,648
Impaired financing receivable, with no related allowance, interest income, accrual method	245,197	297,839	886,737
Impaired financing receivable, with related allowance, recorded investment	570,339	3,551,915	4,410,965
Impaired financing receivable, with related allowance, unpaid principal balance	577,139	3,582,465	4,954,058
Impaired financing receivable, related allowance	49,300	472,400	840,658
Impaired financing receivable, with related allowance, average recorded investment	579,418	3,952,066	4,707,658
Impaired financing receivable, with related allowance, interest income, accrual method	31,684	60,207	251,505
Impaired financing receivable, recorded investment	9,190,640	17,273,879	26,221,312
Impaired financing receivable, unpaid principal balance	11,546,781	21,670,614	31,729,911
Impaired financing receivable, average recorded investment	9,532,286	18,932,756	28,326,306
Impaired financing receivable, interest income, accrual method	$ 276,881	$ 358,046	$ 1,138,242

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Loans Receivable, Net (Summary of loans restructured as Troubled Debt Restructurings) (Details)	12 Months Ended
	Dec. 31, 2015 USD ($) loan	Dec. 31, 2014 USD ($) loan	Dec. 31, 2013 USD ($) loan
Financing Receivable, Modifications [Line Items]
Financing Receivable Restructured, Number of Contracts | loan	7	2	5
Financing Receivable, Pre Modification Recorded Investment	$ 958,460	$ 186,188	$ 1,442,543
Financing Receivable, Post Modification Recorded Investment	$ 958,460	$ 186,188	$ 1,442,543
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period | loan	2	1	1
Recorded Investment - Troubled Debt Restructurings That Subsequently Defaulted During the Period	$ 30,713	$ 66,138	$ 146,267
Residential Real Estate
Financing Receivable, Modifications [Line Items]
Financing Receivable Restructured, Number of Contracts | loan	0
Financing Receivable, Pre Modification Recorded Investment	$ 0
Financing Receivable, Post Modification Recorded Investment	$ 0
Commercial Real Estate 1 [Member]
Financing Receivable, Modifications [Line Items]
Financing Receivable Restructured, Number of Contracts | loan	6	2	4
Financing Receivable, Pre Modification Recorded Investment	$ 922,000	$ 186,188	$ 1,409,693
Financing Receivable, Post Modification Recorded Investment	$ 922,000	$ 186,188	$ 1,409,693
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period | loan	2	1	1
Recorded Investment - Troubled Debt Restructurings That Subsequently Defaulted During the Period	$ 30,713	$ 66,138	$ 146,267
Commercial Business
Financing Receivable, Modifications [Line Items]
Financing Receivable Restructured, Number of Contracts | loan			1
Financing Receivable, Pre Modification Recorded Investment			$ 32,850
Financing Receivable, Post Modification Recorded Investment			$ 32,850
Consumer Loans
Financing Receivable, Modifications [Line Items]
Financing Receivable Restructured, Number of Contracts | loan	1
Financing Receivable, Pre Modification Recorded Investment	$ 36,460
Financing Receivable, Post Modification Recorded Investment	$ 36,460

XML

Loans Receivable, Net (Narrative) (Details)	12 Months Ended
	Dec. 31, 2015 USD ($) loan payments	Dec. 31, 2014 USD ($) loan	Dec. 31, 2013 USD ($) loan
Receivables [Abstract]
Review period to request a new third party appraisal	24 months
Impaired financing receivable, average recorded investment | $	$ 13,122,468	$ 22,211,689	$ 33,574,855
TDRs included in impaired loans | $	$ 6,714,099.000000	$ 9,600,000.0
Number of Contracts - Troubled Debt Restructurings	7	2
Number of Contracts - loans that had been previously restructured that were in default	6	7
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period	2	1	1
Nonperforming Loans, Minimum Consecutive Payments | payments	6

XML

Premises and Equipment, Net (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 38,112,476	$ 35,777,374
Less Accumulated Depreciation	(17,995,558)	(17,544,148)
Total Premises and Equipment, Net	20,116,918	18,233,226
Depreciation Expense	1,242,378	1,214,912	$ 1,243,839
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	6,693,927	6,729,097
Building and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	20,040,102	17,796,209
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	11,142,428	11,068,028
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 236,019	$ 184,040

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Premises and Equipment, Net (Future minimum payments under non-cancelable operating leases) (Details)	9 Months Ended	12 Months Ended
	Dec. 31, 2012 USD ($)	Dec. 31, 2015 USD ($) lease_agreement	Dec. 31, 2014 USD ($)
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2013		$ 356,440
2014		326,000
2015		223,029
2016		214,458
2017		214,458
Thereafter		1,211,468
Total Future Minimum Payments		2,545,853
Total rental expense	$ 415,000	$ 417,000	$ 424,000
Number of operating lease agreements | lease_agreement		5
Monthly rent expense		$ 7,889
Lease One [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		$ 6,737
Operating lease renewal option		30 years
Lease Two [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		$ 800
Operating lease renewal option		10 years
Lease Three [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		$ 8,571
Operating lease renewal option		45 years
Lease Four [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		$ 9,075
Operating lease renewal option		20 years

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Intangible Assets and Goodwill (Changes in intangible assets and goodwill) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Finite-lived Intangible Assets [Roll Forward]
Balance At Beginning Of Year	$ 0
Amortization of Intangible Assets	0	$ 11,970	$ 50,004
Balance At End Of Year	0	0
Intangible Assets, Net (Including Goodwill) [Abstract]
Goodwill	1,199,754	1,199,754
Total	1,199,754	1,199,754
Customer Lists [Member]
Finite-lived Intangible Assets [Roll Forward]
Balance At Beginning Of Year	0	11,970
Amortization of Intangible Assets	0	11,970
Balance At End Of Year	$ 0	$ 0	$ 11,970

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Intangible Assets and Goodwill (Amortization of the intangibles) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Finite-Lived Intangible Assets, Net	$ 0	$ 0

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FHLB Stock (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal Home Loan Bank (FHLB) Stock, At Cost	$ 2,214,800	$ 3,144,600
Federal Home Loan Bank of Atlanta [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal Home Loan Bank Stock, Membership Component, Percent of Total Assets	0.09%	0.15%
Federal Home Loan Bank Stock, Transaction Component, % of Outstanding Advances	4.30%	4.50%
Federal Home Loan Bank (FHLB) Stock, At Cost	$ 2,200,000	$ 3,100,000

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Repossessed Assets Acquired In Settlement Of Loans (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Other Real Estate and Other Assets Repossessed [Roll Forward]
Balance, Beginning Of Period	$ 3,229,710	$ 3,947,226	$ 6,754,425
Additions	4,362,635	1,638,135	3,861,182
Sales	(2,918,587)	(1,850,651)	(5,274,003)
Write Downs	(312,347)	(505,000)	(1,394,378)
Balance, End Of Period	$ 4,361,411	$ 3,229,710	$ 3,947,226

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Deposits (Deposits outstanding by type) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Deposits, by Type [Abstract]
Checking Accounts	$ 155,765,968	$ 143,422,150
Money Market Accounts	229,016,993	234,819,052
Statement Savings Accounts	31,191,828	28,622,933
Total	415,974,789	406,864,135
Certificate Accounts	236,121,756	253,251,029
Total Deposits	$ 652,096,545	$ 660,115,164
Weighted Average Rate Domestic Deposit Liabilities [Abstract]
Checking Accounts, Weighted Rate	0.03%	0.03%
Money Market Accounts, Weighted Rate	0.16%	0.19%
Statement Savings Accounts, Weighted Rate	0.10%	0.10%
Total, Weighted Rate	0.11%	0.13%
Certificate Accounts, Weighted Rate	0.69%	0.79%
Total Deposit, Weighted Rate	0.32%	0.38%
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest-bearing Domestic Deposit, Brokered	$ 42,500,000	$ 38,800,000
Weighted Average Rate Domestic Deposit, Brokered	0.94%	1.14%
Interest Bearing Domestic Deposit Maturities, Brokered, Next Twelve Months	$ 11,500,000
Time Deposits, $100,000 or More	132,000,000	$ 140,000,000
Overdrafts reclassified to loans	$ 46,000	$ 132,000
Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Checking	0.00%	0.00%
Interest Rate Domestic Deposit, Money Market	0.10%	0.10%
Interest Rate Domestic Deposit, Savings	0.00%	0.00%
Interest Rate Domestic Deposit, Excluding Time Deposits	0.00%	0.00%
Interest Rate Domestic Deposit, Time Deposits	0.04%	0.05%
Interest Rate Domestic Deposit	0.00%	0.00%
Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Checking	0.20%	0.15%
Interest Rate Domestic Deposit, Money Market	0.17%	0.20%
Interest Rate Domestic Deposit, Savings	0.10%	0.10%
Interest Rate Domestic Deposit, Excluding Time Deposits	0.20%	0.20%
Interest Rate Domestic Deposit, Time Deposits	2.52%	3.01%
Interest Rate Domestic Deposit	2.52%	3.01%
1.00 – 1.99%
Deposits, by Type [Abstract]
Certificate Accounts	$ 51,479,431	$ 42,014,738
1.00 – 1.99% | Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	0.00%
1.00 – 1.99% | Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	0.99%
2.00 – 2.99%
Deposits, by Type [Abstract]
Certificate Accounts	$ 8,886,814	25,605,349
2.00 – 2.99% | Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	2.00%
2.00 – 2.99% | Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	2.99%
3.00 – 3.99%
Deposits, by Type [Abstract]
Certificate Accounts	$ 0	172,598
3.00 – 3.99% | Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	3.00%
3.00 – 3.99% | Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	3.99%
0.00% - 0.99% [Member]
Deposits, by Type [Abstract]
Certificate Accounts	$ 175,755,511
Interest Rate range 4 [Member]
Deposits, by Type [Abstract]
Certificate Accounts		$ 185,458,344

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Deposits (Amounts and scheduled maturities of all certificates of deposit) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Banking and Thrift [Abstract]
Time deposits, $250,000 or more	$ 71,300,000	$ 69,600,000
Time Deposits, Fiscal Year Maturity [Abstract]
Within 1 Year	141,385,500	142,490,027
After 1 Year, Within 2 Years	56,022,488	57,481,254
After 2 Years, Within 3 Years	23,139,815	22,273,310
After 3 Years, Within 4 Years	9,179,894	18,114,738
After 4 Years, Within 5 Years	6,394,059	12,891,700
Time Deposits	$ 236,121,756	$ 253,251,029

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Advances from the FHLB summarized by year of maturity and weighted average interest rate) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Federal Home Loan Bank, Advances, Fiscal Year Maturity [Abstract]
Due in Next Twelve Months	$ 16,740,000
Due in Year Two	12,900,000
Due in Year Three	5,000,000
Advances From FHLB	$ 34,640,000	$ 52,900,000
Federal Home Loan Bank, Advances, Maturities Summary, Average Interest Rate of Amounts Due [Abstract]
Weighted Rate of Amounts Due within One Year of Balance Sheet Date	1.51%
Weighted Rate, One to Two Years from Balance Sheet Date	4.38%
Weighted Rate, Two to Three Years from Balance Sheet Date	3.39%
Federal Home Loan Bank, Advances, Weighted Rate	3.87%
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures [Abstract]
Federal Home Loan Bank, Advances, Collateral Pledged, Amortized Cost	$ 77,800,000	99,900,000
Federal Home Loan Bank, Advances, Collateral Pledged, Fair Value	$ 74,700,000	$ 99,300,000

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Callable FHLB advances) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	$ 34,640,000	$ 52,900,000
Amount of Additional Borrowing Capacity	240,200,000	$ 195,700,000
Federal Home Loan Bank Advances November 29, 2006 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	$ 5,000,000
Advances from FHLB, Interest Rate at Period End	4.025%
Federal Home Loan Bank Advances May 24, 2007 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	$ 7,900,000
Advances from FHLB, Interest Rate at Period End	4.375%
Federal Home Loan Bank Advances July 25, 2007 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	$ 5,000,000
Advances from FHLB, Interest Rate at Period End	4.396%

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Other Borrowings) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Short-term Debt [Line Items]
Other Borrowings	$ 6,411,977	$ 8,523,348
Financial Instruments, Owned and Pledged as Collateral, at Amortized Cost	14,300,000	17,300,000
Financial Instruments, Owned and Pledged as Collateral, at Fair Value	$ 14,600,000	18,000,000
Minimum
Short-term Debt [Line Items]
Repurchase agreements, maturity term	1 day
Maximum
Short-term Debt [Line Items]
Repurchase agreements, maturity term	3 days
Securities Sold under Agreements to Repurchase [Member]
Short-term Debt [Line Items]
Short-term Debt, Weighted Average Interest Rate	0.15%
Short-term Debt, Maximum Month-end Outstanding Amount	$ 10,300,000	$ 10,800,000

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings Federal Home Loan Bank Advance Prepayments (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Debt Disclosure [Abstract]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Repayment and Penalties	$ 787,851	$ 178,067	$ 589,023
Repayments of Federal Home Loan Bank Borrowings	$ 15,000,000	$ 5,000,000	$ 30,000,000

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Junior Subordinated Debentures (Details) - Junior Subordinated Debt [Member] - Capital Securities [Member] $ in Millions		9 Months Ended	12 Months Ended
	Sep. 21, 2006 USD ($)	Dec. 31, 2012	Dec. 31, 2015 QuarterlyPeriods
Debt Instrument [Line Items]
Proceeds from Issuance of Subordinated Long-term Debt | $	$ 5.2
Annual Distribution Rate			1.94%
Floating basis spread on variable rate		1.70%	1.70%
Debt Instrument, Rights to Defer Interest Payments, Consecutive Quarterly Periods | QuarterlyPeriods			20

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Senior Convertible Debentures (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 01, 2009
Debt Instrument [Line Items]
Senior Convertible Debentures	$ 6,084,000	$ 6,084,000
Senior Convertible Debt [Member] | Senior Convertible Debentures issued December 1, 2009 [Member]
Debt Instrument [Line Items]
Senior Convertible Debentures			$ 6,100,000
Interest rate per year			8.00%
Debt Instrument, Convertible, Conversion Price			$ 20
Debt Instrument, Redemption Price, Percentage	100.00%

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Income Taxes (Income tax expense) (Details) - USD ($)	3 Months Ended								9 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Current Income Tax Expense (Benefit), Continuing Operations [Abstract]
Federal									$ 380,143	$ 1,056,002	$ 1,833,069
State									164,491	285,699	267,904
Total Current Tax Expense									544,634	1,341,701	2,100,973
Deferred Income Tax Expense (Benefit), Continuing Operations [Abstract]
Federal									784,814	722,699	192,051
State									10,936	2,699	10,144
Total Deferred Tax Expense									795,750	725,398	202,195
Total Income Tax Expense	$ 371,000	$ 601,000	$ 527,000	$ 567,000	$ 528,000	$ 756,000	$ 568,000	$ 451,000	$ 1,340,384	$ 2,067,099	$ 2,303,168	$ 1,340,384

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Income Taxes (Income tax reconciliation) (Details) - USD ($)	3 Months Ended								9 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Tax at Statutory Income Tax Rate									$ 1,744,725	$ 2,782,229	$ 2,758,729
State Tax and Other									45,761	(41,986)	66,738
Tax Exempt Interest									(425,450)	(684,708)	(534,325)
Valuation Allowance									(24,652)	11,564	12,026
Total Income Tax Expense	$ 371,000	$ 601,000	$ 527,000	$ 567,000	$ 528,000	$ 756,000	$ 568,000	$ 451,000	$ 1,340,384	$ 2,067,099	$ 2,303,168	$ 1,340,384

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Income Taxes (Deferred tax assets and deferred tax liabilities) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Deferred Tax Assets:
Deferred Compensation	$ 558,870	$ 521,256
Provision For Loan Losses	2,846,867	2,872,552
Other Real Estate Owned	1,004,332	1,194,141
Net Fees Deferred For Financial Reporting	112,782	114,924
Non-accrual Interest	0	431,696
Net Operating Losses	231,775	220,211
Other	205,009	207,423
Total Gross Deferred Tax Assets	4,959,635	5,562,203
Less: Valuation Allowance	(231,775)	(220,211)
Net Deferred Tax Assets	4,727,860	5,341,992
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,630	114,510
Depreciation	420,568	288,157
Other	42,271	63,536
Unrealized Gain on Securities Available for Sale	2,604,222	3,347,240
Total Gross Deferred Tax Liability	3,181,691	3,813,443
Net Deferred Tax Asset	1,546,169	$ 1,528,549
Valuation Allowance, Deferred Tax Asset, Change in Amount	11,564
Bad Debt Reserve for Tax Purposes of Qualified Lender	$ 2,200,000

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Income Taxes (Operating Loss Carryforwards) (Details) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Operating Loss Carryforwards	$ 7.0	$ 6.7

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Regulatory Matters (Regulatory capital amounts and ratios) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)
Actual, Amount	$ 84,671,763	$ 77,746,000
Actual, Ratio	21.70%	20.60%
For Capital Adequacy, Amount	$ 23,429,060	$ 15,073,400
For Capital Adequacy, Ratio	6.00%	4.00%
Total Risk-Based Capital (To Risk Weighted Assets)
Actual, Amount	$ 95,428,763	$ 89,915,000
Actual, Ratio	24.40%	23.90%
For Capital Adequacy, Amount	$ 31,238,746	$ 30,146,800
For Capital Adequacy, Ratio	8.00%	8.00%
Common Equity Tier One Capital	$ 63,503,763
Common Equity Tier 1 Capital to Risk Weighted Assets	16.30%
Common Equity Tier 1 Capital Required for Capital Adequacy	$ 17,571,794.625
CET1 Capital to Risk Weighted Assets Required for Capital Adequacy	4.50%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)
Actual, Amount	$ 84,672,000	$ 77,746,000
Actual, Ratio	10.60%	9.50%
For Capital Adequacy, Amount	$ 31,810,743	$ 32,778,400
For Capital Adequacy, Ratio	4.00%	4.00%
Security Federal Bank [Member]
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)
Actual, Amount	$ 87,728,000	$ 87,222,000
Actual, Ratio	22.50%	23.20%
For Capital Adequacy, Amount	$ 23,440,440	$ 15,061,720
For Capital Adequacy, Ratio	6.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 31,253,920	$ 22,592,580
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	8.00%	6.00%
Total Risk-Based Capital (To Risk Weighted Assets)
Actual, Amount	$ 92,653,000	$ 91,973,000
Actual, Ratio	23.70%	24.40%
For Capital Adequacy, Amount	$ 31,253,920	$ 30,123,440
For Capital Adequacy, Ratio	8.00%	8.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 39,067,400	$ 37,654,300
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Common Equity Tier One Capital	$ 87,728,000
Common Equity Tier 1 Capital to Risk Weighted Assets	22.50%
Common Equity Tier 1 Capital Required for Capital Adequacy	$ 17,580,330
CET1 Capital to Risk Weighted Assets Required for Capital Adequacy	4.50%
CET1 Required to Be Well Capitalized	$ 25,393,810
CET1 Required to be Well Capitalized to Risk Weighted Assets	6.50%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)
Actual, Amount	$ 87,728,000	$ 87,222,000
Actual, Ratio	11.00%	10.60%
For Capital Adequacy, Amount	$ 31,800,960	$ 32,792,480
For Capital Adequacy, Ratio	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 39,751,200	$ 40,990,600
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%

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Employee Benefit Plans (Retirement Benefits) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Postemployment Benefits [Abstract]
Defined contribution plan, requisite service period	6 months
Defined contribution plan, employer contributions	$ 210,000	$ 186,000	$ 189,000
Supplemental retirement plan, expense	$ 205,000	$ 103,000	$ 172,000
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum Days Earned For Bonus	7 days 12 hours
Minimum Days Earned for Bonus	2 days 12 hours
Accrued Bonuses	$ 150,000
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Stock Purchase Plan, purchase discount of the market value	15.00%
Employee Stock Purchase Plan, maximum annual employee purchase amount	$ 25,000
Employee Stock Purchase Plan, maximum annual employee purchase amount as a percent of annual salary	5.00%

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Employee Benefit Plans (Activity under the incentive and non-qualified stock option plans) (Details) - $ / shares	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance, Beginning of Period, Shares		47,500	61,500	68,400
Options Granted, Shares	0	0	0
Options Exercised, Shares	0	0	0
Options Forfeited, Shares		18,000	14,000	6,900
Balance, End of Period, Shares	68,400	29,500	47,500	61,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Balance, Beginning of Period, Weighted Avg. Exercise Price		$ 22.41	$ 22.49	$ 22.63
Options Granted, Weighted Avg. Exercise Price	$ 0	0	0
Options Exercised, Weighted Avg. Exercise Price	0	0	0
Options Forfeited, Weighted Avg. Exercise Price		20.55	22.74	23.87
Balance, End of Period, Weighted Avg. Exercise Price	$ 22.63	$ 23.55	$ 22.41	$ 22.49
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Options Exercisable, Shares		21,500	34,300	42,300
Options Exercisable, Weighted Avg. Exercise Price		$ 23.57	$ 22.00	$ 22.03
Weighted-Average Remaining Life Of Exercisable Options		1 year 4 months 24 days	1 year 1 month 18 days	1 year 3 months 18 days
Options Available For Grant		50,000	50,000	50,000

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Employee Benefit Plans (Stock Option Plans) (Details)		12 Months Ended
	Jun. 30, 2006	Dec. 31, 2015 USD ($) stock_option_plan $ / shares shares	Dec. 31, 2014 USD ($) $ / shares shares	Dec. 31, 2013 USD ($) $ / shares shares	Mar. 31, 2014 USD ($) shares	Mar. 31, 2012 USD ($)	Mar. 31, 2010 shares	Mar. 31, 2009 shares
Postemployment Benefits [Abstract]
Incentive and non-qualified stock option plans, number of plans | stock_option_plan		3
Incentive and non-qualified stock option plans, number of shares authorized							150,000
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vested during period, shares		5,200	5,400	5,400
Options vested during period, shares, weighted average exercise price | $ / shares		$ 23.50	$ 23.50	$ 23.50
Options outstanding and exercisable, instrinsic value | $		$ 0			$ 0	$ 0
Compensation expense related to stock options | $		12,700	$ 12,700	$ (2,600)
Unrecognized compensation cost related to non-vested stock options | $		$ 13,000
Unrecognized compensation cost related to non-vested stock options, period for recognition		3 years
Award annual vesting percentage	100.00%	20.00%
Award expiration period		10 years
2008 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for the issuance		50,000			50,000
2008 Equity Incentive Plan [Member] | Stock Options and SARS [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for the issuance								50,000
2008 Equity Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for the issuance								50,000

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Employee Benefit Plans (Options outstanding) (Details)	Dec. 31, 2015 $ / shares shares
$23.91
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	3,500
Option Price | $ / shares	$ 23.91
$23.03
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	3,500
Option Price | $ / shares	$ 23.03
$24.34
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	2,000
Option Price | $ / shares	$ 24.34
$24.61
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	1,000
Option Price | $ / shares	$ 24.61
$24.28
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	2,000
Option Price | $ / shares	$ 24.28
$23.49
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	13,000
Option Price | $ / shares	$ 23.49
$22.91
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	2,500
Option Price | $ / shares	$ 22.91
$22.91
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options | shares	2,000
Option Price | $ / shares	$ 22.91

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Stock Warrants (Details) - USD ($)		12 Months Ended
	Jul. 31, 2013	Dec. 31, 2008	Dec. 31, 2013
Class of Warrant or Right [Line Items]
Payments for Repurchase of Warrants	$ 50,000
Warrant Issued In Conjunction With Serial Preferred Stock	400,000		$ (400,000)
Adjustments to Additional Paid in Capital, Warrant Repurchased	$ 350,000
US Department of Treasury Capital Purchase Program [Member]
Class of Warrant or Right [Line Items]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right		137,966
Class of Warrant or Right, Termination Period		10 years

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Bank Owned Life Insurance (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Investments, All Other Investments [Abstract]
Payments to Acquire Life Insurance Policies	$ 5,000,000
Bank Owned Life Insurance	16,573,045	$ 11,150,045
Life Insurance, Corporate or Bank Owned, Change in Value	423,000	$ 300,000	$ 339,000
BOLI death benefits	$ 0

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Commitments and Contingencies (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments, Period of Time to Provide Funding	45 days
Loans and Leases Receivable, Commitments to Purchase or Sell	$ 2.5	$ 1.9
Unused lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	51.2	44.5
Undispursed Loans in Process [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	2.9	1.4
Commitments for Letters of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	0.9	0.8
Unused Credit Card Loan Commitments [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	$ 4.6	4.4
Commitments to Extend Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit		$ 0.6

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Related Party Transactions (Details) - USD ($)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Management [Member]
Loans and Leases Receivable, Related Parties [Roll Forward]
Balance, Beginning of Period		$ 202,197	$ 230,722	$ 273,330
New Loans		692	1,116	10,956
Less Loan Payments	$ 53,564	21,151	29,641
Balance, End of Period	$ 273,330	181,738	$ 202,197	230,722
Related Party Deposit Liabilities		$ 15,100,000
All Employees, Officers and Directors [Member]
Loans and Leases Receivable, Related Parties [Roll Forward]
Loans and Leases Receivable, Related Party, Aggregate as Percent of Equity		3.30%	3.40%
Director and Officer [Member]
Loans and Leases Receivable, Related Parties [Roll Forward]
Related Party Transaction, Expenses from Transactions with Related Party		$ 81,000	$ 81,000	$ 79,000

XML

Stock Issuance and Exchange (Details) - USD ($)				3 Months Ended
	Jul. 31, 2013	Dec. 22, 2010	Sep. 29, 2010	Mar. 31, 2015	Dec. 31, 2015	Feb. 12, 2015	Dec. 31, 2014	Dec. 31, 2013
Class of Stock [Line Items]
Shares Issued, Price Per Share						$ 17.22
Stock Issuance, Value			$ 8,000,000
Common Stock Par Value Per Share					$ 0.01		$ 0.01
Payments for Repurchase of Warrants	$ 50,000
Warrant Issued In Conjunction With Serial Preferred Stock	400,000							$ (400,000)
Adjustments to Additional Paid in Capital, Warrant Repurchased	$ 350,000
Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Liquidation Preference, Value			18,000,000
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Liquidation Preference, Value			18,000,000
Proceeds from Issuance of Preferred Stock and Preference Stock			4,000,000
Stock Issuance, Value			$ 4,000,000
Common Stock | Private Placement [Member]
Class of Stock [Line Items]
Stock Issued During Period, Shares, New Issues		82,906
Shares Issued, Price Per Share		$ 10.00
Proceeds from Issuance of Private Placement		$ 829,060
Common Stock Par Value Per Share		$ 0.01
Management [Member] | Common Stock | Private Placement [Member]
Class of Stock [Line Items]
Stock Issued During Period, Shares, New Issues			400,000
Shares Issued, Price Per Share			$ 10.00
Proceeds from Issuance of Private Placement			$ 4,000,000.0
Prior to February 15, 2014 [Member] | Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				5.00%
After February 15, 2014 [Member] | Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				9.00%
During First Eight Years from Date of Issuance [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				2.00%
After First Eight Years from Date of Issuance [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				9.00%
Ineligible as CDFI for 180 Days [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				5.00%
Ineligible as CDFI for 270 Days [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				9.00%

XML

Unvested Restricted Stock (Details) - $ / shares	12 Months Ended
	Dec. 31, 2015	Feb. 12, 2015
Earnings Per Share [Abstract]
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures	1,473
Shares Issued, Price Per Share		$ 17.22

XML

Security Federal Corporation Condensed Financial Statements (Parent Company Only) (Condensed Balance Sheet Data) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
ASSETS:
Cash	$ 8,381,951	$ 10,192,702	$ 7,629,771	$ 7,903,950
Investment Securities, Available For Sale	375,513,870	429,700,540
Total Assets	799,727,630	825,363,826
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Junior Subordinated Debentures	5,155,000	5,155,000
Senior Convertible Debentures	6,084,000	6,084,000
Stockholders' Equity Attributable to Parent	90,967,422	87,435,385	77,990,080	82,592,484
Total Liabilities and Shareholders' Equity	799,727,630	825,363,826
Parent Company [Member]
ASSETS:
Cash	8,785,338	4,542,778	$ 3,880,433	$ 4,098,035
Investment Securities, Available For Sale	154,902	151,674
Investment in Security Federal Statutory Trust	155,000	155,000
Investment In Security Federal Bank	93,150,771	93,860,841
Accounts Receivable And Other Assets	5,002	8,023
Total Assets	102,251,013	98,718,316
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Accounts Payable And Other Liabilities	45,890	45,229
Junior Subordinated Debentures	5,155,000	5,155,000
Senior Convertible Debentures	6,084,000	6,084,000
Stockholders' Equity Attributable to Parent	90,966,123	87,434,087
Total Liabilities and Shareholders' Equity	$ 102,251,013	$ 98,718,316

XML

Security Federal Corporation Condensed Financial Statements (Parent Company Only) (Condensed Statements of Income Data) (Details) - USD ($)	3 Months Ended								9 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income:
Cash Dividends Paid to Parent Company										$ 6,000,000	$ 2,400,000	$ 1,600,000
Interest Income	$ 6,983,000	$ 6,908,000	$ 7,066,000	$ 6,949,000	$ 7,263,000	$ 7,389,000	$ 7,637,000	$ 7,193,000		27,905,752	29,482,164	30,447,367
Miscellaneous Income	1,600,000	1,369,000	1,387,000	2,651,000	1,808,000	1,486,000	1,332,000	1,536,000		7,007,249	6,162,783	6,895,804
Expenses:
Interest Expense	957,000	1,001,000	1,068,000	1,173,000	1,370,000	1,385,000	1,507,000	1,550,000		4,199,179	5,813,056	7,532,936
Other Expenses										4,401,016	4,390,766	4,177,210
Income Before Income Taxes	1,715,000	2,346,000	2,050,000	2,072,000	1,849,000	2,467,000	2,045,000	1,753,000		8,183,026	8,113,908	5,131,546
Income Tax Benefit	371,000	601,000	527,000	567,000	528,000	756,000	568,000	451,000	$ 1,340,384	2,067,099	2,303,168	1,340,384
Net Income	1,344,000	1,745,000	1,523,000	1,505,000	1,321,000	1,711,000	1,477,000	1,302,000		6,115,927	5,810,740	3,791,162
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000		440,000	440,000	440,000
Net Income Available To Common Shareholders	$ 1,234,000	$ 1,635,000	$ 1,413,000	$ 1,395,000	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000		5,675,927	5,370,740	3,351,162
Parent Company [Member]
Income:
Equity in Earnings of Security Federal Bank										506,074	3,779,212	2,558,986
Interest Income										0	0	0
Miscellaneous Income										15,828	12,937	15,771
Total Income										6,521,902	6,192,149	4,174,757
Expenses:
Interest Expense										591,054	587,859	589,988
Other Expenses										18,822	19,382	18,223
Total Expenses										609,876	607,241	608,211
Income Before Income Taxes										5,912,026	5,584,908	3,566,546
Income Tax Benefit										(203,901)	(225,832)	(224,616)
Net Income										6,115,927	5,810,740	3,791,162
Preferred Stock Dividends										440,000	440,000	440,000
Net Income Available To Common Shareholders										$ 5,675,927	$ 5,370,740	$ 3,351,162

XML

Security Federal Corporation Condensed Financial Statements (Parent Company Only) (Condensed Statements of Cash Flow Data) (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Operating Activities:
Net Income	$ 1,344,000	$ 1,745,000	$ 1,523,000	$ 1,505,000	$ 1,321,000	$ 1,711,000	$ 1,477,000	$ 1,302,000	$ 6,115,927	$ 5,810,740	$ 3,791,162
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Stock Compensation Expense									12,676	12,676	(2,580)
Net Cash Provided By Operating Activities									8,986,675	12,200,781	20,361,942
Investing Activities:
Decrease in Loans Receivable									5,472,435	17,578,222	28,739,400
Net Cash Provided By Investing Activities									18,975,116	24,645,287	17,269,471
Financing Activities:
Repayment of Warrant Issued in Conjunction with Preferred Stock									0	0	(50,000)
Dividends Paid to Shareholders-Preferred Stock									(440,000)	(440,000)	(440,000)
Dividends Paid to Shareholders-Common Stock									(942,552)	(942,080)	(942,082)
Net Cash Used By Financing Activities									(29,772,542)	(34,283,137)	(37,905,592)
Net Increase (Decrease) in Cash									(1,810,751)	2,562,931	(274,179)
Cash and Cash Equivalents at Beginning of Year				10,192,702				7,629,771	10,192,702	7,629,771	7,903,950
Cash And Cash Equivalents At End Of Year	8,381,951				10,192,702				8,381,951	10,192,702	7,629,771
Parent Company [Member]
Operating Activities:
Net Income									6,115,927	5,810,740	3,791,162
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Equity in Earnings of Security Federal Bank									(506,074)	(3,779,212)	(2,558,986)
Stock Compensation Expense									12,676	12,676	(2,580)
(Increase) Decrease In Accounts Receivable And Other Assets									825	(49)	(15,248)
Increase in Accounts Payable									1,758	270	132
Net Cash Provided By Operating Activities									5,625,112	2,044,425	1,214,480
Financing Activities:
Dividends Paid to Shareholders-Preferred Stock									(440,000)	(440,000)	(440,000)
Dividends Paid to Shareholders-Common Stock									(942,552)	(942,080)	(942,082)
Net Cash Used By Financing Activities									(1,382,552)	(1,382,080)	(1,432,082)
Net Increase (Decrease) in Cash									4,242,560	662,345	(217,602)
Cash and Cash Equivalents at Beginning of Year				$ 4,542,778				$ 3,880,433	4,542,778	3,880,433	4,098,035
Cash And Cash Equivalents At End Of Year	$ 8,785,338				$ 4,542,778				$ 8,785,338	$ 4,542,778	$ 3,880,433

XML

Carrying Amounts and Fair Value of Financial Instruments (Fair value measurements, recurring basis) (Details) - Fair Value, Measurements, Recurring - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	$ 0
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	375,513,870	$ 429,700,540
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0
FHLB Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
FHLB Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		13,246,661
FHLB Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Federal Farm Credit Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Federal Farm Credit Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		5,667,994
Federal Farm Credit Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
FNMA and FHLMC Bonds | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
FNMA and FHLMC Bonds | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		1,004,381
FNMA and FHLMC Bonds | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
SBA Bonds | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
SBA Bonds | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		108,126,694
SBA Bonds | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Tax Exempt Municipal Bonds | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Tax Exempt Municipal Bonds | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		62,495,423
Tax Exempt Municipal Bonds | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		238,852,713
Equity Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring		306,674
Equity Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	$ 0	$ 0

XML

Carrying Amounts and Fair Value of Financial Instruments (Fair value measurements, nonrecurring basis) (Details) - USD ($)	Dec. 31, 2015		Dec. 31, 2014		Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired financing receivable, related allowance	$ 81,600		$ 475,000		$ 1,102,558
Liabilities, Fair Value Disclosure, Nonrecurring	0
Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	19,389,698		24,867,664
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	2,462,559		1,864,999
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	16,927,139		23,002,665
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	2,462,559		1,864,999
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	2,462,559
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired financing receivable, related allowance	81,600		475,000
Assets, Fair Value Disclosure, Nonrecurring	12,565,728	[1]	19,772,955	[2]
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	[1]	0	[2]
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	[1]	0	[2]
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	12,565,728	[1]	19,772,955	[2]
Foreclosed Assets | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	4,361,411		3,229,710
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 0		0
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring			$ 3,229,710

[1] (1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF

[2] (1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF

XML

Carrying Amounts and Fair Value of Financial Instruments (Significant unobservable inputs used in the fair value measurements) (Details) - Fair Value, Measurements, Nonrecurring - USD ($)	12 Months Ended
	Dec. 31, 2015		Dec. 31, 2014
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 19,389,698		$ 24,867,664
Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 12,565,728	[1]	19,772,955	[2]
Fair Value Measurements, Valuation Techniques	Appraised Value
Significant Unobservable Inputs	Discount Rates/ Discounts to Appraised Values
Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 4,361,411		3,229,710
Fair Value Measurements, Valuation Techniques	Appraised Value/Comparable Sales
Significant Unobservable Inputs	Discount Rates/ Discounts to Appraised Values
Minimum | Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	0.00%
Minimum | Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	13.00%
Maximum | Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	20.00%
Maximum | Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	100.00%
Fair Value, Inputs, Level 3
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 16,927,139		23,002,665
Fair Value, Inputs, Level 3 | Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 12,565,728	[1]	19,772,955	[2]
Fair Value, Inputs, Level 3 | Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring			$ 3,229,710

[1] (1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF

[2] (1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF

XML

Carrying Amounts and Fair Value of Financial Instruments (Summary of the carrying value and estimated fair value of financial instruments) (Details) - USD ($)	Dec. 31, 2015	Dec. 31, 2014
Financial Assets:
Cash And Cash Equivalents	$ 8,382,000	$ 10,193,000
Certificates of Deposits With Other Banks	3,445,000	2,095,000
Investments	405,386,968	429,700,540
Investment And Mortgage-Backed Securities	405,196,000	429,701,000
Loans Receivable, Net	330,572,729	339,874,495
Loans Receivable, Net	327,460,000	340,368,000
Federal Home Loan Bank (FHLB) Stock, At Cost	2,214,800	3,144,600
FHLB Stock	2,215,000	3,145,000
Financial Liabilities:
Checking, Savings, And Money Market Accounts	415,975,000	406,864,000
Time Deposits	236,121,756	253,251,029
Certificate Accounts	235,476,000	253,300,000
Advances from Federal Home Loan Banks	34,640,000	52,900,000
Advances From FHLB	35,676,000	55,646,000
Other Borrowed Money	6,412,000	8,523,000
Subordinated Debt Obligations, Fair Value Disclosure	5,155,000	5,155,000
Senior Convertible Debentures	6,084,000	6,084,000
Fair Value, Inputs, Level 1
Financial Assets:
Cash And Cash Equivalents	8,382,000	10,193,000
Certificates of Deposits With Other Banks	0	0
Investment And Mortgage-Backed Securities	0	0
Loans Receivable, Net	0	0
FHLB Stock	2,215,000	3,145,000
Financial Liabilities:
Checking, Savings, And Money Market Accounts	415,975,000	406,864,000
Certificate Accounts	0	0
Advances From FHLB	0	0
Other Borrowed Money	6,412,000	8,523,000
Subordinated Debt Obligations, Fair Value Disclosure	0	0
Senior Convertible Debentures	0	0
Fair Value, Inputs, Level 2
Financial Assets:
Cash And Cash Equivalents	0	0
Certificates of Deposits With Other Banks	3,445,000	2,095,000
Investment And Mortgage-Backed Securities	405,196,000	429,701,000
Loans Receivable, Net	0	0
FHLB Stock	0	0
Financial Liabilities:
Checking, Savings, And Money Market Accounts	0	0
Certificate Accounts	235,476,000	253,300,000
Advances From FHLB	35,676,000	55,646,000
Other Borrowed Money	0	0
Subordinated Debt Obligations, Fair Value Disclosure	5,155,000	5,155,000
Senior Convertible Debentures	6,084,000	6,084,000
Fair Value, Inputs, Level 3
Financial Assets:
Cash And Cash Equivalents	0	0
Certificates of Deposits With Other Banks	0	0
Investment And Mortgage-Backed Securities	0	0
Loans Receivable, Net	327,460,000	340,368,000
FHLB Stock	0	0
Financial Liabilities:
Checking, Savings, And Money Market Accounts	0	0
Certificate Accounts	0	0
Advances From FHLB	0	0
Other Borrowed Money	0	0
Subordinated Debt Obligations, Fair Value Disclosure	0	0
Senior Convertible Debentures	$ 0	$ 0

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Carrying Amounts and Fair Value of Financial Instruments (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Investor funding period	30 days
Review period to request a new third party appraisal	24 months
Impaired financing receivable, recorded investment	$ 12,647,328	$ 20,247,955	$ 31,354,814
Impaired financing receivable, average recorded investment	13,122,468	$ 22,211,689	$ 33,574,855
Liabilities, fair value disclosure, recurring	0
Fair value disclosure, off-balance sheet risks, amount, liability	$ 52,100,000

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Quarterly Financial Data (Unaudited) (Details) - USD ($)	3 Months Ended								9 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Quarterly Financial Information Disclosure [Abstract]
Interest Income	$ 6,983,000	$ 6,908,000	$ 7,066,000	$ 6,949,000	$ 7,263,000	$ 7,389,000	$ 7,637,000	$ 7,193,000		$ 27,905,752	$ 29,482,164	$ 30,447,367
Interest Expense	957,000	1,001,000	1,068,000	1,173,000	1,370,000	1,385,000	1,507,000	1,550,000		4,199,179	5,813,056	7,532,936
Net Interest Income	6,026,000	5,907,000	5,998,000	5,776,000	5,893,000	6,004,000	6,130,000	5,643,000		23,706,573	23,669,108	22,914,431
Provision For Loan Losses	100,000	(200,000)	0	100,000	250,000	0	100,000	100,000			450,000	2,645,381
Net Interest Income After Provision For Loan Losses	5,926,000	6,107,000	5,998,000	5,676,000	5,643,000	6,004,000	6,030,000	5,543,000		23,706,573	23,219,108	20,269,050
Non-Interest Income	1,600,000	1,369,000	1,387,000	2,651,000	1,808,000	1,486,000	1,332,000	1,536,000		7,007,249	6,162,783	6,895,804
Non-interest Expense	5,811,000	5,130,000	5,335,000	6,255,000	5,602,000	5,023,000	5,317,000	5,326,000		22,530,796	21,267,983	22,033,308
Income Before Income Taxes	1,715,000	2,346,000	2,050,000	2,072,000	1,849,000	2,467,000	2,045,000	1,753,000		8,183,026	8,113,908	5,131,546
Provision For Income Taxes	371,000	601,000	527,000	567,000	528,000	756,000	568,000	451,000	$ 1,340,384	2,067,099	2,303,168	1,340,384
Net Income	1,344,000	1,745,000	1,523,000	1,505,000	1,321,000	1,711,000	1,477,000	1,302,000		6,115,927	5,810,740	3,791,162
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000		440,000	440,000	440,000
Net Income Available To Common Shareholders	$ 1,234,000	$ 1,635,000	$ 1,413,000	$ 1,395,000	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000		$ 5,675,927	$ 5,370,740	$ 3,351,162
Net Income Per Common Share (Basic)	$ 0.42	$ 0.56	$ 0.48	$ 0.47	$ 0.41	$ 0.54	$ 0.46	$ 0.41		$ 1.93	$ 1.82	$ 1.14
Net Income Per Common Share (Diluted)	$ 0.40	$ 0.53	$ 0.46	$ 0.45	$ 0.40	$ 0.52	$ 0.44	$ 0.39		$ 1.84	$ 1.75	$ 1.12
Weighted Average Shares Outstanding (Basic)	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001		2,944,001	2,944,001	2,944,001
Weighted Average Shares Outstanding (Diluted)	3,248,415	3,248,361	3,248,249	3,248,230	3,248,201	3,248,201	3,248,201	3,248,201		3,248,312	3,248,201	3,248,201

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Subsequent Events Securities Sold Subsequent Event Disclosures (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Subsequent Event [Line Items]
Subsequent Event, Description		$ 787,851	$ 178,067	$ 589,023
Gain on Sale of Investment Securities		1,886,081	436,871	1,325,823
Repayments of Federal Home Loan Bank Borrowings		15,000,000	5,000,000	30,000,000
Gains (Losses) on Sales of Other Real Estate		$ 227,053	$ 303,440	$ 101,645
Subsequent Event [Member]
Subsequent Event [Line Items]
Gains (Losses) on Sales of Other Real Estate	$ 739,000