Regulatory Matters

6 Months Ended

Jun. 30, 2016

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.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 capital (as defined in the regulations) to total average assets (as defined), and minimum ratios of Tier 1 total capital (as defined) and common equity Tier 1 (“CET1”) capital to risk-weighted assets (as defined).

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 began to be phased in starting in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019.

The Company 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. 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 June 30, 2016, it would have exceeded all regulatory capital requirements.

9. Regulatory Matters, Continued

As of June 30, 2016, the Bank and the Company exceeded all regulatory capital requirements and the Bank was considered “well capitalized” under regulatory capital guidelines of the FDIC. The following tables provide the Company’s and the Bank’s regulatory capital requirements and actual results at the dates indicated below:

	Actual				For Capital Adequacy				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
June 30, 2016
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	88,132	21.6	%	$	24,486	6.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	98,249		24.1	%	32,648		8.0	%	N/A		N/A
Common Equity Tier 1 Capital (To Risk Weighted Assets)	66,099		16.2	%	18,365		4.5	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	88,132		10.9	%	32,247		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	88,209	21.6	%	$	24,523	6.0	%	$	32,698	8.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	93,359		22.8	%	32,698		8.0	%	40,872		10.0	%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	88,209		21.6	%	18,393		4.5	%	26,567		6.5	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	88,209		10.9	%	32,238		4.0	%	40,297		5.0	%
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	%