Regulatory Matters

9 Months Ended

Sep. 30, 2017

Banking and Thrift [Abstract]

Regulatory Matters

Regulatory Matters

The Bank, as a state-chartered, federally insured savings 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 weighting and other factors.

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 September 30, 2017, it would have exceeded all regulatory capital requirements.

9. Regulatory Matters, Continued

Based on its capital levels at September 30, 2017, the Bank exceeded all regulatory capital requirements as of that date. Consistent with the Bank's goals to operate a sound and profitable organization, it is the Bank's policy to maintain a "well-capitalized" status under the regulatory capital categories of the FDIC. Based on capital levels at September 30, 2017, the Bank was considered to be "well-capitalized" under applicable regulatory requirements. Management monitors the capital levels to provide for current and future business opportunities and to maintain the Bank's "well-capitalized" status. 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"
(Dollars in Thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
SECURITY FEDERAL CORP.	September 30, 2017
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	77,970	15.5%	$	30,227	6.0%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	84,289		16.7%	40,303		8.0%	N/A		N/A
Common Equity Tier 1 Capital (To Risk Weighted Assets)	72,970		14.5%	22,670		4.5%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	77,970		9.1%	34,398		4.0%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	88,802	17.6%	$	30,218	6.0%	$	40,290	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	95,121		18.9%	40,290		8.0%	50,363		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	88,802		17.6%	22,663		4.5%	32,736		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	88,802		10.3%	34,393		4.0%	42,992		5.0%
SECURITY FEDERAL CORP.	December 31, 2016
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	73,787	16.6%	$	26,714	6.0%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	79,383		17.8%	35,618		8.0%	N/A		N/A
Common Equity Tier 1 Capital (To Risk Weighted Assets)	68,787		15.4%	20,035		4.5%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	73,787		9.1%	32,548		4.0%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	88,139	19.8%	$	26,694	6.0%	$	35,592	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	93,735		21.1%	35,592		8.0%	44,490		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	88,139		19.8%	20,021		4.5%	28,919		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	88,139		10.8%	32,587		4.0%	40,734		5.0%

9. Regulatory Matters, Continued

In addition to the minimum common equity Tier 1 ("CET1"), Tier 1 and total capital ratios, the Bank now has to maintain a capital conservation buffer consisting of additional CET1 capital 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 retained income that could be utilized for such actions. The new capital conservation buffer requirement began to be phased in beginning in January 2016 at 0.625% of risk-weighted assets and increases each year until fully implemented to an amount equal to 2.5% of risk weighted assets in January 2019. At September 30, 2017 the Bank’s CET1 capital exceeded the required capital conservation buffer of 1.25%.