10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10 – Q

(Mark one)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD:

FROM: TO:

COMMISSION FILE NUMBER: 000-16120

SECURITY FEDERAL CORPORATION

(Exact name of registrant as specified in its charter)

South Carolina	57-0858504
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

238 RICHLAND AVENUE NORTHWEST, AIKEN, SOUTH CAROLINA 29801

(Address of principal executive office and Zip Code)

(803) 641-3000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filed    [ ]	Smaller reporting company [ X ]
Non-accelerated filer    [ X ]	Emerging growth company [ ]
Accelerated filer [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

YES NO

Indicate by check mark whether the registrant is a shell corporation (defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Securities registered pursuant to Section 12(b) of the Act: None

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

CLASS:	OUTSTANDING SHARES AT:	SHARES:
Common Stock, par value $0.01 per share	August 13, 2019	2,955,925

PART I.	FINANCIAL INFORMATION (UNAUDITED)	PAGE NO.
Item 1.	Financial Statements (unaudited):	3
	Consolidated Balance Sheets at June 30, 2019 and December 31, 2018	3
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018	4
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2019 and 2018	5
	Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2019 and 2018	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	7
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	47
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	48
	Signatures	50

SCHEDULES OMITTED

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

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Part 1. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets

	June 30, 2019			December 31, 2018
	(Unaudited)			(Audited)
ASSETS:
Cash and Cash Equivalents	$	11,019,027		$	12,705,910
Certificates of Deposit with Other Banks	950,005			1,200,010
Investment and Mortgage-Backed Securities:
Available For Sale ("AFS")	434,193,401			386,255,837
Held To Maturity ("HTM") (Fair Value of $22,869,540 and $23,249,400 at June 30, 2019 and December 31, 2018, Respectively)	22,513,877			23,638,013
Total Investments and Mortgage-Backed Securities	456,707,278			409,893,850
Loans Receivable, Net:
Held For Sale	3,750,815			1,781,985
Held For Investment (Net of Allowance of $8,753,539 and $9,171,717 at June 30, 2019 and December 31, 2018, Respectively)	437,824,853			428,271,532
Total Loans Receivable, Net	441,575,668			430,053,517
Accrued Interest Receivable:
Loans	1,208,960			1,257,683
Mortgage-Backed Securities	608,127			591,849
Investment Securities	1,768,256			1,877,844
Total Accrued Interest Receivable	3,585,343			3,727,376
Operating Lease Right-of-Use Assets	2,901,753			—
Premises and Equipment, Net	25,505,350			24,174,707
Federal Home Loan Bank ("FHLB") Stock, at Cost	3,401,200			2,204,000
Other Real Estate Owned ("OREO")	734,140			722,442
Bank Owned Life Insurance ("BOLI")	21,507,893			21,237,893
Goodwill	1,199,754			1,199,754
Other Assets	4,325,166			5,494,800
Total Assets	$	973,412,577		$	912,614,259
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Deposit Accounts	$	786,448,829		$	767,496,707
Advance Payments By Borrowers for Taxes and Insurance	529,875			258,505
Advances From FHLB	60,700,000			34,030,000
Other Borrowings	15,753,586			10,698,429
Note Payable	—			2,362,500
Junior Subordinated Debentures	5,155,000			5,155,000
Senior Convertible Debentures	6,044,000			6,064,000
Operating Lease Liabilities	2,909,137			—
Other Liabilities	6,735,520			6,030,685
Total Liabilities	$	884,275,947		$	832,095,826
Shareholders' Equity:
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued and Outstanding Shares, 3,156,858 and 2,955,925, Respectively, at June 30, 2019 and 3,154,829 and 2,953,896, Respectively, at December 31, 2018	$	31,569		$	31,548
Additional Paid-In Capital	12,282,115			12,235,341
Treasury Stock, at Cost (200,933 Shares)	(4,330,712		)	(4,330,712		)
Accumulated Other Comprehensive Income (Loss) ("AOCI")	5,102,605			(27,909		)
Retained Earnings	76,051,053			72,610,165
Total Shareholders' Equity	$	89,136,630		$	80,518,433
Total Liabilities and Shareholders' Equity	$	973,412,577		$	912,614,259

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

3

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Interest Income:
Loans	$	6,046,834		$	5,685,638		$	12,050,336		$	11,075,125
Mortgage-Backed Securities	1,621,616			1,276,967			3,170,738			2,592,387
Investment Securities	1,434,119			1,057,234			2,848,112			2,117,900
Other	25,832			8,908			90,037			17,156
Total Interest Income	9,128,401			8,028,747			18,159,223			15,802,568
Interest Expense:
NOW and Money Market Accounts	570,965			262,005			1,056,438			449,210
Savings Accounts	18,868			12,747			35,194			24,300
Certificate Accounts	1,064,133			612,197			1,976,793			1,149,758
FHLB Advances and Other Borrowed Money	167,050			164,848			324,160			355,870
Note Payable	11,738			62,263			35,515			138,934
Senior Convertible Debentures	120,880			121,280			241,760			242,560
Junior Subordinated Debentures	55,771			50,331			113,181			94,016
Total Interest Expense	2,009,405			1,285,671			3,783,041			2,454,648
Net Interest Income	7,118,996			6,743,076			14,376,182			13,347,920
Provision For Loan Losses	—			—			100,000			—
Net Interest Income After Provision For Loan Losses	7,118,996			6,743,076			14,276,182			13,347,920
Non-Interest Income:
Gain on Sale of Investment Securities	670,134			—			960,902			436,304
Gain on Sale of Loans	372,048			367,646			546,331			653,649
Service Fees on Deposit Accounts	254,610			250,493			506,627			507,672
Commissions From Insurance Agency	175,693			149,111			326,993			328,336
Trust Income	258,600			243,500			517,200			476,000
BOLI Income	135,000			135,000			270,000			270,000
Check Card Fee Income	355,321			338,611			697,655			645,657
Grant Income	17,414			—			277,029			—
Other	253,741			260,185			585,656			470,948
Total Non-Interest Income	2,492,561			1,744,546			4,688,393			3,788,566
Non-Interest Expense:
Compensation and Employee Benefits	4,137,872			3,842,295			8,316,906			7,651,419
Occupancy	576,987			540,175			1,129,220			1,091,443
Advertising	176,480			85,418			349,164			274,090
Depreciation and Maintenance of Equipment	639,840			557,423			1,250,197			1,097,720
Federal Deposit Insurance Corporation ("FDIC") Insurance Premiums	69,306			66,595			142,482			133,381
Net Recovery of OREO Operation	(160,033		)	(198,493		)	(252,147		)	(159,760		)
Other	1,800,656			1,346,846			3,049,801			2,670,912
Total Non-Interest Expense	7,241,108			6,240,259			13,985,623			12,759,205
Income Before Income Taxes	2,370,449			2,247,363			4,978,952			4,377,281
Provision For Income Taxes	486,418			427,409			1,006,048			827,210
Net Income	1,884,031			1,819,954			3,972,904			3,550,071
Net Income Per Common Share (Basic)	$	0.64		$	0.62		$	1.34		$	1.20
Net Income Per Common Share (Diluted)	$	0.61		$	0.59		$	1.28		$	1.15
Cash Dividend Per Share on Common Stock	$	0.09		$	0.09		$	0.18		$	0.18
Weighted Average Shares Outstanding (Basic)	2,955,650			2,953,412			2,955,086			2,953,297
Weighted Average Shares Outstanding (Diluted)	3,257,850			3,257,017			3,257,286			3,256,929

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

4

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

	Three Months Ended June 30,
	2019			2018
Net Income	$	1,884,031		$	1,819,954
Other Comprehensive Income (Loss)
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gains (Losses) on Securities AFS, Net of Taxes of $921,187 and $(289,726) at June 30, 2019 and 2018, Respectively	2,820,989			(884,515		)
Reclassification Adjustment for Gains Included in Net Income, Net of Taxes of $167,534 at June 30, 2019	(502,600		)	—
Amortization of Unrealized Gains on AFS Securities Transferred to HTM, Net of Taxes of $(1,931) and $(6,854) at June 30, 2019 and 2018, Respectively	(5,792		)	(20,562		)
Other Comprehensive Income (Loss), Net of Tax	2,312,597			(905,077		)
Comprehensive Income	$	4,196,628		$	914,877

	Six Months Ended June 30,
	2019			2018
Net Income	$	3,972,904		$	3,550,071
Other Comprehensive Income (Loss)
Unrealized Gains (Losses) on Securities:
Unrealized Holding Gains (Losses) on Securities AFS Net of Taxes of $1,920,184 and $(1,186,283) at June 30, 2019 and 2018, Respectively	5,867,006			(3,627,413		)
Reclassification Adjustment for Gains Included in Net Income, Net of Taxes of $240,226 and $109,076 at June 30, 2019 and 2018, Respectively	(720,676		)	(327,228		)
Amortization of Unrealized Gains on AFS Securities Transferred to HTM, Net of Taxes of $(5,272) and $(17,719) at June 30, 2019 and 2018, Respectively	(15,816		)	(46,240		)
Other Comprehensive Income (Loss)	5,130,514			(4,000,881		)
Comprehensive Income (Loss)	$	9,103,418		$	(450,810	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

5

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity (Unaudited)

For the Six Months Ended June 30,2019 and 2018

	Common Stock		Additional Paid – In Capital		Treasury Stock			AOCI			Retained Earnings			Total
Balance at December 31, 2017	$	31,539	$	12,212,844	$	(4,330,712	)	$	2,932,122		$	67,077,661		$	77,923,454
Net Income	—		—		—			—			1,730,117			1,730,117
Other Comprehensive Loss, Net of Tax	—		—		—			(3,095,804		)	—			(3,095,804		)
Reclassification of stranded tax effects from AOCI to Retained Earnings	—		—		—			611,091			(611,091		)	—
Stock Options Exercised	4		8,015		—			—			—			8,019
Cash Dividends on Common Stock											(265,889		)	(265,889		)
Balance at March 31, 2018	$	31,543	$	12,220,859	$	(4,330,712	)	$	447,409		$	67,930,798		$	76,299,897
Net Income	—		—		—			—			1,819,954			1,819,954
Other Comprehensive Loss, Net of Tax	—		—		—			(905,077		)	—			(905,077		)
Stock Options Exercised	1		2,290		—			—			—			2,291
Cash Dividends on Common Stock	—		—		—			—			(265,898		)	(265,898		)
Balance at June 30, 2018	$	31,544	$	12,223,149	$	(4,330,712	)	$	(457,668	)	$	69,484,854		$	76,951,167

	Common Stock		Additional Paid – In Capital		Treasury Stock			AOCI			Retained Earnings			Total
Balance at December 31, 2018	$	31,548	$	12,235,341	$	(4,330,712	)	$	(27,909	)	$	72,610,165		$	80,518,433
Net Income	—		—		—			—			2,088,873			2,088,873
Other Comprehensive Income, Net of Tax	—		—		—			2,817,917			—			2,817,917
Employee Stock Purchases	5		12,004		—			—			—			12,009
Redemption of Convertible Debentures	10		19,990		—			—			—			20,000
Cash Dividends on Common Stock	—		—		—			—			(265,982		)	(265,982		)
Balance at March 31, 2019	$	31,563	$	12,267,335	$	(4,330,712	)	$	2,790,008		$	74,433,056		$	85,191,250
Net Income	—		—		—			—			1,884,031			1,884,031
Other Comprehensive Loss, Net of Tax	—		—		—			2,312,597			—			2,312,597
Employee Stock Purchases	6		14,780		—			—			—			14,786
Cash Dividends on Common Stock	—		—		—			—			(266,034		)	(266,034		)
Balance at June 30, 2019	$	31,569	$	12,282,115	$	(4,330,712	)	$	5,102,605		$	76,051,053		$	89,136,630

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

6

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	3,972,904		$	3,550,071
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Depreciation Expense	781,982			704,130
Discount Accretion and Premium Amortization	2,636,812			2,917,979
Provision for Loan Losses	100,000			—
Earnings on BOLI	(270,000		)	(270,000		)
Gain on Sales of Loans	(546,331		)	(653,649		)
Gain on Sales of Mortgage-Backed Securities ("MBS")	(2,459		)	(181,034		)
Gain on Sales of Investment Securities	(958,443		)	(255,270		)
Gain on Sales of OREO	(137,274		)	(307,316		)
Write Down on OREO	14,000			50,000
Amortization of Operating Lease Right-of-Use Assets	188,759			—
Amortization of Deferred Loan Costs	89,585			39,554
Proceeds From Sale of Loans Held For Sale	19,548,315			24,602,224
Origination of Loans Held For Sale	(20,970,814		)	(23,426,657		)
Decrease (Increase) in Accrued Interest Receivable:
Loans	48,723			13,235
MBS	(16,278		)	44,299
Investment Securities	109,588			(11,590		)
Increase in Advance Payments By Borrowers	271,370			294,178
Decrease in Other, Net	(2,678		)	(340,203		)
Net Cash Provided By Operating Activities	$	4,857,761		$	6,769,951
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of MBS AFS	$	(71,340,833	)	$	(21,859,860	)
Proceeds from Payments and Maturities of MBS AFS	16,427,795			18,844,610
Proceeds from Sale of MBS AFS	26,770,329			17,007,024
Proceeds from Payments and Maturities of MBS Held To Maturity ("HTM")	1,020,431			1,564,802
Purchase of Investment Securities AFS	(67,023,891		)	(27,418,272		)
Proceeds from Payments and Maturities of Investment Securities AFS	17,308,244			16,336,240
Proceeds from Sale of Investment Securities AFS	35,174,873			11,563,456
Proceeds from Payments and Maturities of Investment Securities HTM	—			2,000,000
Proceeds from Redemption of Certificates of Deposits with Other Banks	250,005			—
Purchase of FHLB Stock	(4,517,900		)	(4,080,600		)
Redemption of FHLB Stock	3,320,700			4,512,200
Purchase of BOLI	—			(1,900,000		)
Increase in Loans Receivable	(10,545,706		)	(40,310,177		)
Proceeds From Sale of OREO	914,376			599,434
Purchase and Improvement of Premises and Equipment	(2,112,625		)	(884,239		)
Net Cash Used By Investing Activities	$	(54,354,202	)	$	(24,025,382	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Deposit Accounts	$	18,952,122		$	36,399,604
Proceeds from FHLB Advances	143,080,000			150,778,000
Repayment of FHLB Advances	(116,410,000		)	(162,023,000		)
Increase in Other Borrowings, Net	5,055,157			2,829,389
Repayment of Note Payable	(2,362,500		)	(3,400,000		)
Proceeds from Employee Stock Options Exercised	—			10,310
Proceeds from Employee Stock Purchases	26,795			—
Dividends to Common Stock Shareholders	(532,016		)	(531,787		)
Net Cash Provided By Financing Activities	$	47,809,558		$	24,062,516
Net (Decrease) Increase in Cash and Cash Equivalents	(1,686,883		)	6,807,085
Cash and Cash Equivalents at Beginning of Period	12,705,910			10,319,624
Cash and Cash Equivalents at End of Period	$	11,019,027		$	17,126,709

7

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited) (Continued)
	Six Months Ended June 30,
	2019		2018
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest	$	3,531,407	$	2,450,522
Cash Paid for Income Taxes	$	746,541	$	422,273
Non-Cash Transactions:
Initial Recognition of Operating Lease Right-of-Use Assets	$	3,090,512	$	—
Initial Recognition of Operating Lease Liabilities	$	3,090,512	$	—
Transfers From Loans Receivable to OREO	$	802,800	$	315,550
Other Comprehensive Income (Loss)	$	5,130,514	$	(4,000,881	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

8

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and accounting principles generally accepted in the United States of America ("GAAP"); therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows.  Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods.  Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the audited consolidated financial statements appearing in Security Federal Corporation’s (the “Company”) 2018 Annual Report to Shareholders which was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”) when reviewing interim financial statements. The unaudited consolidated results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

2. Principles of Consolidation

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

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

3. Critical Accounting Policies

The Company has adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements.  Our significant accounting policies are described in the footnotes to the audited consolidated financial statements at December 31, 2018 included in our 2018 Annual Report to Shareholders.  Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities, and, as such, have a greater possibility of producing results that could be materially different than originally reported.  We consider these accounting policies to be critical accounting policies.  The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances.  Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

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

9

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

3. Critical Accounting Policies, Continued

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

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

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

4. Earnings Per Share

Accounting guidance specifies the computation, presentation and disclosure requirements for earnings per share (“EPS”) for entities with publicly held common stock or potential common stock such as options, warrants, convertible securities or contingent stock agreements if those securities trade in a public market. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding.  Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive common shares had been issued.  The dilutive effect of options outstanding under the Company’s stock option plan is reflected in diluted EPS by application of the treasury stock method. There were no stock options outstanding at June 30, 2019. All of the options outstanding at June 30, 2018 had an exercise price below the average market price during the six months ended June 30, 2018. Therefore, these options were considered to be dilutive to EPS in that period. Diluted EPS also assumes the convertible debentures were converted into 302,200 and 303,200 shares of common stock at the beginning of both the three and six month periods ended June 30, 2019 and 2018, respectively. The related interest expense recorded during the period is added back to the EPS numerator while the underlying shares are added to the denominator.

The following tables include a summary of the Company's basic and diluted EPS for the periods indicated.

10

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

	Three Months Ended June 30,
	2019						2018
	Income		Shares	Per Share Amounts			Income		Shares	Per Share Amounts
Basic EPS	$	1,884,031	2,955,650	$	0.64		$	1,819,954	2,953,412	$	0.62
Effect of Dilutive Securities:
Stock Options	—		—	—			—		405	—
Senior Convertible Debentures	90,660		302,200	(0.03		)	90,960		303,200	(0.03)
Diluted EPS	$	1,974,691	3,257,850	$	0.61		$	1,910,914	3,257,017	$	0.59

	Six Months Ended June 30,
	2019					2018
	Income		Shares	Per Share Amounts		Income		Shares	Per Share Amounts
Basic EPS	$	3,972,904	2,955,086	$	1.34	$	3,550,071	2,953,297	$	1.20
Effect of Dilutive Securities:
Stock Options	—		—	—		—		432	—
Senior Convertible Debentures	181,320		302,200	(0.06)		181,920		303,200	(0.05)
Diluted EPS	$	4,154,224	3,257,286	$	1.28	$	3,731,991	3,256,929	$	1.15

5. Stock-Based Compensation

Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Options are granted at exercise prices not less than the fair value of the Company’s common stock on the date of the grant. At June 30, 2019, the Company had no remaining options outstanding and there was no activity during the six months ended June 30, 2019.

The following is a summary of the activity under the Company’s stock option plans for the three and six months ended June 30, 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018				2018
	Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Balance, Beginning of Period	4,150		$	22.91	4,500	$	22.91
Options Exercised	(100	)	22.91		(450)	22.91
Options Forfeited	(2,400	)	22.91		(2,400)	22.91
Balance, End of Period	1,650		$	22.91	1,650	$	22.91
Options Exercisable	1,650				1,650
Options Available For Grant	50,000				50,000

11

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of investment and mortgage-backed securities available for sale at the dates indicated were as follows:

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	42,103,107	$	238	$	300,679	$	41,802,666
Small Business Administration (“SBA”) Bonds	127,569,964		819,719		526,779		127,862,904
Tax Exempt Municipal Bonds	43,719,725		3,209,011		1,659		46,927,077
Taxable Municipal Bonds	994,317		40,013		—		1,034,330
Mortgage-Backed Securities	212,865,678		3,888,596		342,850		216,411,424
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	427,407,791	$	7,957,577	$	1,171,967	$	434,193,401
	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	12,934,037	$	20,713	$	69,249	$	12,885,501
SBA Bonds	125,777,016		560,352		890,837		125,446,531
Tax Exempt Municipal Bonds	60,141,164		1,518,974		329,769		61,330,369
Taxable Municipal Bonds	1,998,258		3,546		23,919		1,977,885
Mortgage-Backed Securities	185,291,038		1,073,432		1,903,919		184,460,551
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	386,296,513	$	3,177,017	$	3,217,693	$	386,255,837

Student Loan Pools are typically 97% guaranteed by the United States government while SBA bonds are 100% backed by the full faith and credit of the United States government. Included in the tables above and below in mortgage-backed securities are Government National Mortgage Association ("GNMA") mortgage-backed securities, which are also backed by the full faith and credit of the United States government.  At June 30, 2019, AFS GNMA mortgage-backed securities had an amortized cost and fair value of $88.4 million and $89.3 million, respectively, compared to an amortized cost and fair value of $80.4 million and $80.2 million, respectively, at December 31, 2018.

Also included in mortgage-backed securities in the tables above and below are private label collateralized mortgage obligation ("CMO") securities, which are issued by non-governmental real estate mortgage investment conduits and are not backed by the full faith and credit of the United States government.  At June 30, 2019 the Bank held AFS private label CMO mortgage-backed securities with an amortized cost and fair value of $27.5 million and $27.8 million, respectively, compared to an amortized cost and fair value of $29.7 million and $29.5 million, respectively, at December 31, 2018.

12

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

The amortized cost and fair value of investment and mortgage-backed securities available for sale at June 30, 2019 are shown below by contractual maturity.  Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties. Since mortgage-backed securities are not due at a single maturity date, they are disclosed separately, rather than allocated over the maturity groupings set forth in the table below.

	June 30, 2019
Investment Securities:	Amortized Cost		Fair Value
One Year or Less	$	557,354	$	557,305
After One – Five Years	7,115,134		7,184,250
After Five – Ten Years	53,034,809		53,245,373
More Than Ten Years	153,834,816		156,795,049
Mortgage-Backed Securities	212,865,678		216,411,424
Total Available For Sale	$	427,407,791	$	434,193,401

At June 30, 2019 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 $149.0 million and $150.9 million, respectively, compared to an amortized cost and fair value of $111.8 million and $111.7 million, respectively, at December 31, 2018.

The Company received $61.9 million and $28.6 million in gross proceeds from sales of available for sale securities during the six months ended June 30, 2019 and 2018, respectively. As a result, the Company recognized gross gains of $1.2 million and $503,000 during the six months ended June 30, 2019 and 2018, respectively, with $283,000 and $67,000 gross losses recognized for the same periods, respectively.

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

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	32,833,351	$	267,097	$	2,025,945	$	33,582	$	34,859,296	$	300,679
SBA Bonds	5,500,585		35,593		54,691,034		491,186		60,191,619		526,779
Tax Exempt Municipal Bonds	—		—		1,145,730		1,659		1,145,730		1,659
Mortgage-Backed Securities	22,979,022		142,857		22,160,286		199,993		45,139,308		342,850
	$	61,312,958	$	445,547	$	80,022,995	$	726,420	$	141,335,953	$	1,171,967

	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	8,384,145	$	69,249	$	—	$	—	$	8,384,145	$	69,249
SBA Bonds	59,496,936		479,955		25,054,861		410,882		84,551,797		890,837
Tax Exempt Municipal Bonds	4,585,849		91,281		9,626,613		238,488		14,212,462		329,769
Taxable Municipal Bond	—		—		980,520		23,919		980,520		23,919
Mortgage-Backed Securities	38,168,598		249,050		81,947,249		1,654,869		120,115,847		1,903,919
	$	110,635,528	$	889,535	$	117,609,243	$	2,328,158	$	228,244,771	$	3,217,693

13

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

Securities classified as available for sale are recorded at fair market value.  At June 30, 2019 and December 31, 2018, 62.0% and 72.4% of the unrealized losses, representing 73 and 92 individual securities, respectively, consisted of securities in a continuous loss position for 12 months or more. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature.  The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”).

Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value. If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or the Company may recognize a portion in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment. There was no OTTI recognized during the six months ended June 30, 2019.

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

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of held to maturity securities at the dates indicated below were as follows:

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Federal Home Loan Mortgage Corporation ("FHLMC") Bond	$	998,764	$	1,565	$	—	$	1,000,329
Mortgage-Backed Securities (1)	21,515,113		385,464		31,366		21,869,211
Total Held To Maturity	$	22,513,877	$	387,029	$	31,366	$	22,869,540
	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
FHLMC Bond	$	998,541	$	—	$	20,564	$	977,977
Mortgage-Backed Securities (1)	22,639,472		78,281		446,330		22,271,423
Total Held To Maturity	$	23,638,013	$	78,281	$	466,894	$	23,249,400

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

The FHLB, FHLMC and the Federal National Mortgage Association ("FNMA") are government sponsored enterprises ("GSEs") and the securities and bonds issued by GSEs are not backed by the full faith and credit of the United States government.  At June 30, 2019, the Bank held an amortized cost and fair value of $12.5 million and $12.8 million, respectively, in GNMA mortgage-backed securities classified as held to maturity, which are included in the table above, compared to an amortized cost and fair value of $13.3 million and $13.1 million, respectively, at December 31, 2018. The Company has not invested in any private label mortgage-backed securities classified as held to maturity.

At June 30, 2019, the amortized cost and fair value of mortgage-backed securities held to maturity that were pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $18.7 million and $19.0 million, respectively, compared to an amortized cost and fair value of $19.8 million and $19.4 million, respectively, at December 31, 2018.

14

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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

The amortized cost and fair value of investment and mortgage-backed securities held to maturity at June 30, 2019 are shown below by contractual maturity.  Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties. Since mortgage-backed securities are not due at a single maturity date, they are disclosed separately, rather than allocated over the maturity groupings set forth in the table below.

	June 30, 2019
Investment Securities HTM:	Amortized Cost		Fair Value
One – Five Years	$	998,764	$	1,000,329
Mortgage-Backed Securities	21,515,113		21,869,211
Total Held to Maturity	$	22,513,877	$	22,869,540

The following tables show gross unrealized losses, fair value, and length of time that individual held to maturity securities have been in a continuous unrealized loss position at the dates indicated below.

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-Backed Securities (1)	$	—	$	—	$	4,802,482	$	31,366	$	4,802,482	$	31,366
	$	—	$	—	$	4,802,482	$	31,366	$	4,802,482	$	31,366

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

	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLMC Bond	$	—	$	—	$	977,977	$	20,564	$	977,977	$	20,564
Mortgage-Backed Securities (1)	—		—		16,855,973		446,330		16,855,973		446,330
	$	—	$	—	$	17,833,950	$	466,894	$	17,833,950	$	466,894

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

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

15

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.    Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates indicated below:

	June 30, 2019		December 31, 2018
Residential Real Estate Loans	$	86,342,461	$	83,965,416
Consumer Loans	55,487,981		56,907,555
Commercial Business Loans	28,644,611		28,086,686
Commercial Real Estate Loans	284,436,448		275,960,438
Total Loans Held For Investment	454,911,501		444,920,095
Loans Held For Sale	3,750,815		1,781,985
Total Loans Receivable, Gross	$	458,662,316	$	446,702,080
Less:
Allowance For Loan Losses	8,753,539		9,171,717
Loans in Process	7,976,939		7,225,271
Deferred Loan Fees	356,170		251,575
	17,086,648		16,648,563
Total Loans Receivable, Net	$	441,575,668	$	430,053,517

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

The tables below summarize the balance within each risk category by loan type, excluding loans held for sale, at June 30, 2019 and December 31, 2018.

June 30, 2019	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	77,215,699	$	4,408,390	$	1,258,332	$	3,460,040	$	86,342,461
Consumer	45,116,336		8,043,951		476,096		1,851,598		55,487,981
Commercial Business	22,838,747		5,210,616		329,530		265,718		28,644,611
Commercial Real Estate	211,766,521		51,632,311		16,617,403		4,420,213		284,436,448
Total	$	356,937,303	$	69,295,268	$	18,681,361	$	9,997,569	$	454,911,501

December 31, 2018	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	75,558,544	$	3,369,776	$	958,354	$	4,078,742	$	83,965,416
Consumer	46,948,251		6,899,912		567,682		2,491,710		56,907,555
Commercial Business	22,670,318		4,708,036		339,533		368,799		28,086,686
Commercial Real Estate	204,197,354		45,653,796		18,492,785		7,616,503		275,960,438
Total	$	349,374,467	$	60,631,520	$	20,358,354	$	14,555,754	$	444,920,095

16

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.    Loans Receivable, Net, Continued

The following tables present an age analysis of past due balances, including loans on non-accrual status, by category at June 30, 2019 and December 31, 2018:

	June 30, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential Real Estate	$	317,819	$	—	$	55,844	$	373,663	$	85,968,798	$	86,342,461
Consumer	346,110		170,596		44,051		560,757		54,927,224		55,487,981
Commercial Business	60,945		35,448		42,968		139,361		28,505,250		28,644,611
Commercial Real Estate	1,576,388		16,509		2,071,736		3,664,633		280,771,815		284,436,448
Total	$	2,301,262	$	222,553	$	2,214,599	$	4,738,414	$	450,173,087	$	454,911,501

	December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential Real Estate	$	—	$	332,000	$	497,713	$	829,713	$	83,135,703	$	83,965,416
Consumer	555,798		247,894		1,120,462		1,924,154		54,983,401		56,907,555
Commercial Business	205,613		106,163		18,648		330,424		27,756,262		28,086,686
Commercial Real Estate	1,556,863		424,103		1,634,770		3,615,736		272,344,702		275,960,438
Total	$	2,318,274	$	1,110,160	$	3,271,593	$	6,700,027	$	438,220,068	$	444,920,095

At June 30, 2019 and December 31, 2018, the Company did not have any loans that were 90 days or more past due and still accruing interest. The Company's strategy is to work with its borrowers to reach acceptable payment plans while protecting its interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, the Company may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.

The following table shows non-accrual loans by category at June 30, 2019 compared to December 31, 2018:

	June 30, 2019				December 31, 2018				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	1,377,567	0.3	%	$	2,084,870	0.5	%	$	(707,303	)	(33.9)%
Consumer	354,381		0.1		1,274,673		0.3		$	(920,292	)	(72.2)
Commercial Business	115,375		—		124,458		—		(9,083		)	(7.3)
Commercial Real Estate	2,614,607		0.6		3,564,494		0.8		(949,887		)	(26.6)
Total Non-accrual Loans	$	4,461,930	1.0	%	$	7,048,495	1.5	%	$	(2,586,565	)	(36.7)%

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

17

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.    Loans Receivable, Net, Continued

The following tables show the activity in the allowance for loan losses by category for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,147,670		$	1,121,205		$	991,982		$	5,537,698		$	8,798,555
Provision for Loan Losses	(23,308		)	69,702			(95,635		)	49,241			—
Charge-Offs	—			(135,286		)	—			(28,079		)	(163,365		)
Recoveries	1,450			36,706			496			79,697			118,349
Ending Balance	$	1,125,812		$	1,092,327		$	896,843		$	5,638,557		$	8,753,539

	Six Months Ended June 30, 2019
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,191,443		$	1,203,593		$	923,600		$	5,853,081		$	9,171,717
Provision for Loan Losses	(35,958		)	74,508			(40,189		)	101,639			100,000
Charge-Offs	(34,599		)	(265,480		)	(1,132		)	(428,164		)	(729,375		)
Recoveries	4,926			79,706			14,564			112,001			211,197
Ending Balance	$	1,125,812		$	1,092,327		$	896,843		$	5,638,557		$	8,753,539

	Three Months Ended June 30, 2018
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,207,254		$	1,042,150		$	1,128,680		$	4,825,932		$	8,204,016
Provision for Loan Losses	104,394			185,314			(40,216		)	(249,492		)	—
Charge-Offs	(2,579		)	(73,774		)	(11,031		)	(9,890		)	(97,274		)
Recoveries	—			60,084			—			444,350			504,434
Ending Balance	$	1,309,069		$	1,213,774		$	1,077,433		$	5,010,900		$	8,611,176

	Six Months Ended June 30, 2018
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,233,843		$	1,144,815		$	1,011,227		$	4,831,733		$	8,221,618
Provision for Loan Losses	88,949			72,381			98,724			(260,054		)	—
Charge-Offs	(13,930		)	(91,026		)	(32,518		)	(9,890		)	(147,364		)
Recoveries	207			87,604			—			449,111			536,922
Ending Balance	$	1,309,069		$	1,213,774		$	1,077,433		$	5,010,900		$	8,611,176

18

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.    Loans Receivable, Net, Continued

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

	Allowance For Loan Losses
June 30, 2019	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,125,812	$	1,125,812
Consumer	71,301		1,021,026		1,092,327
Commercial Business	—		896,843		896,843
Commercial Real Estate	565,000		5,073,557		5,638,557
Total	$	636,301	$	8,117,238	$	8,753,539

	Allowance For Loan Losses
December 31, 2018	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,191,443	$	1,191,443
Consumer	73,662		1,129,931		1,203,593
Commercial Business	—		923,600		923,600
Commercial Real Estate	665,000		5,188,081		5,853,081
Total	$	738,662	$	8,433,055	$	9,171,717

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

	Loans Receivable
June 30, 2019	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	1,142,166	$	85,200,295	$	86,342,461
Consumer	206,117		55,281,864		55,487,981
Commercial Business	72,407		28,572,204		28,644,611
Commercial Real Estate	3,380,756		281,055,692		284,436,448
Total	$	4,801,446	$	450,110,055	$	454,911,501

	Loans Receivable
December 31, 2018	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	1,700,861	$	82,264,555	$	83,965,416
Consumer	1,060,043		55,847,512		56,907,555
Commercial Business	77,206		28,009,480		28,086,686
Commercial Real Estate	6,526,015		269,434,423		275,960,438
Total	$	9,364,125	$	435,555,970	$	444,920,095

19

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.    Loans Receivable, Net, Continued

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired management measures the impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sell, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and, if it is over 24 months old, will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis. The average balance of impaired loans was $4.9 million for the three months ended June 30, 2019 compared to $12.8 million for the three months ended June 30, 2018.

The following tables present information related to impaired loans by loan category at June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018.

	June 30, 2019						December 31, 2018
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With No Related Allowance Recorded:
Residential Real Estate	$	1,142,165	$	1,142,165	$	—	$	1,700,861	$	1,700,861	$	—
Consumer	134,817		143,117		—		986,380		994,680		—
Commercial Business	72,406		967,406		—		77,206		972,206		—
Commercial Real Estate	2,383,766		2,676,723		—		5,084,458		6,116,761		—
With an Allowance Recorded:
Consumer	71,301		71,301		71,301		73,662		73,662		73,662
Commercial Real Estate	996,990		1,396,990		565,000		1,441,558		1,441,558		665,000
Total
Residential Real Estate	1,142,165		1,142,165		—		1,700,861		1,700,861		—
Consumer	206,118		214,418		71,301		1,060,042		1,068,342		73,662
Commercial Business	72,406		967,406		—		77,206		972,206		—
Commercial Real Estate	3,380,756		4,073,713		565,000		6,526,016		7,558,319		665,000
Total	$	4,801,445	$	6,397,702	$	636,301	$	9,364,125	$	11,299,728	$	738,662

20

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.    Loans Receivable, Net, Continued

	Three Months Ended June 30,
	2019				2018
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Residential Real Estate	$	1,157,380	$	—	$	1,963,932	$	—
Consumer	137,233		—		177,644		—
Commercial Business	73,606		—		85,804		—
Commercial Real Estate	2,481,028		14,085		10,285,113		56,646
With an Allowance Recorded:
Consumer	71,554		—		—		—
Commercial Real Estate	996,990		—		252,821		2,509
Total
Residential Real Estate	1,157,380		—		1,963,932		—
Consumer	208,787		—		177,644		—
Commercial Business	73,606		—		85,804		—
Commercial Real Estate	3,478,018		14,085		10,537,934		59,155
Total	$	4,917,791	$	14,085	$	12,765,314	$	59,155

	Six Months Ended June 30,
	2019				2018
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Residential Real Estate	$	1,347,984	$	—	$	2,089,364	$	1,078
Consumer	982,404		—		179,177		—
Commercial Business	75,149		—		91,260		—
Commercial Real Estate	2,866,245		28,332		10,325,567		117,215
With an Allowance Recorded:
Consumer	72,072		—		—		—
Commercial Real Estate	1,181,152		—		252,821		2,849
Total
Residential Real Estate	1,347,984		—		2,089,364		1,078
Consumer	1,054,476		—		179,177		—
Commercial Business	75,149		—		91,260		—
Commercial Real Estate	4,047,397		28,332		10,578,388		120,064
Total	$	6,525,006	$	28,332	$	12,938,189	$	121,142

21

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

8.    Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Company may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (Financial Accounting Standards Board ("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 Company grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.  

At the date of modification, TDRs are initially classified as nonaccrual TDRs. TDR loans 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).

TDRs included in impaired loans at June 30, 2019 and December 31, 2018 were $896,000 and $1.4 million, respectively, and the Company had no commitments at these dates to lend additional funds on these loans. There were no new TDRs during the six months ended June 30, 2019 and 2018. At June 30, 2019, there were no TDR loans in default. In comparison, at June 30, 2018, two TDR loans with a combined balance of $607,000 were in default. There were no TDRs, for which there was a payment default within the first 12 months of the modification during the six months ended June 30, 2019 and 2018. The Bank considers any loan 30 days or more past due to be in default.

The Company's policy with respect to accrual of interest on loans restructured as 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 probable. 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.

The Company closely monitors 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.  The Company's policy with respect tononperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the modified loan terms before that loan can be placed back on accrual status.  Further, the borrower must demonstrate the capacity to continue making payments on the loan prior to restoration of accrual status.

9. 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 $3.0 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 $3.0 billion or more in assets, it would have exceeded all regulatory capital requirements with Common Equity Tier 1 ("CET1") capital, Tier 1 leverage-based capital, Tier 1 risk-based capital and total risk-based capital ratios of 14.7%, 9.4%, 15.6% and 16.9%, respectively, at June 30, 2019.

22

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

9. Regulatory Matters, Continued

Based on its capital levels at June 30, 2019, 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 June 30, 2019, 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 tables below provide the Bank’s regulatory capital requirements and actual results at the dates indicated.

	Actual			For Capital Adequacy			To Be "Well-Capitalized"
(Dollars in Thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
	June 30, 2019
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	90,261	16.0%	$	33,775	6.0%	$	45,033	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	97,319		17.3%	45,033		8.0%	56,292		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	90,261		16.0%	25,331		4.5%	36,590		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	90,261		9.6%	37,528		4.0%	46,910		5.0%
	December 31, 2018
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	89,188	16.2%	$	33,005	6.0%	$	44,007	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	96,092		17.5%	44,007		8.0%	55,009		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	89,188		16.2%	24,754		4.5%	35,756		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	89,188		9.8%	36,486		4.0%	45,608		5.0%

In addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer, which consists of additional CET1 capital greater than 2.5% of risk weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At June 30, 2019 the Bank’s conservation buffer was 9.3%.

23

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

10. Carrying Amounts and Fair Value of Financial Instruments

GAAP requires the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet and to measure that fair value using an exit price notion, the price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions.

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).

Level 1 -	Quoted Market Price in Active Markets 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 -	Significant Other Observable Inputs 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 -	Significant Unobservable Inputs 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 June 30, 2019, the Company’s investment portfolio was comprised of student loan pools, government and agency bonds, mortgage-backed securities issued by government agencies or GSEs, private label CMO mortgage-backed securities, municipal securities, and one equity investment. 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 a result, 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 the FHLMC or other 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 a commitment 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.

24

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

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 impaired, management measures the impairment by determining the fair value of the collateral for the loan.

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 June 30, 2019, our impaired loans were generally 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. At June 30, 2019 and December 31, 2018, the recorded investment in impaired loans was $4.8 million and $9.4 million, respectively.

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. Foreclosed assets are recorded as nonrecurring Level 3.

Assets measured at fair value on a recurring basis were as follows at June 30, 2019 and December 31, 2018:

	June 30, 2019						December 31, 2018
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Student Loan Pools	$	—	$	41,802,666	$	—	$	—	$	12,885,501	$	—
SBA Bonds	—		127,862,904		—		—		125,446,531		—
Tax Exempt Municipal Bonds	—		46,927,077		—		—		61,330,369		—
Taxable Municipal Bonds	—		1,034,330		—		—		1,977,885		—
Mortgage-Backed Securities	—		216,411,424		—		—		184,460,551		—
Equity Securities	—		155,000		—		—		155,000		—
Total	$	—	$	434,193,401	$	—	$	—	$	386,255,837	$	—

There were no liabilities measured at fair value on a recurring basis at either June 30, 2019 or December 31, 2018.

25

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

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 tables below present assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall. 

	June 30, 2019
Assets:	Level 1		Level 2		Level 3		Total
Mortgage Loans Held For Sale	$	—	$	3,750,815	$	—	$	3,750,815
Collateral Dependent Impaired Loans (1)	—		—		4,155,630		4,155,630
Foreclosed Assets	—		—		734,140		734,140
Total	$	—	$	3,750,815	$	4,889,770	$	8,640,585

	December 31, 2018
Assets:	Level 1		Level 2		Level 3		Total
Mortgage Loans Held For Sale	$	—	$	1,781,985	$	—	$	1,781,985
Collateral Dependent Impaired Loans (1)	—		—		8,613,570		8,613,570
Foreclosed Assets	—		—		722,442		722,442
Total	$	—	$	1,781,985	$	9,336,012	$	11,117,997

^{(1) COLLATERAL IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $636,000 AND $739,000 AT JUNE 30, 2019 AND DECEMBER 31, 2018, RESPECTIVELY.}  

There were no liabilities measured at fair value on a nonrecurring basis at either June 30, 2019 or December 31, 2018.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis at June 30, 2019, the significant unobservable inputs used in the fair value measurements were as follows:

			Valuation	Significant
Level 3 Assets	Fair Value		Technique	Unobservable Inputs	Range
Collateral Dependent Impaired Loans	$	4,155,630	Appraised Value	Discount Rates/ Discounts to Appraised Values	4% - 97%
Foreclosed Assets	$	734,140	Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	16% - 68%

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 Deposit 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.

26

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

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.

Note Payable—The carrying value of the note payable 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.

The following tables provide a summary of the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2019 and December 31, 2018 presented in accordance with the applicable accounting guidance.

June 30, 2019	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	11,019	$	11,019	$	11,019	$	—	$	—
Certificates of Deposits with Other Banks	950		950		—		950		—
Investment and Mortgage-Backed Securities	456,707		457,063		—		457,063		—
Loans Receivable, Net	441,576		438,290		—		—		438,290
FHLB Stock	3,401		3,401		3,401		—		—
Financial Liabilities:
Deposits:
Checking, Savings & Money Market Accounts	$	535,901	$	535,901	$	535,901	$	—	$	—
Certificate Accounts	250,547		250,222		—		250,222		—
Advances from FHLB	60,700		60,785		—		60,785		—
Other Borrowed Money	15,754		15,754		15,754		—		—
Senior Convertible Debentures	6,044		6,044		—		6,044		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—

December 31, 2018	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	12,706	$	12,706	$	12,706	$	—	$	—
Certificates of Deposits with Other Banks	1,200		1,200		—		1,200		—
Investment and Mortgage-Backed Securities	409,894		409,505		—		409,505		—
Loans Receivable, Net	430,054		421,379		—		—		421,379
FHLB Stock	2,204		2,204		2,204		—		—
Financial Liabilities:
Deposits:
Checking, Savings & Money Market Accounts	$	529,043	$	529,043	$	529,043	$	—	$	—
Certificate Accounts	238,454		236,103		—		236,103		—
Advances from FHLB	34,030		33,771		—		33,771		—
Other Borrowed Money	10,698		10,698		10,698		—		—
Note Payable	2,363		2,363		—		2,363		—
Senior Convertible Debentures	6,064		6,064		—		6,064		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—

27

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

At June 30, 2019, the Bank had $91.4 million in 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 amount 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.

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.

11. Accounting and Reporting Changes

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

In February 2016, the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. In July 2018, the FASB further amended the Leases Topic of the ASC to make narrow amendments to clarify how to apply certain aspects of the new leases standard. The amendments also give entities another additional and optional method for transition to the new guidance and to provide lessors with a practical expedient. The amendments were effective for reporting periods beginning after December 15, 2018. The Company adopted the new standard and recorded a right-of use asset and lease liability of $3.1 million effective January 1, 2019. Additional disclosures required by the ASC have been included in "Note 13 - Leases."

In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The guidance significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019 including interim periods within those fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018. However, the FASB proposed in July 2019 extending the adoption date for certain registrants, including the Company, to fiscal years beginning after December 15, 2022. The Company is in the process of identifying required changes to the loan loss estimation models and processes and evaluating the impact of this new guidance. Once adopted, the Company expects the allowance for loan losses to increase, however, until its evaluation is complete the magnitude of the increase will be unknown.

In March 2017, the FASB issued guidance on Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The guidance shortens the amortization period for certain callable debt securities held at a premium. The amendments were effective for the Company for reporting periods beginning after December 15, 2018. The adoption of these amendments did not have a material effect on the Company's consolidated financial statements.

28

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

11. Accounting and Reporting Changes, Continued

In June 2018, the FASB amended the Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Previously, these awards were recorded at the fair value of consideration received or the fair value of the equity instruments issued and was measured as the earlier of the commitment date or date performance was completed. The guidance requires the awards to be measured at the grant-date fair value of the equity instrument. The new standard became effective for reporting periods beginning after December 15, 2018. The adoption of these amendments did not have a material effect on the Company's consolidated financial statements.

In August 2018, the FASB amended the Fair Value Measurement Topic of the ASC to remove, modify, and add certain fair value disclosure requirements based on the concepts in the FASB Concepts Statement, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements. The amendments will be effective for reporting periods beginning after December 15, 2019. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this guidance and delay adoption of the additional disclosures until their effective date. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In March 2019, the FASB issued guidance to address concerns by lessors that are not manufacturers or dealers when assessing the fair value of underlying assets under the leases standard discussed above and to clarify that lessees and lessors are exempt from a certain interim disclosure requirement associated with adopting the new standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In April 2019, the FASB issued guidance to provide entities that have certain financial instruments measured at amortized cost that have credit losses, to irrevocably elect the fair value option in Subtopic 825-10, upon adoption of the June 2016 guidance related to accounting for credit losses and modifying the impairment model for certain debt securities. The fair value option applies to available-for-sale debt securities. This guidance should be applied at adoption on a modified-retrospective basis as a cumulative-effect adjustment to the opening balance of retained earnings in the statement of financial condition. 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 consolidated financial position, results of operations or cash flows.

12. Non-Interest Income

The Company recognizes revenue as it is earned and noted no impact to its revenue recognition policies as a result of the adoption of ASU 2014-09. The following is a discussion of key revenues within the scope of this guidance.

Revenue Recognition

In accordance with Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services that are promised within each contract and identifies those that contain performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

29

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

12. Non-Interest Income, Continued

Deposit Fees

The Bank earns fees from its deposit customers for account maintenance, transaction-based and overdraft services.  Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly basis.  The performance obligation is satisfied and the fees are recognized on a monthly basis as the service period is completed. Transaction-based fees on deposits accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

Check Card Fee Income

Check card fee income represents fees earned when a debit card issued by the Bank is used.  The Bank earns interchange fees from debit cardholder transactions through the Mastercard payment network.  Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the card.  Certain expenses directly associated with the debit card are recorded on a net basis with the fee income.

Trust Income

Trust income includes monthly advisory fees that are based on assets under management and certain transaction fees that are assessed and earned monthly, concurrently with the investment management services provided to the customer. The Bank does not charge performance based fees for its trust services and does not currently have any institutional clients, hedge funds or mutual funds. Although trust income is included within the scope of ASC 606, based on the fees charged by the Bank, there were no changes in the accounting for trust income at this time.  

Gains/Losses on OREO Sales

Gains/losses on the sale of OREO are included in non-interest expense and are generally recognized when the performance obligation is complete. This is typically at delivery of control over the property to the buyer at the time of each real estate closing.

The following table presents the Company's non-interest income for the three and six months ended June 30, 2019 and 2018. All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income, with the exception of gains on the sale of OREO, which are included in non-interest expense when applicable.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Non-interest income:
Service fees on deposit accounts	$	254,610	$	250,493	$	506,627	$	507,672
Check card fee income	355,321		338,611		697,655		645,657
Trust income	258,600		243,500		517,200		476,000
Insurance commissions (1)	175,693		149,111		326,993		328,336
Gain on sale of investment securities, net (1)	670,134		—		960,902		436,304
Gain on sale of loans, net (1)	372,048		367,646		546,331		653,649
BOLI income (1)	135,000		135,000		270,000		270,000
Grant income (1)	17,414		—		277,029		—
Other non-interest income (1)	253,741		260,185		585,656		470,948
Total non-interest income	$	2,492,561	$	1,744,546	$	4,688,393	$	3,788,566
(1) Not within the scope of ASC 606

30

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

13. Leases

Effective January 1, 2019 the Company adopted ASC 842 “Leases.” Currently, the Company has operating leases on six of its branches that are accounted for under this standard. As a result of this standard, the Company recognized a right-of-use asset of $3.1 million effective January 1, 2019. During the six months ended June 30, 2019, the Company made cash payments in the amount of $221,000 for operating leases. The lease expense recognized during this period amounted to $229,000 and the lease liability was reduced by $189,000. The following table is a maturity analysis of the operating lease liabilities. The weighted average lease term is eight years and the weighted average discount rate used is 3.2%.

Year	Cash Payments	Lease Expense	Liability Reduction
2019	443,858	458,364	458,364
2020	434,395	448,568	448,568
2021	425,078	438,771	438,771
2022	436,496	438,771	438,771
2023	448,299	438,771	438,771
Thereafter	1,317,256	1,282,137	1,282,137
Total	3,505,382	3,505,382	3,505,382

14. 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 consolidated financial statements were available to be issued and determined that there were no subsequent events requiring disclosure.

31

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements and “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995

Certain matters discussed in this Quarterly Report on Form 10-Q may constitute 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 or financial items, 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 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 allowance for loan losses;

• 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 originate loans for sale and sell loans in the secondary market;

• results of examinations of the Company by the Federal Reserve and our bank subsidiary by the 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, 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;

• our ability to attract and retain deposits;

• 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 risks 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;

• disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing;

• 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;

32

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

• our ability to pay dividends on our common 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 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 the Company's 2018 Form 10-K under Item 1A, “Risk Factors.” Such developments could have an adverse impact on our consolidated financial position and results of operations.

Any of the forward-looking statements that we make in this quarterly report on Form 10-Q and in other public reports and statements we make may turn out to be inaccurate as a result of our beliefs and assumptions we make in connection with the factors set forth above or because of other unidentified and unpredictable factors. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements and you should not rely on such statements. The Company undertakes no obligation to publish revised forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date hereof. These risks could cause our actual results for 2019 and beyond to differ materially from those expressed in any forward-looking statements by or on behalf of us, and could negatively affect the Company’s consolidated financial condition, consolidated results of operations, liquidity and stock price performance.

33

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Financial Condition at June 30, 2019 and December 31, 2018

Assets

Total assets increased $60.8 million or 6.7% to $973.4 million at June 30, 2019 from $912.6 million at December 31, 2018. Changes in total assets were primarily concentrated in the following asset categories:

					Increase (Decrease)
	June 30, 2019		December 31, 2018		Amount			Percent
Cash and Cash Equivalents	$	11,019,027	$	12,705,910	$	(1,686,883	)	(13.3)%
Certificates of Deposits with Other Banks	950,005		1,200,010		(250,005		)	(20.8)
Investments and MBS – AFS	434,193,401		386,255,837		47,937,564			12.4
Investments and MBS – HTM	22,513,877		23,638,013		(1,124,136		)	(4.8)
Loans Receivable, Net	441,575,668		430,053,517		11,522,151			2.7
OREO	734,140		722,442		11,698			1.6
Operating Lease Right-of-Use Assets	2,901,753		—		2,901,753			100.0
Premises and Equipment, Net	25,505,350		24,174,707		1,330,643			5.5
FHLB Stock	3,401,200		2,204,000		1,197,200			54.3
BOLI	21,507,893		21,237,893		270,000			1.3
Other Assets	4,325,166		5,494,800		(1,169,634		)	(21.3)

Cash and cash equivalents decreased $1.7 million or 13.3% to $11.0 million at June 30, 2019 from $12.7 million at December 31, 2018. The decrease is partially attributable to the early repayment of the Company's $2.4 million unsecured term loan from another financial institution during the second quarter of 2019 and the use of excess cash to fund higher yielding interest-earning assets.

Certificates of deposits with other banks decreased $250,000 or 20.8% to $1.0 million at June 30, 2019. The decrease was due to the maturity and redemption of two of the Bank's lower yielding time deposits with other banks during the first six months of 2019.

Investment and mortgage-backed securities AFS increased $47.9 million or 12.4% to $434.2 million at June 30, 2019 from $386.3 million at December 31, 2018 as purchases of new investment and mortgage backed securities AFS exceeded maturities, principal paydowns, and investments sold during the year. Investment and mortgage-backed securities HTM decreased $1.1 million or 4.8% to $22.5 million at June 30, 2019 from $23.6 million at December 31, 2018 as a result of maturities and principal paydowns.

Loans receivable, net, including loans held for sale, increased $11.5 million or 2.7% to $441.6 million at June 30, 2019 from $430.1 million at December 31, 2018. Consumer loans decreased $1.4 million or 2.5% to $55.5 million at June 30, 2019 compared to $56.9 million at December 31, 2018. Commercial business loans increased $558,000 or 2.0% to $28.6 million at June 30, 2019 from $28.1 million at December 31, 2018 while commercial real estate loans increased $8.5 million or 3.1% to $284.4 million at June 30, 2019 from $276.0 million at December 31, 2018. Residential real estate loans increased $2.4 million or 2.8% to $86.3 million at June 30, 2019 from $84.0 million at December 31, 2018. Loans held for sale increased $2.0 million or 110.5% to $3.8 million at June 30, 2019 from $1.8 million at December 31, 2018.

Premises and equipment, net increased $1.3 million or 5.5% to $25.5 million at June 30, 2019 from $24.2 million at December 31, 2018 as result of our growth and recent expansion into the Augusta, Georgia market. The Bank’s newest branch, located in Augusta, Georgia, is under construction but scheduled to open later this year. It will be a full-service branch offering depository banking as well as commercial and consumer lending.

Effective January 1, 2019, the Company adopted the amended Leases topic of the ASC 842. As a result of this standard, the Company recognized $3.1 million in right-of-use assets on that date. Currently, the Company has operating leases on six of its facilities that are accounted for under this standard. At June 30, 2019, these assets had a balance of $2.9 million. For additional information regarding the adoption of this topic, refer to Note 13 of the Notes to Consolidated Financial Statements included herein.

34

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

FHLB stock increased $1.2 million or 54.3% to $3.4 million at June 30, 2019 from $2.2 million at December 31, 2018. 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 is 4.25% of outstanding advances (borrowings) from the FHLB of Atlanta. As the Bank's total advances and assets have increased, so has its required investment in FHLB stock.

The cash value of BOLI increased $270,000 or 1.3% to $21.5 million at June 30, 2019 from $21.2 million at December 31, 2018. The entire increase was a result of income recognized during the period due to changes in the cash surrender value of the underlying policies. 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.

Other assets decreased $1.2 million or 21.3% to $4.3 million at June 30, 2019 from $5.5 million at December 31, 2018. The decrease was primarily the result of a $1.6 million decrease in net deferred tax assets, which was related to increased unrealized gains in the investment portfolio due to increases in the fair value of investment and mortgage-backed securities AFS at June 30, 2019.

Liabilities

Deposit Accounts

Total deposits increased $19.0 million or 2.5% to $786.4 million at June 30, 2019 from $767.5 million at December 31, 2018. This growth was primarily due to increases in checking and certificate accounts, which increased $17.3 million and $12.1 million, respectively, during the first half of 2019. The balances, weighted average rates and increases and decreases in deposit accounts at June 30, 2019 and December 31, 2018 are shown below.

	June 30, 2019			December 31, 2018				Increase (Decrease)
	Balance		Weighted Rate	Balance		Weighted Rate		Amount			Percent
Demand Accounts:
Checking	$	236,826,174	0.06%	$	219,515,207	0.09%		$	17,310,967		7.9%
Money Market	248,338,505		0.84	261,136,008		0.65		(12,797,503		)	(4.9)
Savings	50,736,726		0.15	48,391,799		0.14		2,344,927			4.8
Total	$	535,901,405	0.39%	$	529,043,014	0.31	%	$	6,858,391		1.3%
Certificate Accounts
0.00 – 0.99%	$	42,306,194		$	70,854,896			$	(28,548,702	)	(40.3)%
1.00 – 1.99%	103,823,100			120,011,938				(16,188,838		)	(13.5)
2.00 – 2.99%	104,418,130			47,586,859				56,831,271			119.4
Total	$	250,547,424	1.73%	$	238,453,693	1.37%		$	12,093,731		5.1%
Total Deposits	$	786,448,829	0.82%	$	767,496,707	0.64%		$	18,952,122		2.5%

Included in certificate accounts were $31.6 million and $33.1 million in brokered deposits at June 30, 2019 and December 31, 2018, respectively, with a weighted average interest rate of 1.94% and 1.86%, respectively.

Advances From FHLB

FHLB advances increased $26.7 million or 78.4% to $60.7 million at June 30, 2019 from $34.0 million at December 31, 2018 to fund growth in the Bank’s loan and investment and mortgage-backed securities AFS portfolios. FHLB advances are summarized by contractual year of maturity and weighted average interest rate in the table below.

35

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

	June 30, 2019			December 31, 2018			Increase (Decrease)
Year Due:	Balance		Rate	Balance		Rate	Balance			Percent
2019	$	11,500,000	1.49%	$	23,530,000	1.55%	$	(12,030,000	)	(51.1)%
2020	24,200,000		2.32	10,500,000		1.91	13,700,000			130.5
2021	25,000,000		1.97	—		—	25,000,000			100.0
Total Advances	$	60,700,000	2.02%	$	34,030,000	1.66%	$	26,670,000		78.4%

Advances are secured by a blanket collateral agreement with the FHLB pledging the Bank’s portfolio of residential first mortgage loans and investment securities with an amortized cost and fair value of $93.5 million and $88.3 million, respectively, at June 30, 2019 and $79.1 million and $71.4 million, respectively, at December 31, 2018.

There were no callable FHLB advances at June 30, 2019. 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.

Other Borrowings

The Bank had $15.8 million in other borrowings (non-FHLB advances) at June 30, 2019, an increase of $5.1 million or 47.3% from $10.7 million at December 31, 2018. 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. The interest rate paid on the repurchase agreements was 0.50% at June 30, 2019 compared to 0.25% at December 31, 2018.

The Bank had pledged as collateral for these repurchase agreements investment and mortgage-backed securities with amortized costs and fair values of $20.5 million and $20.7 million, respectively, at June 30, 2019 and $16.7 million and $16.7 million, respectively, at December 31, 2018.

Note Payable

On October 31, 2016, the Company repurchased all 22,000 shares of its Series B Preferred Stock from the United States Department of the Treasury ("Treasury") for $21.4 million. In connection with the funding of this repurchase, the Company obtained a $14.0 million unsecured term loan from another financial institution. During the quarter ended June 30, 2019 the $2.4 million remaining balance of this loan was paid off.

Junior Subordinated Debentures

On September 21, 2006, Security Federal Statutory Trust (the "Trust"), issued and sold fixed and floating rate 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 Sheets 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 4.11% at June 30, 2019. 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.

Convertible Debentures

Effective 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 and commenced on 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 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. The 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.

36

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Equity

Shareholders’ equity increased $8.6 million or 10.7% to $89.1 million at June 30, 2019 from $80.5 million at December 31, 2018. The increase was attributable to net income of $4.0 million combined with a $5.1 million increase in accumulated other comprehensive income, net of tax during the six months endedJune 30, 2019. The increase in net accumulated other comprehensive income was related to the unrecognized gain in value of investment and mortgage-backed securities AFS during the six months endedJune 30, 2019. These increases in equity were partially offset by $532,000 in dividends paid to common shareholders during the six months endedJune 30, 2019. Book value per common share was $30.16 at June 30, 2019 compared to $27.26 at December 31, 2018.

37

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Results of Operations for the Three Month Periods Ended June 30, 2019 and 2018

Net Income

Net income increased $64,000 or 3.5% to $1.9 million or $0.61 per diluted common share for the three months ended June 30, 2019 compared to $1.8 million or $0.59 per diluted common share for the three months ended June 30, 2018. The increase in earnings was primarily the result of increases in net interest income and non-interest income, which were partially offset by an increase in non-interest expense.

Net Interest Income

Net interest income increased $376,000 or 5.6% to $7.1 million during the quarter ended June 30, 2019, compared to $6.7 million for the same period in 2018. During the quarter ended June 30, 2019, average interest earning assets increased $52.5 million or 6.4% to $872.2 million from $819.6 million for the same period in 2018. The increase in average earning assets and the related 26 basis point increase in average yield was partially offset by a higher cost of funds as total interest expense increased $724,000, or 56.3%, to $2.0 million during the quarter ended June 30, 2019 compared to $1.3 million for the same period in 2018. The increase was related to interest expense on deposits, which increased during the quarter ended June 30, 2019 as a result of the increase in short-term interest rates resulting in a 41 basis point increase in average cost combined with an increase in average deposits. Average interest-bearing liabilities increased $33.9 million or 4.8% to $742.4 million for the three months ended June 30, 2019 from $708.5 million for the comparable period in 2018. The Company's net interest margin was 3.30% for the quarter ended June 30, 2019 compared to 3.33% for the same quarter in 2018. The Company's net interest spread on a tax equivalent basis decreased 10 basis points to 3.13% for the three months ended June 30, 2019 from 3.23% for the comparable period in 2018.

Interest Income

The following table compares detailed average balances, associated yields, and the resulting changes in interest income for the three months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Change in Average Balance		Increase in Interest Income
	2019			2018
(Dollars in thousands)	Average Balance		Yield(1)	Average Balance		Yield(1)
Loans Receivable, Net	$	438,613	5.51%	$	429,306	5.30%	$	9,307	$	361
Mortgage-Backed Securities	214,312		3.03	192,459		2.65	21,853		345
Investment Securities(2)	215,617		2.78	194,447		2.35	21,170		359
Overnight Time and Certificates of Deposit	3,608		2.86	3,404		1.05	204		17
Total Interest-Earning Assets	$	872,150	4.22%	$	819,616	3.96%	$	52,534	$	1,082

⁽¹⁾Annualized

⁽²⁾Tax equivalent basis recognizes the income tax savings when comparing taxable and tax-exempt assets and was calculated using an effective tax rate of 21% for the quarters ended June 30, 2019 and 2018. The tax equivalent adjustment relates to the tax exempt municipal bonds and was $66,219 and $83,962 for the quarters ended June 30, 2019 and 2018, respectively.

Total tax equivalent interest income increased $1.1 million or 13.3% to $9.2 million during the quarter ended June 30, 2019 compared to $8.1 million during the same period in 2018. This increase was the result of a $52.5 million increase in average interest-earning assets combined with an increase of 26 basis points in the average yield on interest-earning assets. Total interest income on loans increased $361,000 or 6.4% to $6.0 million during the quarter ended June 30, 2019 from $5.7 million during the comparable period in 2018. The increase was the result of a $9.3 million or 2.2% increase in the average loan portfolio balance combined with an increase of 21 basis points in the average yield on loans. Interest income from MBS increased $345,000 or 27.0% to $1.6 million during the quarter ended June 30, 2019 due to a $21.9 million increase in the average balance combined with an increase of 38 basis points in the average MBS portfolio yield. Tax equivalent interest income from investment securities increased $359,000 or 31.5% to $1.5 million during the quarter ended June 30, 2019 due to a $21.2 million or 10.9% increase in

38

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

the average balance of the investment securities portfolio combined with an increase of 43 basis points in the average yield on investment securities.

Interest Expense

The following table compares detailed average balances, cost of funds, and the resulting changes in interest expense for the three months ended June 30, 2019 and 2018.

	Three Months Ended June 30,							Change in Average Balance			Increase (Decrease) in Interest Expense
	2019			2018
(Dollars in thousands)	Average Balance		Cost(1)	Average Balance		Cost(1)
Now and Money Market Accounts	$	380,947	0.60%	$	355,133	0.30	%	$	25,814		$	309
Savings Accounts	50,827		0.15	46,252		0.11		4,575			6
Certificate Accounts	253,362		1.68	232,148		1.05		21,214			452
FHLB Advances and Other Borrowed Money	45,164		1.48	58,173		1.13		(13,009		)	2
Note Payable	893		5.26	5,535		4.50		(4,642		)	(51		)
Junior Subordinated Debentures	5,155		4.33	5,155		3.91		—			5
Senior Convertible Debentures	6,044		8.00	6,064		8.00		(20		)	—
Total Interest-Bearing Liabilities	$	742,392	1.08%	$	708,460	0.73	%	$	33,932		$	723

⁽¹⁾ Annualized

Total interest expense increased $724,000 or 56.3% to $2.0 million during the three months ended June 30, 2019 compared to $1.3 million for the same period in 2018 reflecting the rise in market interest rates over the last year. The increase was attributable to increases in interest rates paid and a $33.9 million increase in the average balance of interest-bearing liabilities. Interest expense on deposits increased $767,000 or 86.5% to $1.7 million during the three months ended June 30, 2019 compared to $887,000 for the same period in 2018. The increase was attributable to a 41 basis point increase in the average cost of deposit accounts combined with a $51.6 million or 8.1% increase in average interest-bearing deposits to $685.1 million for the three months ended June 30, 2019 compared to $633.5 million for the three months ended June 30, 2018.

Provision for Loan Losses

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 policies and procedures in place for evaluating and monitoring the overall credit quality of the loan portfolio and for 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 loan portfolio based on historical trends and the risk inherent in each loan category. Currently, management applies a five year historical loss ratio to each loan category to estimate the inherent loss in these pooled loans.

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. These loans are evaluated for impairment and recorded in accordance with accounting guidance. 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 underlying the loan.

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.

39

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

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. The table below shows the changes in the allowance for loan losses for the quarters ended June 30, 2019 and 2018.

	Three Months Ended June 30,
	2019		2018
Beginning Balance	$	8,798,555	$	8,204,016
Charge-offs	(163,365)		(97,274)
Recoveries	118,349		504,434
Net (Charge-offs) Recoveries	(45,016)		407,160
Ending Balance	$	8,753,539	$	8,611,176
Allowance For Loan Losses as a % of Gross Loans Receivable, Held For Investment at the End of the Period	1.96%		1.98%
Allowance For Loan Losses as a % of Impaired Loans at the End of the Period	182.31%		72.69%
Impaired Loans	$	4,801,446	$	11,846,522
Gross Loans Receivable, Held For Investment (1)	$	446,578,392	$	436,007,496
Total Loans Receivable, Net	$	441,575,668	$	429,926,352

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

There was no provision for loan losses for both the quarters ended June 30, 2019 and 2018. The Company had net charge-offs of $45,000, or 0.04% of gross loans, for the quarter ended June 30, 2019 compared to net recoveries of $407,000, or 0.37% of gross loans, for the comparable period in 2018. The allowance for loan losses as a percentage of gross loans was 1.96% at June 30, 2019 compared to 1.98% at June 30, 2018.

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 need to acquire these properties through foreclosure or other means and subsequently sell, develop or liquidate them.

Management believes the allowance for loan losses is adequate based on its best estimates of the probable losses inherent in the loan portfolio, although there can be no guarantee these estimates will not be proven incorrect in the future. 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.

Non-Interest Income

Non-interest income increased $748,000 or 42.9% to $2.5 million for the three months ended June 30, 2019 compared to $1.7 million for the three months ended June 30, 2018. The following table summarizes the changes in non-interest income:

40

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

	Three Months Ended June 30,				Increase (Decrease)
	2019		2018		Amounts			Percent
Gain on Sale of Investment Securities	$	670,134	$	—	$	670,134		100.0	%
Gain on Sale of Loans	372,048		367,646		4,402			1.2
Service Fees on Deposit Accounts	254,610		250,493		4,117			1.6
Commissions From Insurance Agency	175,693		149,111		26,582			17.8
BOLI Income	135,000		135,000		—			—
Trust Income	258,600		243,500		15,100			6.2
Check Card Fee Income	355,321		338,611		16,710			4.9
Grant Income	17,414		—		17,414			1.0
Other	253,741		260,185		(6,444		)	(2.5)
Total Non-Interest Income	$	2,492,561	$	1,744,546	$	748,015		42.9	%

The increase in non-interest income was primarily attributable to an increase in net gain on the sale of investment securities AFS. Net gain on sale of investment securities was $670,000 during the quarter ended June 30, 2019 compared to none for the same period last year.

Non-Interest Expense

For the quarter ended June 30, 2019, non-interest expense increased $1.0 million or 16.0% to $7.2 million compared to $6.2 million for the same period in 2018. The following table summarizes the changes in non-interest expense:

	Three Months Ended June 30,						Increase (Decrease)
	2019			2018			Amounts		Percent
Compensation and Employee Benefits	$	4,137,872		$	3,842,295		$	295,577	7.7%
Occupancy	576,987			540,175			36,812		6.8
Advertising	176,480			85,418			91,062		106.6
Depreciation and Maintenance of Equipment	639,840			557,423			82,417		14.8
FDIC Insurance Premiums	69,306			66,595			2,711		4.1
Net (Recovery) Cost of Operation of OREO	(160,033		)	(198,493		)	38,460		(19.4)
Other	1,800,656			1,346,846			453,810		33.7
Total Non-Interest Expense	$	7,241,108		$	6,240,259		$	1,000,849	16.0%

Compensation and employee benefits expenses increased $296,000 or 7.7% to $4.1 million for the quarter ended June 30, 2019 compared to $3.8 million for the same period last year due to general annual cost of living increases combined with an increase in the number of full time equivalent employees as a result of our growth and expansion into the Augusta, Georgia market.

Other non-interest expenses increased $454,000, or 33.7% to $1.8 million for the three months ended June 30, 2019 compared to $1.3 million for the same period in the prior year. Other expenses include legal, professional and consulting expenses, supplies and other miscellaneous expenses.

Provision For Income Taxes

The provision for income taxes increased $59,000 or 13.8% to $486,000 for the quarter ended June 30, 2019 from $427,000 for the same period in 2018. Income before income taxes was $2.4 million for the quarter ended June 30, 2019 compared to $2.2 million for the same period in 2018. The Company’s combined federal and state effective income tax rate for the current quarter was 20.5% compared to 19.0% for the same quarter one year ago.

41

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Results of Operations for the Six Months Ended June 30, 2019 and 2018

Net Income

Net income increased $423,000 or 11.9% to $4.0 million for the six months ended June 30, 2019 when compared to the same six month period in 2018. The increase in earnings was primarily due to increases in net interest income and non-interest income. These items were partially offset by an increase in non-interest expense.

Net Interest Income

Net interest income increased $1.0 million or 7.7% to $14.4 million for the six months ended June 30, 2019 compared to $13.3 million for the same period last year. During the six months ended June 30, 2019, average interest earning assets increased $47.4 million or 5.8% to $862.1 million from $814.8 million for the six months ended June 30, 2018. Average interest-bearing liabilities also increased by $28.4 million or 4.0% to $735.1 million for the six months ended June 30, 2019 from $706.7 million for the same period in 2018. The increase in average earning assets and the related 33 basis point increase in average yield was partially offset by a higher cost of funds as total interest expense increased $1.3 million, or 54.1%, to $3.8 million in the first six months of 2019 compared to $2.5 million for the same period in 2018. The increase was related to interest expense on deposits, which increased during the first half of 2019 as a result of the increase in short-term interest rates resulting in a 39 basis point increase in average cost combined with an increase in average deposits.

The Company's net interest margin increased to 3.37% for the six months ended June 30, 2019 compared to 3.32% for the six months ended June 30, 2018. The net interest spread on a tax equivalent basis decreased one basis point to 3.22% for the six months ended June 30, 2019 from 3.23% for the comparable period in 2018.

Interest Income

The following table compares detailed average balances, associated yields, and the resulting changes in interest income for the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,							Change in Average Balance		Increase in Interest Income
	2019				2018
(Dollars in Thousands)	Average Balance		Yield(1)		Average Balance		Yield(1)
Loans Receivable, Net	$	434,289	5.55	%	$	416,242	5.32%	$	18,047	$	975
Mortgage-Backed Securities	211,816		2.99		199,659		2.60	12,157		578
Investment Securities(2)	209,597		2.86		195,334		2.34	14,263		706
Overnight Time & Certificates of Deposit	6,442		2.80		3,538		0.97	2,904		73
Total Interest-Earning Assets	$	862,144	4.25	%	$	814,773	3.92%	$	47,371	$	2,332

⁽¹⁾Annualized

⁽²⁾Tax equivalent basis recognizes the income tax savings when comparing taxable and tax-exempt assets and was calculated using an effective tax rate of 21% for the six months ended June 30, 2019 and 2018. The tax equivalent adjustment relates to the tax exempt municipal bonds and was $144,000 and $168,000 for the six months ended June 30, 2019 and 2018, respectively.

Total tax equivalent interest income increased $2.3 million or 14.6% to $18.3 million during the six months ended June 30, 2019 from $16.0 million for the same period in 2018. This increase was primarily the result of a $47.4 million or 5.8% increase in average interest earning assets combined with an increase of 33 basis points in the average yield on interest-earning assets. Total interest income on loans increased $975,000 or 8.8% to $12.1 million during the six months ended June 30, 2019 from $11.1 million for the same period in 2018. The increase was a result of a $18.0 million or 4.3% increase in the average loan portfolio to $434.3 million from $416.2 million for the same period in 2018 combined with an increase of 23 basis points in the average yield on loans. Interest income from mortgage-backed securities increased $578,000 or 22.3% to $3.2 million for the six months ended June 30, 2019 from $2.6 million for the same period in 2018. The increase was the result of a $12.2 million or 6.1% increase in the average balance of mortgage-backed securities combined with an increase of 39 basis points in the average MBS portfolio yield. Tax equivalent interest income from investment securities increased $706,000 or 30.9% to $3.0 million for the six months ended June 30, 2019 from $2.3 million for the same period in 2018 due to a $14.3 million increase in the average balance of investment securities combined with an increase of 52 basis points in the average yield on investment securities.

42

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Interest Expense

The following table compares detailed average balances, cost of funds, and the resulting changes in interest expense for the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,								Change in Average Balance			Increase (Decrease) in Interest Expense
	2019				2018
(Dollars in Thousands)	Average Balance		Yield(1)		Average Balance		Yield(1)
Now and Money Market Accounts	$	375,118	0.56%		$	351,089	0.26	%	$	24,029		$	607
Savings Accounts	49,811		0.14		45,019		0.11		4,792			11
Certificates Accounts	251,373		1.57		231,267		0.99		20,106			827
FHLB Advances and Other Borrowed Money	46,240		1.40		61,715		1.15		(15,475		)	(32		)
Note Payable	1,361		5.22		6,416		4.33		(5,055		)	(103		)
Junior Subordinated Debentures	5,155		4.39		5,155		3.65		—			19
Senior Convertible Debentures	6,047		8.00		6,064		8.00		(17		)	(1		)
Total Interest-Bearing Liabilities	$	735,105	1.03	%	$	706,725	0.69	%	$	28,380		$	1,328

⁽¹⁾ Annualized

Interest expense increased $1.3 million or 54.1% to $3.8 million during the six months ended June 30, 2019 compared to $2.5 million for the same period in 2018. The increase was attributable to increases in interest rates paid combined with a $28.4 million or 4.0% increase in the average balance of interest-bearing liabilities. Interest expense on deposits increased $1.4 million or 89.0% to $3.1 million during the six months ended June 30, 2019 compared to $1.6 million for the same period last year. The increase was attributable to a $48.9 million or 7.8% increase in the average balance of interest-bearing deposits to $676.3 million for the six months ended June 30, 2019 compared to $627.4 million for the six months ended June 30, 2018 combined with an increase of 39 basis points in the average cost of deposit accounts.

Interest expense on FHLB advances and other borrowings decreased $32,000 or 8.9% to $324,000 during the six months ended June 30, 2019 from $356,000 during the same period in 2018 due to a $15.5 million or 25.1% decrease in the average balance of FHLB advances and other borrowed money to $46.2 million during the six months ended June 30, 2019 from $61.7 million for the same period last year, which was partially offset by an increase of 25 basis points in the average cost.

Provision for Loan Losses

There was $100,000 in provision for loan losses recorded during the six months ended June 30, 2019 compared to none for the same period in 2018. The provision for loan losses increased due to higher net loan receivable balances and loan charge-offs. The Company had net charge-offs of $518,000 for the six months ended June 30, 2019 compared to net recoveries of $390,000 during the comparable period in 2018. The following table summarizes the changes in the allowance for loan losses for the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019		2018
Beginning Balance	$	9,171,717	$	8,221,618
Provision for Loan Losses	100,000		—
Charge-offs	(729,375)		(147,364)
Recoveries	211,197		536,922
Net Recoveries (Charge-offs)	(518,178)		389,558
Ending Balance	$	8,753,539	$	8,611,176

43

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Non-Interest Income

Non-interest income increased $900,000 or 23.8% to $4.7 million for the six months ended June 30, 2019, compared to $3.8 million for the six months ended June 30, 2018. The following table summarizes the changes in the components of non-interest income:

	Six Months Ended June 30,				Increase (Decrease)
	2019		2018		Amounts			Percent
Gain on Sale of Investment Securities	$	960,902	$	436,304	$	524,598		120.2	%
Gain on Sale of Loans	546,331		653,649		(107,318		)	(16.4	)
Service Fees on Deposit Accounts	506,627		507,672		(1,045		)	(0.2	)
BOLI Income	270,000		270,000		—			—
Commissions From Insurance Agency	326,993		328,336		(1,343		)	(0.4	)
Trust Income	517,200		476,000		41,200			8.7
Check Card Fee Income	697,655		645,657		51,998			8.1
Grant Income	277,029		—		277,029			100.0
Other	585,656		470,948		114,708			24.4
Total Non-Interest Income	$	4,688,393	$	3,788,566	$	899,827		23.8	%

Net gain on sale of investment securities was $961,000 during the six months ended June 30, 2019, an increase of $525,000 or 120.2% compared to a net gain of $436,000 during the same period last year. The Company sold 55 investment securities for proceeds of $61.9 million during the six months ended June 30, 2019 compared to 23 investment securities sold for proceeds of $28.6 million during the same period last year.

Gain on sale of loans decreased $107,000 or 16.4% to $546,000 for the six months ended June 30, 2019 compared to $654,000 during the same period in 2018 as the dollar volume of loans sold decreased.

The Company received a Bank Enterprise Award grant from the United States Department of the Treasury in the amount of $277,000 during the six months ended June 30, 2019 in recognition of its continued commitment to community development in economically distressed areas. A similar grant was received in 2018, but not until the third quarter.

Trust income increased $41,000 or 8.7% due to an increase in assets under management. Check card fee income increased $52,000 or 8.1% reflecting higher transaction volume. Other non-interest income increased $115,000.

Non-Interest Expense

For the six months ended June 30, 2019, non-interest expense increased $1.2 million or 9.6% to $14.0 million compared to $12.8 million for the same period in 2018. The following table summarizes the changes in the components of non-interest expense:

	Six Months Ended June 30,						Increase (Decrease)
	2019			2018			Amounts			Percent
Compensation and Employee Benefits	$	8,316,906		$	7,651,419		$	665,487		8.7	%
Occupancy	1,129,220			1,091,443			37,777			3.5	%
Advertising	349,164			274,090			75,074			27.4	%
Depreciation and Maintenance of Equipment	1,250,197			1,097,720			152,477			13.9	%
FDIC Insurance Premiums	142,482			133,381			9,101			6.8	%
Net Benefit of Operation of OREO	(252,147		)	(159,760		)	(92,387		)	57.8	%
Other	3,049,801			2,670,912			378,889			14.2	%
Total Non-Interest Expense	$	13,985,623		$	12,759,205		$	1,226,418		9.6	%

Compensation and employee benefits expenses were $8.3 million for the six months ended June 30, 2019, an increase of $665,000 or 8.7% from $7.7 million during the same period last year. The increase was due to general annual cost of living increases combined with a slight increase in employees. The Company had an average of 228 full time equivalent employees during the six months ended June 30, 2019 compared to an average of 220 during the six months ended June 30, 2018.

44

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Depreciation and maintenance of equipment increased $152,000 or 13.9% primarily due to additional capital expenses related to our newest branch in Evans, Georgia and another branch in Augusta, Georgia, which is scheduled to open later this year.

The Company had a net benefit of $252,000 from the operation of OREO properties during the six months ended June 30, 2019 compared to a net benefit of $160,000 during the six months ended June 30, 2018. This line item includes all expenses associated with OREO including write-down in value and gain or loss on sales incurred during each period. The Company recorded $137,000 in net gain on sales of OREO properties and write-downs of $14,000 during the first six months of 2019 compared to net gain on sales of$295,000 and write-downs of $50,000 during the same period in 2018.

Provision For Income Taxes

The provision for income taxes increased $179,000 or 21.6% to $1.0 million for the six months ended June 30, 2019 from $827,000 for the same period in 2018. Income before taxes was $5.0 million and $4.4 million for the six months ended June 30, 2019 and 2018, respectively. The Company’s combined federal and state effective income tax rate was 20.2% for the six months ended June 30, 2019 compared to 18.9% for the same period in 2018.

45

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Liquidity Commitments, Capital Resources, and Impact of Inflation and Changing Prices

Liquidity

The Company actively analyzes and manages the Bank’s liquidity with the objective of maintaining an adequate level of liquidity and to ensure the availability of sufficient cash flows to support loan growth, fund deposit withdrawals, fund operations, and satisfy other financial commitments. See the “Consolidated Statements of Cash Flows” contained in Item 1 – Financial Statements, herein.

The primary sources of funds are customer deposits, loan repayments, loan sales, maturing investment securities, and advances from the FHLB. The sources of funds, together with retained earnings and equity, are used to make loans, acquire investment securities and other assets, and fund continuing operations. While maturities and the scheduled amortization of loans are a predictable source of funds, deposit flows and mortgage repayments are greatly influenced by the level of interest rates, economic conditions, and competition. Management believes that the Company’s current liquidity position and its forecasted operating results are sufficient to fund all of its existing commitments.

During the six months ended June 30, 2019 loan disbursements exceeded loan repayments resulting in a $11.5 million or 2.7% increase in total net loans receivable. Also during the six months ended June 30, 2019, deposits increased $19.0 million or 2.5% and FHLB advances increased $26.7 million or 78.4%. The Bank had $220.4 million in additional borrowing capacity at the FHLB at the end of the period. At June 30, 2019, the Bank had $170.6 million of certificates of deposit maturing within one year. Based on previous experience, the Bank anticipates a significant portion of these certificates will be renewed on maturity.

At June 30, 2019, the Bank exceeded all regulatory capital requirements with Common Equity Tier 1 Capital (CET1), Tier 1 leverage-based capital, Tier 1 risk-based capital, and total risk-based capital ratios of 16.0%, 9.6%, 16.0%, and 17.3%, respectively. To be categorized as “well capitalized” under the prompt corrective action provisions the Bank must maintain minimum CET1, total risk based capital, Tier 1 risk based capital and Tier 1 leverage capital ratios of 6.5%, 10.0%, 8.0% and 5.0%, respectively. In addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer, which consists of additional CET1 capital greater than 2.5% of risk weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At June 30, 2019 the Bank’s conservation buffer was 9.3%.

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 $3.0 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 $3.0 billion or more in assets, at June 30, 2019, it would have exceeded all regulatory capital requirements with CET1, Tier 1 leverage-based capital, Tier 1 risk- based capital and total risk-based capital ratios of 14.7%, 9.4%, 15.6%, and 16.9%, respectively.

Off-Balance Sheet Commitments

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments generally include commitments to originate mortgage, commercial and consumer loans, and involve to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The Company’s maximum exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amount of those instruments. Since some commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company uses the same credit policies in making commitments as it does for on-balance sheet instruments. Collateral is not required to support commitments.

The following table sets forth the length of time until maturity for unused commitments to extend credit and standby letters of credit at June 30, 2019.

(Dollars in thousands)	One Month or Less		One Through Three Months		Three Through Twelve Months		Total Within One Year		Greater Than One Year		Total
Unused Lines of Credit	$	726	$	6,659	$	22,185	$	29,570	$	60,372	$	89,942
Standby Letters of Credit	10		495		775		1,280		213		1,493
Total	$	736	$	7,154	$	22,960	$	30,850	$	60,585	$	91,435

46

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and rates. The Company’s market risk arises principally from interest rate risk inherent in its lending, investment, deposit and borrowing activities. Management actively monitors and manages its interest rate risk exposure. Although the Company manages other risks such as credit quality and liquidity risk in the normal course of business, management considers interest rate risk to be its most significant market risk that could potentially have the largest material effect on the Company’s financial condition and results of operations. Other types of market risks such as foreign currency exchange rate risk and commodity price do not arise in the normal course of the Company’s business activities.

The Company’sprofitability is affected by fluctuations in the market interest rate. Management’s goal is to maintain a reasonable balance between exposure to interest rate fluctuations and earnings. A sudden and substantial increase or decrease in interest rates may adversely impact the Company’s earnings to the extent that the interest rates on interest-earning assets and interest-bearing liabilities do not change at the same rate, to the same extent or on the same basis. The Company monitors the impact of changes in interest rates on its net interest income using a test that measures the impact on net interest income and net portfolio value of an immediate change in interest rates in 100 basis point increments. Net portfolio value is defined as the net present value of assets, liabilities, and off-balance sheet contracts. There were no material changes in information concerning market risk from the information provided in the Company’s 2018 Form 10-K.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures: An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a - 15(e) of the Securities Exchange Act of 1934 (“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 quarterly report. The Company’s Chief Executive Officer and Chief Financial Officer concluded that at June 30, 2019 the Company’s disclosure controls and procedures were 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 period specified in the Securities and Exchange Commission’s rules and forms. There have been no significant changes in our internal controls over financial reporting during the quarter ended June 30, 2019 that have materially affected or are reasonably likely to affect our internal controls over financial reporting.

The Company does not expect that its disclosure controls and procedures will prevent all error and or fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control procedure, misstatements due to error or fraud may occur and not be detected.

Part II: Other Information

Item 1    Legal Proceedings

The Company is not engaged in any legal proceedings of a material nature at the present time. From time to time, the Company is a party to legal proceedings in the ordinary course of business wherein it enforces its security interest in mortgage loans it has made.

47

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Item 1A    Risk Factors

There have been no material changes in the risk factors previously disclosed in the Company’s 2018 Form 10-K.

Item 2    Unregistered Sales of Equity Securities and Use Of Proceeds

None

Item 3    Defaults Upon Senior Securities

None

Item 4    Mine Safety Disclosures

Not applicable

Item 5    Other Information

None

Item 6    Exhibits

3.1	Articles of Incorporation, as amended (1)
3.2	Amended and Restated Bylaws (2)
4.1	Form of Stock Certificate of the Company and other instruments defining the rights of security holders, including indentures (3)
4.2	Form of Indenture with respect to the Company's 8.0% Convertible Senior Debentures Due 2029 (4)
4.3	Specimen Convertible Senior Debenture Due 2029 (4)
10.1	1993 Salary Continuation Agreements (5)
10.2	Amendment One to 1993 Salary Continuation Agreements (6)
10.3	Form of 2006 Salary Continuation Agreement (7)
10.4	Form of Security Federal Split Dollar Agreement (7)
10.5	1999 Stock Option Plan (8)
10.6	2002 Stock Option Plan (9)
10.7	2006 Stock Option Plan (10)
10.8	2008 Equity Incentive Plan (11)
10.9	Forms of incentive stock option agreement and non-qualified stock option agreement pursuant to the 2006 Stock Option Plan (10)
10.10	2018 Employee Stock Purchase Plan (12)
10.11	Incentive Compensation Plan (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	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
101	The following materials from Security Federal Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Extensible Business Reporting Language (XBRL): (a) Consolidated Balance Sheets; (b) Consolidated Statements of Income; (c) Consolidated Statements of Comprehensive Income (Loss); (d) Consolidated Statements of Changes in Shareholders’ Equity; (e) Consolidated Statements of Cash Flows; and (f) 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.

48

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

(2) Filed on January 16, 2015 as an exhibit to the Company’s Current Report on Form 8-K dated January 15, 2015 and incorporated herein by reference.

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

(4) 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.

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

(6) 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.

(7) 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.

(8) Filed on March 2, 2000, as an exhibit to the Company's Registration Statement on Form S-8 and incorporated herein by reference

(9) Filed on January 3, 2003, as an exhibit to the Company's Registration Statement on Form S-8 and incorporated herein by reference.

(10) 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.

(11) Filed on November 12, 2008, as an exhibit to the Company's Registration Statement on Form S-8 and incorporated herein by reference.

(12) Filed on March 28, 2018, as an exhibit to the Company’s Proxy Statement and incorporated herein by reference.

49

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements 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:	August 13, 2019	By:	/s/J. Chris Verenes
				J. Chris Verenes
				Chief Executive Officer
				Duly Authorized Representative

Date:	August 13, 2019	By:	/s/Jessica T. Cummins
				Jessica T. Cummins
				Chief Financial Officer
				Duly Authorized Representative

50

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act

31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act

32 Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act

101 The following materials from Security Federal Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Extensible Business Reporting Language (XBRL): (a) Consolidated Balance Sheets; (b) Consolidated Statements of Income; (c) Consolidated Statements of Comprehensive Income (Loss); (d) Consolidated Statements of Changes in Shareholders’ Equity; (e) Consolidated Statements of Cash Flows; and (f) Notes to Consolidated Financial Statements

51

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 quarterly report on Form 10-Q 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: August 13, 2019

/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 quarterly report on Form 10-Q 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: August 13, 2019

/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 Quarterly Report on Form 10-Q, 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: August 13, 2019

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 13, 2019
Entity [Abstract]
Entity Registrant Name	Security Federal Corporation
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Central Index Key	0000818677
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		2,955,925
Entity Filer Category	Non-accelerated Filer
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Shell Company	false
Entity Current Reporting Status	Yes

XML

Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
ASSETS:
Cash and Cash Equivalents	$ 11,019,027	$ 12,705,910
Certificates of Deposit with Other Banks	950,005	1,200,010
Investment and Mortgage-Backed Securities:
Available For Sale (AFS)	434,193,401	386,255,837
Investment and Mortgage-Backed Securities, Held to Maturity	22,513,877	23,638,013
Total Investments And Mortgage-Backed Securities	456,707,278	409,893,850
Loans Receivable, Net:
Held For Sale	3,750,815	1,781,985
Loans and Leases Receivable, Net Amount	437,824,853	428,271,532
Total Loans Receivable, Net	441,575,668	430,053,517
Accrued Interest Receivable:
Loans	1,208,960	1,257,683
Mortgage-Backed Securities	608,127	591,849
Investment Securities	1,768,256	1,877,844
Total Accrued Interest Receivable	3,585,343	3,727,376
Operating Lease, Right-of-Use Asset	2,901,753	0
Premises and Equipment, Net	25,505,350	24,174,707
Federal Home Loan Bank (FHLB) Stock, at Cost	3,401,200	2,204,000
Other Real Estate Owned (OREO)	734,140	722,442
Bank Owned Life Insurance (BOLI)	21,507,893	21,237,893
Goodwill	1,199,754	1,199,754
Other Assets	4,325,166	5,494,800
Total Assets	973,412,577	912,614,259
Liabilities:
Deposit Accounts	786,448,829	767,496,707
Advance Payments By Borrowers For Taxes And Insurance	529,875	258,505
Advances From FHLB	60,700,000	34,030,000
Other Borrowings	15,753,586	10,698,429
Junior Subordinated Debentures	5,155,000
Junior Subordinated Debentures	5,155,000	5,155,000
Notes Payable	0	2,362,500
Senior Convertible Debentures	6,044,000
Senior Convertible Debentures	6,044,000	6,064,000
Operating Lease, Liability	2,909,137	0
Other Liabilities	6,735,520	6,030,685
Total Liabilities	884,275,947	832,095,826
Shareholders' Equity:
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued and Outstanding Shares, 3,156,858 and 2,955,925, Respectively, at June 30, 2019 and 3,154,829 and 2,953,896, Respectively, at December 31, 2018	31,569	31,548
Additional Paid-In Capital	12,282,115	12,235,341
Treasury Stock, at Cost (200,933 Shares)	(4,330,712)	(4,330,712)
Accumulated Other Comprehensive Income (Loss) (AOCI)	5,102,605	(27,909)
Retained Earnings	76,051,053	72,610,165
Total Shareholders' Equity	89,136,630	80,518,433
Total Liabilities and Shareholders' Equity	$ 973,412,577	$ 912,614,259

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 427,407,791	$ 386,296,513
Fair Value of Investment And Mortgage-Backed Securities Held To Maturity	22,869,540	23,249,400
Allowance For Loan Losses	$ 8,753,539	$ 9,171,717
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	0	22,000
Serial Preferred Stock Shares Outstanding	0	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	3,156,858	3,154,829
Common Stock, Shares, Outstanding	2,955,925	2,953,896
Treasury Stock Shares Held	200,933	200,933

XML

Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Interest Income:
Loans	$ 6,046,834	$ 5,685,638	$ 12,050,336	$ 11,075,125
Mortgage-Backed Securities	1,621,616	1,276,967	3,170,738	2,592,387
Investment Securities	1,434,119	1,057,234	2,848,112	2,117,900
Other	25,832	8,908	90,037	17,156
Total Interest Income	9,128,401	8,028,747	18,159,223	15,802,568
Interest Expense:
NOW and Money Market Accounts	570,965	262,005	1,056,438	449,210
Savings Accounts	18,868	12,747	35,194	24,300
Certificate Accounts	1,064,133	612,197	1,976,793	1,149,758
FHLB Advances and Other Borrowed Money	167,050	164,848	324,160	355,870
Interest Expense, Other	11,738	62,263	35,515	138,934
Senior Convertible Debentures	120,880	121,280	241,760	242,560
Junior Subordinated Debentures	55,771	50,331	113,181	94,016
Total Interest Expense	2,009,405	1,285,671	3,783,041	2,454,648
Net Interest Income	7,118,996	6,743,076	14,376,182	13,347,920
Provision For Loan Losses	0	0	100,000	0
Net Interest Income After Provision For Loan Losses	7,118,996	6,743,076	14,276,182	13,347,920
Non-Interest Income:
Gain on Sale of Investment Securities	670,134	0	960,902	436,304
Gain on Sale of Loans	372,048	367,646	546,331	653,649
Service Fees on Deposit Accounts	254,610	250,493	506,627	507,672
Commissions From Insurance Agency	175,693	149,111	326,993	328,336
Trust Income	258,600	243,500	517,200	476,000
BOLI Income	135,000	135,000	270,000	270,000
Grant Revenue	17,414	0	277,029	0
Check card revenue	355,321	338,611	697,655	645,657
Other	253,741	260,185	585,656	470,948
Total Non-Interest Income	2,492,561	1,744,546	4,688,393	3,788,566
Non-Interest Expense:
Compensation and Employee Benefits	4,137,872	3,842,295	8,316,906	7,651,419
Occupancy	576,987	540,175	1,129,220	1,091,443
Advertising	176,480	85,418	349,164	274,090
Depreciation and Maintenance of Equipment	639,840	557,423	1,250,197	1,097,720
Federal Deposit Insurance Corporation (FDIC) Insurance Premiums	69,306	66,595	142,482	133,381
Net Recovery of OREO Operation	(160,033)	(198,493)	(252,147)	(159,760)
Other	1,800,656	1,346,846	3,049,801	2,670,912
Total Non-Interest Expense	7,241,108	6,240,259	13,985,623	12,759,205
Income Before Income Taxes	2,370,449	2,247,363	4,978,952	4,377,281
Provision For Income Taxes	486,418	427,409	1,006,048	827,210
Net Income	1,884,031	1,819,954	3,972,904	3,550,071
Net Income	$ 1,884,031	$ 1,819,954	$ 3,972,904	$ 3,550,071
Net Income Per Common Share (Basic)	$ 0.64	$ 0.62	$ 1.34	$ 1.20
Net Income Per Common Share (Diluted)	0.61	0.59	1.28	1.15
Cash Dividend Per Share on Common Stock	$ 0.09	$ 0.09	$ 0.18	$ 0.18
Weighted Average Shares Outstanding (Basic)	2,955,650	2,953,412	2,955,086	2,953,297
Weighted Average Shares Outstanding (Diluted)	3,257,850	3,257,017	3,257,286	3,256,929

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net Income	$ 1,884,031	$ 1,819,954	$ 3,972,904	$ 3,550,071
Other Comprehensive Income:
Other Comprehensive Income (Loss), Transfers from Held-to-maturity to Available-for-Sale Securities, Net of Tax		(20,562)	(15,816)	(46,240)
Reclassification Adjustment for Gains Included in Net Income, Net of Taxes of $167,534 at June 30, 2019	(502,600)	0	(720,676)	(327,228)
Amortization of Unrealized Gains on AFS Securities Transferred to HTM	(5,792)
Unrealized Holding Gains (Losses) on Securities AFS, Net of Taxes of $921,187 and $(289,726) at June 30, 2019 and 2018, Respectively	(2,820,989)	884,515	(5,867,006)	3,627,413
Other Comprehensive Income (Loss), Net of Tax	2,312,597	(905,077)	5,130,514	(4,000,881)
Comprehensive Income	$ 4,196,628	$ 914,877	$ 9,103,418	$ (450,810)

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Other Comprehensive Income, Amortization on Unrealized Gain on AFS Transfer to HTM, Tax	$ (1,931)	$ (6,854)	$ (5,272)	$ (17,719)
Other Comprehensive Income (Loss), Securities, Available-for-Sale, Unrealized Holding Gain (Loss) Arising During Period, Tax	921,187	(289,726)
Other Comprehensive Income (Loss), Securities, Available-for-sale, Tax			1,920,184	(1,186,283)
Other Comprehensive Income (Loss), Available-for-sale Securities, before Reclassification Adjustments, Tax	$ 167,534	$ 0
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI for Sale of Securities, Tax			$ 240,226	$ 109,076

XML

Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($)	Total	Common Stock	Additional Paid-In Capital	Treasury Stock	Accumulated Other Comprehensive Income	Retained Earnings
Balance at at Dec. 31, 2017	$ 77,923,454	$ 31,539	$ 12,212,844	$ (4,330,712)	$ 2,932,122	$ 67,077,661
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	1,730,117					1,730,117
Other Comprehensive Income, Net Of Tax:	(3,095,804)				(3,095,804)
Cash Dividends on Common Stock	(265,889)					265,889
Balance at at Mar. 31, 2018	76,299,897	31,543	12,220,859	(4,330,712)	447,409	67,930,798
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock Issued During Period, Value, Stock Options Exercised	8,019
Balance at at Dec. 31, 2017	77,923,454	31,539	12,212,844	(4,330,712)	2,932,122	67,077,661
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	3,550,071
Other Comprehensive Income, Net Of Tax:	(4,000,881)
Balance at at Jun. 30, 2018	76,951,167	31,544	12,223,149	(4,330,712)	(457,668)	69,484,854
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock Issued During Period, Value, Stock Options Exercised		1
Adjustments to Additional Paid in Capital, Share-based Compensation, Stock Options, Requisite Service Period Recognition			2,290
Balance at at Mar. 31, 2018	76,299,897	31,543	12,220,859	(4,330,712)	447,409	67,930,798
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	1,819,954					1,819,954
Other Comprehensive Income, Net Of Tax:	(905,077)				(905,077)
Cash Dividends on Common Stock	(265,898)					265,898
Balance at at Jun. 30, 2018	76,951,167	31,544	12,223,149	(4,330,712)	(457,668)	69,484,854
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock Issued During Period, Value, Stock Options Exercised	2,291
Balance at at Dec. 31, 2018	80,518,433	31,548	12,235,341	(4,330,712)	(27,909)	72,610,165
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	2,088,873					2,088,873
Other Comprehensive Income, Net Of Tax:	2,817,917				2,817,917
Stock Issued During Period, Value, Employee Stock Purchase Plan	12,009	5
Adjustments to Additional Paid in Capital, Share-based Compensation, Employee Stock Purchase Program, Requisite Service Period Recognition			12,004
Stock Issued During Period, Value, Stock Options Exercised		10
Adjustments to Additional Paid in Capital, Share-based Compensation, Stock Options, Requisite Service Period Recognition			19,990
Stock Issued During Period, Value, Conversion of Convertible Securities, Net of Adjustments	20,000
Cash Dividends on Common Stock	(265,982)					265,982
Balance at at Mar. 31, 2019	85,191,250	31,563	12,267,335	(4,330,712)	2,790,008	74,433,056
Balance at at Dec. 31, 2018	80,518,433	31,548	12,235,341	(4,330,712)	(27,909)	72,610,165
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	3,972,904
Other Comprehensive Income, Net Of Tax:	5,130,514
Balance at at Jun. 30, 2019	89,136,630	31,569	12,282,115	(4,330,712)	5,102,605	76,051,053
Balance at at Mar. 31, 2019	85,191,250	31,563	12,267,335	(4,330,712)	2,790,008	74,433,056
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	1,884,031					1,884,031
Other Comprehensive Income, Net Of Tax:	2,312,597				2,312,597
Stock Issued During Period, Value, Employee Stock Purchase Plan	14,786	6
Adjustments to Additional Paid in Capital, Share-based Compensation, Employee Stock Purchase Program, Requisite Service Period Recognition			14,780
Reclass from AOCI to Retained Earnings for stranded tax effect					0	0
Cash Dividends on Common Stock	(266,034)					266,034
Balance at at Jun. 30, 2019	$ 89,136,630	$ 31,569	$ 12,282,115	$ (4,330,712)	$ 5,102,605	$ 76,051,053

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 3,972,904	$ 3,550,071
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Depreciation Expense	781,982	704,130
Discount Accretion and Premium Amortization	2,636,812	2,917,979
Provision for Loan Losses	100,000	0
Earnings on BOLI	(270,000)	(270,000)
Gain on Sales of Loans	(546,331)	(653,649)
Gain on Sales of Mortgage-Backed Securities (MBS)	(2,459)	(181,034)
Gain on Sales of Investment Securities	(958,443)	(255,270)
Gain on Sales of OREO	(137,274)	(307,316)
Write Down on OREO	14,000	50,000
Amortization of Operating Lease ROU Asset	188,759
Amortization of Deferred Loan Costs	89,585	39,554
Proceeds From Sale of Loans Held For Sale	19,548,315	24,602,224
Origination of Loans Held For Sale	(20,970,814)	(23,426,657)
Decrease (Increase) in Accrued Interest Receivable:
Loans	48,723	13,235
MBS	(16,278)	44,299
Investment Securities	109,588	(11,590)
Increase in Advance Payments By Borrowers	271,370	294,178
Decrease in Other, Net	(2,678)	(340,203)
Net Cash Provided By Operating Activities	4,857,761	6,769,951
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of MBS AFS	(71,340,833)	(21,859,860)
Proceeds from Payments and Maturities of MBS AFS	16,427,795	18,844,610
Proceeds from Payments and Maturities of MBS Held To Maturity (HTM)	0
Proceeds from Maturities, Prepayments and Calls of Long-term Investments		2,000,000
Proceeds from (Payments for) in Interest-bearing Deposits in Banks	250,005	0
Proceeds from Maturities, Prepayments and Calls of Mortgage Backed Securities (MBS)	1,020,431	1,564,802
Purchase of Investment Securities AFS	(67,023,891)	(27,418,272)
Proceeds from Sale, Maturity and Collection of Investments	17,308,244	16,336,240
Proceeds From Sale of Investment Securities Available For Sale	35,174,873	11,563,456
Proceeds From Sale Of Mortgage-Backed Securities Available For Sale	26,770,329	17,007,024
Purchase of FHLB Stock	(4,517,900)	(4,080,600)
Redemption of FHLB Stock	3,320,700	4,512,200
Payment to Acquire Life Insurance Policy, Investing Activities	0	(1,900,000)
Increase (Decrease) In Loans Receivable	(10,545,706)	(40,310,177)
Proceeds From Sale of OREO	914,376	599,434
Purchase and Improvement of Premises and Equipment	(2,112,625)	(884,239)
Net Cash Used By Investing Activities	(54,354,202)	(24,025,382)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Deposit Accounts	18,952,122	36,399,604
Proceeds from FHLB Advances	143,080,000	150,778,000
Repayment of FHLB Advances	(116,410,000)	(162,023,000)
Proceeds from (Repayments of) Other Debt	5,055,157	2,829,389
Repayments of Notes Payable	(2,362,500)	(3,400,000)
Proceeds from Stock Options Exercised	0	10,310
Proceeds from Stock Plans	26,795	0
Dividends to Common Stock Shareholders	(532,016)	(531,787)
Net Cash Provided By Financing Activities	47,809,558	24,062,516
Net (Decrease) Increase in Cash and Cash Equivalents	(1,686,883)	6,807,085
Cash and Cash Equivalents at Beginning of Period	12,705,910	10,319,624
Cash and Cash Equivalents at End of Period	11,019,027	17,126,709
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid for Interest	3,531,407	2,450,522
Cash Paid for Income Taxes	746,541	422,273
Non-Cash Transactions:
Transfers From Loans Receivable to OREO	$ 802,800	$ 315,550

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and accounting principles generally accepted in the United States of America ("GAAP"); therefore, they do not include all disclosures necessary for a complete presentation of financial condition, results of operations, and cash flows.  Such statements are unaudited but, in the opinion of management, reflect all adjustments, which are of a normal recurring nature and necessary for a fair presentation of results for the selected interim periods.  Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the audited consolidated financial statements appearing in Security Federal Corporation’s (the “Company”) 2018 Annual Report to Shareholders which was filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”) when reviewing interim financial statements. 

XML

Principles of Consolidation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Principles of Consolidation

XML

Critical Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Critical Accounting Policies

Critical Accounting Policies

The Company has adopted various accounting policies, which govern the application of accounting principles generally accepted in the United States in the preparation of our financial statements.  Our significant accounting policies are described in the footnotes to the audited consolidated financial statements at December 31, 2018 included in our 2018 Annual Report to Shareholders.  Certain accounting policies involve significant judgments and assumptions by management, which have a material impact on the carrying value of certain assets and liabilities, and, as such, have a greater possibility of producing results that could be materially different than originally reported.  We consider these accounting policies to be critical accounting policies.  The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances.  Because of the nature of the judgments and assumptions we make, actual results could differ from these judgments and estimates which could have a material impact on our carrying values of assets and liabilities and our results of operations.

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

3. Critical Accounting Policies, Continued

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

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

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

XML

Earnings Per Common Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

	Three Months Ended June 30,
	2019						2018
	Income		Shares	Per Share Amounts			Income		Shares	Per Share Amounts
Basic EPS	$	1,884,031	2,955,650	$	0.64		$	1,819,954	2,953,412	$	0.62
Effect of Dilutive Securities:
Stock Options	—		—	—			—		405	—
Senior Convertible Debentures	90,660		302,200	(0.03		)	90,960		303,200	(0.03)
Diluted EPS	$	1,974,691	3,257,850	$	0.61		$	1,910,914	3,257,017	$	0.59

	Six Months Ended June 30,
	2019					2018
	Income		Shares	Per Share Amounts		Income		Shares	Per Share Amounts
Basic EPS	$	3,972,904	2,955,086	$	1.34	$	3,550,071	2,953,297	$	1.20
Effect of Dilutive Securities:
Stock Options	—		—	—		—		432	—
Senior Convertible Debentures	181,320		302,200	(0.06)		181,920		303,200	(0.05)
Diluted EPS	$	4,154,224	3,257,286	$	1.28	$	3,731,991	3,256,929	$	1.15

Earnings Per Share

Accounting guidance specifies the computation, presentation and disclosure requirements for earnings per share (“EPS”) for entities with publicly held common stock or potential common stock such as options, warrants, convertible securities or contingent stock agreements if those securities trade in a public market. Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding.  Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive common shares had been issued.  The dilutive effect of options outstanding under the Company’s stock option plan is reflected in diluted EPS by application of the treasury stock method. There were no stock options outstanding at June 30, 2019. All of the options outstanding at June 30, 2018 had an exercise price below the average market price during the six months ended June 30, 2018. Therefore, these options were considered to be dilutive to EPS in that period. Diluted EPS also assumes the convertible debentures were converted into 302,200 and 303,200 shares of common stock at the beginning of both the three and six month periods ended June 30, 2019 and 2018, respectively. The related interest expense recorded during the period is added back to the EPS numerator while the underlying shares are added to the denominator.

The following tables include a summary of the Company's basic and diluted EPS for the periods indicated.

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Benefit Plans

Stock-Based Compensation

Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Options are granted at exercise prices not less than the fair value of the Company’s common stock on the date of the grant. At June 30, 2019, the Company had no remaining options outstanding and there was no activity during the six months ended June 30, 2019.

The following is a summary of the activity under the Company’s stock option plans for the three and six months ended June 30, 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018				2018
	Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Balance, Beginning of Period	4,150		$	22.91	4,500	$	22.91
Options Exercised	(100	)	22.91		(450)	22.91
Options Forfeited	(2,400	)	22.91		(2,400)	22.91
Balance, End of Period	1,650		$	22.91	1,650	$	22.91
Options Exercisable	1,650				1,650
Options Available For Grant	50,000				50,000

XML

Investment and Mortgage-Backed Securities, Available for Sale

6 Months Ended

Jun. 30, 2019

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 were as follows:

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	42,103,107	$	238	$	300,679	$	41,802,666
Small Business Administration (“SBA”) Bonds	127,569,964		819,719		526,779		127,862,904
Tax Exempt Municipal Bonds	43,719,725		3,209,011		1,659		46,927,077
Taxable Municipal Bonds	994,317		40,013		—		1,034,330
Mortgage-Backed Securities	212,865,678		3,888,596		342,850		216,411,424
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	427,407,791	$	7,957,577	$	1,171,967	$	434,193,401
	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	12,934,037	$	20,713	$	69,249	$	12,885,501
SBA Bonds	125,777,016		560,352		890,837		125,446,531
Tax Exempt Municipal Bonds	60,141,164		1,518,974		329,769		61,330,369
Taxable Municipal Bonds	1,998,258		3,546		23,919		1,977,885
Mortgage-Backed Securities	185,291,038		1,073,432		1,903,919		184,460,551
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	386,296,513	$	3,177,017	$	3,217,693	$	386,255,837

Student Loan Pools are typically 97% guaranteed by the United States government while SBA bonds are 100% backed by the full faith and credit of the United States government. Included in the tables above and below in mortgage-backed securities are Government National Mortgage Association ("GNMA") mortgage-backed securities, which are also backed by the full faith and credit of the United States government.  At June 30, 2019, AFS GNMA mortgage-backed securities had an amortized cost and fair value of $88.4 million and $89.3 million, respectively, compared to an amortized cost and fair value of $80.4 million and $80.2 million, respectively, at December 31, 2018.

Also included in mortgage-backed securities in the tables above and below are private label collateralized mortgage obligation ("CMO") securities, which are issued by non-governmental real estate mortgage investment conduits and are not backed by the full faith and credit of the United States government.  At June 30, 2019 the Bank held AFS private label CMO mortgage-backed securities with an amortized cost and fair value of $27.5 million and $27.8 million, respectively, compared to an amortized cost and fair value of $29.7 million and $29.5 million, respectively, at December 31, 2018.

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

The amortized cost and fair value of investment and mortgage-backed securities available for sale at June 30, 2019 are shown below by contractual maturity.  Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties. Since mortgage-backed securities are not due at a single maturity date, they are disclosed separately, rather than allocated over the maturity groupings set forth in the table below.

	June 30, 2019
Investment Securities:	Amortized Cost		Fair Value
One Year or Less	$	557,354	$	557,305
After One – Five Years	7,115,134		7,184,250
After Five – Ten Years	53,034,809		53,245,373
More Than Ten Years	153,834,816		156,795,049
Mortgage-Backed Securities	212,865,678		216,411,424
Total Available For Sale	$	427,407,791	$	434,193,401

At June 30, 2019 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 $149.0 million and $150.9 million, respectively, compared to an amortized cost and fair value of $111.8 million and $111.7 million, respectively, at December 31, 2018.

The Company received $61.9 million and $28.6 million in gross proceeds from sales of available for sale securities during the six months ended June 30, 2019 and 2018, respectively. As a result, the Company recognized gross gains of $1.2 million and $503,000 during the six months ended June 30, 2019 and 2018, respectively, with $283,000 and $67,000 gross losses recognized for the same periods, respectively.

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

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	32,833,351	$	267,097	$	2,025,945	$	33,582	$	34,859,296	$	300,679
SBA Bonds	5,500,585		35,593		54,691,034		491,186		60,191,619		526,779
Tax Exempt Municipal Bonds	—		—		1,145,730		1,659		1,145,730		1,659
Mortgage-Backed Securities	22,979,022		142,857		22,160,286		199,993		45,139,308		342,850
	$	61,312,958	$	445,547	$	80,022,995	$	726,420	$	141,335,953	$	1,171,967

	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	8,384,145	$	69,249	$	—	$	—	$	8,384,145	$	69,249
SBA Bonds	59,496,936		479,955		25,054,861		410,882		84,551,797		890,837
Tax Exempt Municipal Bonds	4,585,849		91,281		9,626,613		238,488		14,212,462		329,769
Taxable Municipal Bond	—		—		980,520		23,919		980,520		23,919
Mortgage-Backed Securities	38,168,598		249,050		81,947,249		1,654,869		120,115,847		1,903,919
	$	110,635,528	$	889,535	$	117,609,243	$	2,328,158	$	228,244,771	$	3,217,693

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

Securities classified as available for sale are recorded at fair market value.  At June 30, 2019 and December 31, 2018, 62.0% and 72.4% of the unrealized losses, representing 73 and 92 individual securities, respectively, consisted of securities in a continuous loss position for 12 months or more. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature.  The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”).

Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value. If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or the Company may recognize a portion in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment. There was no OTTI recognized during the six months ended June 30, 2019.

XML

Investment and Mortgage-Backed Securities, Held to Maturity

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investment and Mortgage-Backed Securities, Held to Maturity

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

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of held to maturity securities at the dates indicated below were as follows:

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Federal Home Loan Mortgage Corporation ("FHLMC") Bond	$	998,764	$	1,565	$	—	$	1,000,329
Mortgage-Backed Securities (1)	21,515,113		385,464		31,366		21,869,211
Total Held To Maturity	$	22,513,877	$	387,029	$	31,366	$	22,869,540
	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
FHLMC Bond	$	998,541	$	—	$	20,564	$	977,977
Mortgage-Backed Securities (1)	22,639,472		78,281		446,330		22,271,423
Total Held To Maturity	$	23,638,013	$	78,281	$	466,894	$	23,249,400

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

The FHLB, FHLMC and the Federal National Mortgage Association ("FNMA") are government sponsored enterprises ("GSEs") and the securities and bonds issued by GSEs are not backed by the full faith and credit of the United States government.  At June 30, 2019, the Bank held an amortized cost and fair value of $12.5 million and $12.8 million, respectively, in GNMA mortgage-backed securities classified as held to maturity, which are included in the table above, compared to an amortized cost and fair value of $13.3 million and $13.1 million, respectively, at December 31, 2018. The Company has not invested in any private label mortgage-backed securities classified as held to maturity.

At June 30, 2019, the amortized cost and fair value of mortgage-backed securities held to maturity that were pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $18.7 million and $19.0 million, respectively, compared to an amortized cost and fair value of $19.8 million and $19.4 million, respectively, at December 31, 2018.

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

The amortized cost and fair value of investment and mortgage-backed securities held to maturity at June 30, 2019 are shown below by contractual maturity.  Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties. Since mortgage-backed securities are not due at a single maturity date, they are disclosed separately, rather than allocated over the maturity groupings set forth in the table below.

	June 30, 2019
Investment Securities HTM:	Amortized Cost		Fair Value
One – Five Years	$	998,764	$	1,000,329
Mortgage-Backed Securities	21,515,113		21,869,211
Total Held to Maturity	$	22,513,877	$	22,869,540

The following tables show gross unrealized losses, fair value, and length of time that individual held to maturity securities have been in a continuous unrealized loss position at the dates indicated below.

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-Backed Securities (1)	$	—	$	—	$	4,802,482	$	31,366	$	4,802,482	$	31,366
	$	—	$	—	$	4,802,482	$	31,366	$	4,802,482	$	31,366

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

	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLMC Bond	$	—	$	—	$	977,977	$	20,564	$	977,977	$	20,564
Mortgage-Backed Securities (1)	—		—		16,855,973		446,330		16,855,973		446,330
	$	—	$	—	$	17,833,950	$	466,894	$	17,833,950	$	466,894

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

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

XML

Loans Receivable, Net

6 Months Ended

Jun. 30, 2019

Loans Receivable, Net [Abstract]

Financing Receivables [Text Block]

Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates indicated below:

	June 30, 2019		December 31, 2018
Residential Real Estate Loans	$	86,342,461	$	83,965,416
Consumer Loans	55,487,981		56,907,555
Commercial Business Loans	28,644,611		28,086,686
Commercial Real Estate Loans	284,436,448		275,960,438
Total Loans Held For Investment	454,911,501		444,920,095
Loans Held For Sale	3,750,815		1,781,985
Total Loans Receivable, Gross	$	458,662,316	$	446,702,080
Less:
Allowance For Loan Losses	8,753,539		9,171,717
Loans in Process	7,976,939		7,225,271
Deferred Loan Fees	356,170		251,575
	17,086,648		16,648,563
Total Loans Receivable, Net	$	441,575,668	$	430,053,517

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

The tables below summarize the balance within each risk category by loan type, excluding loans held for sale, at June 30, 2019 and December 31, 2018.

June 30, 2019	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	77,215,699	$	4,408,390	$	1,258,332	$	3,460,040	$	86,342,461
Consumer	45,116,336		8,043,951		476,096		1,851,598		55,487,981
Commercial Business	22,838,747		5,210,616		329,530		265,718		28,644,611
Commercial Real Estate	211,766,521		51,632,311		16,617,403		4,420,213		284,436,448
Total	$	356,937,303	$	69,295,268	$	18,681,361	$	9,997,569	$	454,911,501

December 31, 2018	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	75,558,544	$	3,369,776	$	958,354	$	4,078,742	$	83,965,416
Consumer	46,948,251		6,899,912		567,682		2,491,710		56,907,555
Commercial Business	22,670,318		4,708,036		339,533		368,799		28,086,686
Commercial Real Estate	204,197,354		45,653,796		18,492,785		7,616,503		275,960,438
Total	$	349,374,467	$	60,631,520	$	20,358,354	$	14,555,754	$	444,920,095

8.    Loans Receivable, Net, Continued

The following tables present an age analysis of past due balances, including loans on non-accrual status, by category at June 30, 2019 and December 31, 2018:

	June 30, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential Real Estate	$	317,819	$	—	$	55,844	$	373,663	$	85,968,798	$	86,342,461
Consumer	346,110		170,596		44,051		560,757		54,927,224		55,487,981
Commercial Business	60,945		35,448		42,968		139,361		28,505,250		28,644,611
Commercial Real Estate	1,576,388		16,509		2,071,736		3,664,633		280,771,815		284,436,448
Total	$	2,301,262	$	222,553	$	2,214,599	$	4,738,414	$	450,173,087	$	454,911,501

	December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential Real Estate	$	—	$	332,000	$	497,713	$	829,713	$	83,135,703	$	83,965,416
Consumer	555,798		247,894		1,120,462		1,924,154		54,983,401		56,907,555
Commercial Business	205,613		106,163		18,648		330,424		27,756,262		28,086,686
Commercial Real Estate	1,556,863		424,103		1,634,770		3,615,736		272,344,702		275,960,438
Total	$	2,318,274	$	1,110,160	$	3,271,593	$	6,700,027	$	438,220,068	$	444,920,095

At June 30, 2019 and December 31, 2018, the Company did not have any loans that were 90 days or more past due and still accruing interest. The Company's strategy is to work with its borrowers to reach acceptable payment plans while protecting its interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, the Company may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.

The following table shows non-accrual loans by category at June 30, 2019 compared to December 31, 2018:

	June 30, 2019				December 31, 2018				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	1,377,567	0.3	%	$	2,084,870	0.5	%	$	(707,303	)	(33.9)%
Consumer	354,381		0.1		1,274,673		0.3		$	(920,292	)	(72.2)
Commercial Business	115,375		—		124,458		—		(9,083		)	(7.3)
Commercial Real Estate	2,614,607		0.6		3,564,494		0.8		(949,887		)	(26.6)
Total Non-accrual Loans	$	4,461,930	1.0	%	$	7,048,495	1.5	%	$	(2,586,565	)	(36.7)%

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

8.    Loans Receivable, Net, Continued

The following tables show the activity in the allowance for loan losses by category for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,147,670		$	1,121,205		$	991,982		$	5,537,698		$	8,798,555
Provision for Loan Losses	(23,308		)	69,702			(95,635		)	49,241			—
Charge-Offs	—			(135,286		)	—			(28,079		)	(163,365		)
Recoveries	1,450			36,706			496			79,697			118,349
Ending Balance	$	1,125,812		$	1,092,327		$	896,843		$	5,638,557		$	8,753,539

	Six Months Ended June 30, 2019
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,191,443		$	1,203,593		$	923,600		$	5,853,081		$	9,171,717
Provision for Loan Losses	(35,958		)	74,508			(40,189		)	101,639			100,000
Charge-Offs	(34,599		)	(265,480		)	(1,132		)	(428,164		)	(729,375		)
Recoveries	4,926			79,706			14,564			112,001			211,197
Ending Balance	$	1,125,812		$	1,092,327		$	896,843		$	5,638,557		$	8,753,539

	Three Months Ended June 30, 2018
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,207,254		$	1,042,150		$	1,128,680		$	4,825,932		$	8,204,016
Provision for Loan Losses	104,394			185,314			(40,216		)	(249,492		)	—
Charge-Offs	(2,579		)	(73,774		)	(11,031		)	(9,890		)	(97,274		)
Recoveries	—			60,084			—			444,350			504,434
Ending Balance	$	1,309,069		$	1,213,774		$	1,077,433		$	5,010,900		$	8,611,176

	Six Months Ended June 30, 2018
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,233,843		$	1,144,815		$	1,011,227		$	4,831,733		$	8,221,618
Provision for Loan Losses	88,949			72,381			98,724			(260,054		)	—
Charge-Offs	(13,930		)	(91,026		)	(32,518		)	(9,890		)	(147,364		)
Recoveries	207			87,604			—			449,111			536,922
Ending Balance	$	1,309,069		$	1,213,774		$	1,077,433		$	5,010,900		$	8,611,176

8.    Loans Receivable, Net, Continued

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

	Allowance For Loan Losses
June 30, 2019	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,125,812	$	1,125,812
Consumer	71,301		1,021,026		1,092,327
Commercial Business	—		896,843		896,843
Commercial Real Estate	565,000		5,073,557		5,638,557
Total	$	636,301	$	8,117,238	$	8,753,539

	Allowance For Loan Losses
December 31, 2018	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,191,443	$	1,191,443
Consumer	73,662		1,129,931		1,203,593
Commercial Business	—		923,600		923,600
Commercial Real Estate	665,000		5,188,081		5,853,081
Total	$	738,662	$	8,433,055	$	9,171,717

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

	Loans Receivable
June 30, 2019	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	1,142,166	$	85,200,295	$	86,342,461
Consumer	206,117		55,281,864		55,487,981
Commercial Business	72,407		28,572,204		28,644,611
Commercial Real Estate	3,380,756		281,055,692		284,436,448
Total	$	4,801,446	$	450,110,055	$	454,911,501

	Loans Receivable
December 31, 2018	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	1,700,861	$	82,264,555	$	83,965,416
Consumer	1,060,043		55,847,512		56,907,555
Commercial Business	77,206		28,009,480		28,086,686
Commercial Real Estate	6,526,015		269,434,423		275,960,438
Total	$	9,364,125	$	435,555,970	$	444,920,095

8.    Loans Receivable, Net, Continued

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired management measures the impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sell, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and, if it is over 24 months old, will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis. The average balance of impaired loans was $4.9 million for the three months ended June 30, 2019 compared to $12.8 million for the three months ended June 30, 2018.

The following tables present information related to impaired loans by loan category at June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018.

	June 30, 2019						December 31, 2018
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With No Related Allowance Recorded:
Residential Real Estate	$	1,142,165	$	1,142,165	$	—	$	1,700,861	$	1,700,861	$	—
Consumer	134,817		143,117		—		986,380		994,680		—
Commercial Business	72,406		967,406		—		77,206		972,206		—
Commercial Real Estate	2,383,766		2,676,723		—		5,084,458		6,116,761		—
With an Allowance Recorded:
Consumer	71,301		71,301		71,301		73,662		73,662		73,662
Commercial Real Estate	996,990		1,396,990		565,000		1,441,558		1,441,558		665,000
Total
Residential Real Estate	1,142,165		1,142,165		—		1,700,861		1,700,861		—
Consumer	206,118		214,418		71,301		1,060,042		1,068,342		73,662
Commercial Business	72,406		967,406		—		77,206		972,206		—
Commercial Real Estate	3,380,756		4,073,713		565,000		6,526,016		7,558,319		665,000
Total	$	4,801,445	$	6,397,702	$	636,301	$	9,364,125	$	11,299,728	$	738,662

8.    Loans Receivable, Net, Continued

	Three Months Ended June 30,
	2019				2018
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Residential Real Estate	$	1,157,380	$	—	$	1,963,932	$	—
Consumer	137,233		—		177,644		—
Commercial Business	73,606		—		85,804		—
Commercial Real Estate	2,481,028		14,085		10,285,113		56,646
With an Allowance Recorded:
Consumer	71,554		—		—		—
Commercial Real Estate	996,990		—		252,821		2,509
Total
Residential Real Estate	1,157,380		—		1,963,932		—
Consumer	208,787		—		177,644		—
Commercial Business	73,606		—		85,804		—
Commercial Real Estate	3,478,018		14,085		10,537,934		59,155
Total	$	4,917,791	$	14,085	$	12,765,314	$	59,155

	Six Months Ended June 30,
	2019				2018
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Residential Real Estate	$	1,347,984	$	—	$	2,089,364	$	1,078
Consumer	982,404		—		179,177		—
Commercial Business	75,149		—		91,260		—
Commercial Real Estate	2,866,245		28,332		10,325,567		117,215
With an Allowance Recorded:
Consumer	72,072		—		—		—
Commercial Real Estate	1,181,152		—		252,821		2,849
Total
Residential Real Estate	1,347,984		—		2,089,364		1,078
Consumer	1,054,476		—		179,177		—
Commercial Business	75,149		—		91,260		—
Commercial Real Estate	4,047,397		28,332		10,578,388		120,064
Total	$	6,525,006	$	28,332	$	12,938,189	$	121,142

8.    Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Company may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (Financial Accounting Standards Board ("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 Company grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.  

At the date of modification, TDRs are initially classified as nonaccrual TDRs. TDR loans 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).

TDRs included in impaired loans at June 30, 2019 and December 31, 2018 were $896,000 and $1.4 million, respectively, and the Company had no commitments at these dates to lend additional funds on these loans. There were no new TDRs during the six months ended June 30, 2019 and 2018. At June 30, 2019, there were no TDR loans in default. In comparison, at June 30, 2018, two TDR loans with a combined balance of $607,000 were in default. There were no TDRs, for which there was a payment default within the first 12 months of the modification during the six months ended June 30, 2019 and 2018. The Bank considers any loan 30 days or more past due to be in default.

The Company's policy with respect to accrual of interest on loans restructured as 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 probable. 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.

The Company closely monitors 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.  The Company's policy with respect tononperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the modified loan terms before that loan can be placed back on accrual status.  Further, the borrower must demonstrate the capacity to continue making payments on the loan prior to restoration of accrual status.

XML

Regulatory Matters

6 Months Ended

Jun. 30, 2019

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 $3.0 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 $3.0 billion or more in assets, it would have exceeded all regulatory capital requirements with Common Equity Tier 1 ("CET1") capital, Tier 1 leverage-based capital, Tier 1 risk-based capital and total risk-based capital ratios of 14.7%, 9.4%, 15.6% and 16.9%, respectively, at June 30, 2019.

9. Regulatory Matters, Continued

Based on its capital levels at June 30, 2019, 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 June 30, 2019, 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 tables below provide the Bank’s regulatory capital requirements and actual results at the dates indicated.

	Actual			For Capital Adequacy			To Be "Well-Capitalized"
(Dollars in Thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
	June 30, 2019
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	90,261	16.0%	$	33,775	6.0%	$	45,033	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	97,319		17.3%	45,033		8.0%	56,292		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	90,261		16.0%	25,331		4.5%	36,590		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	90,261		9.6%	37,528		4.0%	46,910		5.0%
	December 31, 2018
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	89,188	16.2%	$	33,005	6.0%	$	44,007	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	96,092		17.5%	44,007		8.0%	55,009		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	89,188		16.2%	24,754		4.5%	35,756		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	89,188		9.8%	36,486		4.0%	45,608		5.0%

In addition to the minimum capital requirements, the Bank must maintain a capital conservation buffer, which consists of additional CET1 capital greater than 2.5% of risk weighted assets above the required minimum levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses. At June 30, 2019 the Bank’s conservation buffer was 9.3%.

XML

Carrying Amounts and Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Carrying Amounts and Fair Value of Financial Instruments

Carrying Amounts and Fair Value of Financial Instruments

GAAP requires the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet and to measure that fair value using an exit price notion, the price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions.

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).

Level 1 -	Quoted Market Price in Active Markets 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 -	Significant Other Observable Inputs 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 -	Significant Unobservable Inputs 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 June 30, 2019, the Company’s investment portfolio was comprised of student loan pools, government and agency bonds, mortgage-backed securities issued by government agencies or GSEs, private label CMO mortgage-backed securities, municipal securities, and one equity investment. 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 a result, 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 the FHLMC or other 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 a commitment 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.

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

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 impaired, management measures the impairment by determining the fair value of the collateral for the loan.

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 June 30, 2019, our impaired loans were generally 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. At June 30, 2019 and December 31, 2018, the recorded investment in impaired loans was $4.8 million and $9.4 million, respectively.

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. Foreclosed assets are recorded as nonrecurring Level 3.

Assets measured at fair value on a recurring basis were as follows at June 30, 2019 and December 31, 2018:

	June 30, 2019						December 31, 2018
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Student Loan Pools	$	—	$	41,802,666	$	—	$	—	$	12,885,501	$	—
SBA Bonds	—		127,862,904		—		—		125,446,531		—
Tax Exempt Municipal Bonds	—		46,927,077		—		—		61,330,369		—
Taxable Municipal Bonds	—		1,034,330		—		—		1,977,885		—
Mortgage-Backed Securities	—		216,411,424		—		—		184,460,551		—
Equity Securities	—		155,000		—		—		155,000		—
Total	$	—	$	434,193,401	$	—	$	—	$	386,255,837	$	—

There were no liabilities measured at fair value on a recurring basis at either June 30, 2019 or December 31, 2018.

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

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 tables below present assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall. 

	June 30, 2019
Assets:	Level 1		Level 2		Level 3		Total
Mortgage Loans Held For Sale	$	—	$	3,750,815	$	—	$	3,750,815
Collateral Dependent Impaired Loans (1)	—		—		4,155,630		4,155,630
Foreclosed Assets	—		—		734,140		734,140
Total	$	—	$	3,750,815	$	4,889,770	$	8,640,585

	December 31, 2018
Assets:	Level 1		Level 2		Level 3		Total
Mortgage Loans Held For Sale	$	—	$	1,781,985	$	—	$	1,781,985
Collateral Dependent Impaired Loans (1)	—		—		8,613,570		8,613,570
Foreclosed Assets	—		—		722,442		722,442
Total	$	—	$	1,781,985	$	9,336,012	$	11,117,997

^{(1) COLLATERAL IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $636,000 AND $739,000 AT JUNE 30, 2019 AND DECEMBER 31, 2018, RESPECTIVELY.}  

There were no liabilities measured at fair value on a nonrecurring basis at either June 30, 2019 or December 31, 2018.

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis at June 30, 2019, the significant unobservable inputs used in the fair value measurements were as follows:

			Valuation	Significant
Level 3 Assets	Fair Value		Technique	Unobservable Inputs	Range
Collateral Dependent Impaired Loans	$	4,155,630	Appraised Value	Discount Rates/ Discounts to Appraised Values	4% - 97%
Foreclosed Assets	$	734,140	Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	16% - 68%

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 Deposit 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.

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

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.

Note Payable—The carrying value of the note payable 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.

The following tables provide a summary of the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2019 and December 31, 2018 presented in accordance with the applicable accounting guidance.

June 30, 2019	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	11,019	$	11,019	$	11,019	$	—	$	—
Certificates of Deposits with Other Banks	950		950		—		950		—
Investment and Mortgage-Backed Securities	456,707		457,063		—		457,063		—
Loans Receivable, Net	441,576		438,290		—		—		438,290
FHLB Stock	3,401		3,401		3,401		—		—
Financial Liabilities:
Deposits:
Checking, Savings & Money Market Accounts	$	535,901	$	535,901	$	535,901	$	—	$	—
Certificate Accounts	250,547		250,222		—		250,222		—
Advances from FHLB	60,700		60,785		—		60,785		—
Other Borrowed Money	15,754		15,754		15,754		—		—
Senior Convertible Debentures	6,044		6,044		—		6,044		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—

December 31, 2018	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	12,706	$	12,706	$	12,706	$	—	$	—
Certificates of Deposits with Other Banks	1,200		1,200		—		1,200		—
Investment and Mortgage-Backed Securities	409,894		409,505		—		409,505		—
Loans Receivable, Net	430,054		421,379		—		—		421,379
FHLB Stock	2,204		2,204		2,204		—		—
Financial Liabilities:
Deposits:
Checking, Savings & Money Market Accounts	$	529,043	$	529,043	$	529,043	$	—	$	—
Certificate Accounts	238,454		236,103		—		236,103		—
Advances from FHLB	34,030		33,771		—		33,771		—
Other Borrowed Money	10,698		10,698		10,698		—		—
Note Payable	2,363		2,363		—		2,363		—
Senior Convertible Debentures	6,064		6,064		—		6,064		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—

10. Carrying Amounts and Fair Value of Financial Instruments, Continued

At June 30, 2019, the Bank had $91.4 million in 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 amount 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.

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.

XML

Non-interest Income (Notes)

6 Months Ended

Jun. 30, 2019

Other Income and Expenses [Abstract]

Other Income and Other Expense Disclosure [Text Block]

12. Non-Interest Income

The Company recognizes revenue as it is earned and noted no impact to its revenue recognition policies as a result of the adoption of ASU 2014-09. The following is a discussion of key revenues within the scope of this guidance.

Revenue Recognition

In accordance with Topic 606, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services that are promised within each contract and identifies those that contain performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

12. Non-Interest Income, Continued

Deposit Fees

The Bank earns fees from its deposit customers for account maintenance, transaction-based and overdraft services.  Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly basis.  The performance obligation is satisfied and the fees are recognized on a monthly basis as the service period is completed. Transaction-based fees on deposits accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

Check Card Fee Income

Check card fee income represents fees earned when a debit card issued by the Bank is used.  The Bank earns interchange fees from debit cardholder transactions through the Mastercard payment network.  Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The performance obligation is satisfied and the fees are earned when the cost of the transaction is charged to the card.  Certain expenses directly associated with the debit card are recorded on a net basis with the fee income.

Trust Income

Trust income includes monthly advisory fees that are based on assets under management and certain transaction fees that are assessed and earned monthly, concurrently with the investment management services provided to the customer. The Bank does not charge performance based fees for its trust services and does not currently have any institutional clients, hedge funds or mutual funds. Although trust income is included within the scope of ASC 606, based on the fees charged by the Bank, there were no changes in the accounting for trust income at this time.  

Gains/Losses on OREO Sales

Gains/losses on the sale of OREO are included in non-interest expense and are generally recognized when the performance obligation is complete. This is typically at delivery of control over the property to the buyer at the time of each real estate closing.

The following table presents the Company's non-interest income for the three and six months ended June 30, 2019 and 2018. All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income, with the exception of gains on the sale of OREO, which are included in non-interest expense when applicable.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Non-interest income:
Service fees on deposit accounts	$	254,610	$	250,493	$	506,627	$	507,672
Check card fee income	355,321		338,611		697,655		645,657
Trust income	258,600		243,500		517,200		476,000
Insurance commissions (1)	175,693		149,111		326,993		328,336
Gain on sale of investment securities, net (1)	670,134		—		960,902		436,304
Gain on sale of loans, net (1)	372,048		367,646		546,331		653,649
BOLI income (1)	135,000		135,000		270,000		270,000
Grant income (1)	17,414		—		277,029		—
Other non-interest income (1)	253,741		260,185		585,656		470,948
Total non-interest income	$	2,492,561	$	1,744,546	$	4,688,393	$	3,788,566
(1) Not within the scope of ASC 606

XML

Subsequent Events

6 Months Ended

Jun. 30, 2019

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 consolidated financial statements were available to be issued and determined that there were no subsequent events requiring disclosure.

XML

Critical Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Allowance for Loan Losses

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

3. Critical Accounting Policies, Continued

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

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

Income Taxes

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

XML

Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Reconciliation of net income to net income available to common shareholders

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Activity under stock option plans

	Three Months Ended June 30,				Six Months Ended June 30,
	2018				2018
	Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Balance, Beginning of Period	4,150		$	22.91	4,500	$	22.91
Options Exercised	(100	)	22.91		(450)	22.91
Options Forfeited	(2,400	)	22.91		(2,400)	22.91
Balance, End of Period	1,650		$	22.91	1,650	$	22.91
Options Exercisable	1,650				1,650
Options Available For Grant	50,000				50,000

Options outstanding

XML

Investment and Mortgage-Backed Securities, Available for Sale (Tables)

6 Months Ended

Jun. 30, 2019

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 were as follows:

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	42,103,107	$	238	$	300,679	$	41,802,666
Small Business Administration (“SBA”) Bonds	127,569,964		819,719		526,779		127,862,904
Tax Exempt Municipal Bonds	43,719,725		3,209,011		1,659		46,927,077
Taxable Municipal Bonds	994,317		40,013		—		1,034,330
Mortgage-Backed Securities	212,865,678		3,888,596		342,850		216,411,424
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	427,407,791	$	7,957,577	$	1,171,967	$	434,193,401
	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	12,934,037	$	20,713	$	69,249	$	12,885,501
SBA Bonds	125,777,016		560,352		890,837		125,446,531
Tax Exempt Municipal Bonds	60,141,164		1,518,974		329,769		61,330,369
Taxable Municipal Bonds	1,998,258		3,546		23,919		1,977,885
Mortgage-Backed Securities	185,291,038		1,073,432		1,903,919		184,460,551
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	386,296,513	$	3,177,017	$	3,217,693	$	386,255,837

Schedule of Available For Sale Securities, Contractual Maturities

	June 30, 2019
Investment Securities:	Amortized Cost		Fair Value
One Year or Less	$	557,354	$	557,305
After One – Five Years	7,115,134		7,184,250
After Five – Ten Years	53,034,809		53,245,373
More Than Ten Years	153,834,816		156,795,049
Mortgage-Backed Securities	212,865,678		216,411,424
Total Available For Sale	$	427,407,791	$	434,193,401

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 the individual available for sale securities were in a continuous unrealized loss position at the dates indicated.

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	32,833,351	$	267,097	$	2,025,945	$	33,582	$	34,859,296	$	300,679
SBA Bonds	5,500,585		35,593		54,691,034		491,186		60,191,619		526,779
Tax Exempt Municipal Bonds	—		—		1,145,730		1,659		1,145,730		1,659
Mortgage-Backed Securities	22,979,022		142,857		22,160,286		199,993		45,139,308		342,850
	$	61,312,958	$	445,547	$	80,022,995	$	726,420	$	141,335,953	$	1,171,967

	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	8,384,145	$	69,249	$	—	$	—	$	8,384,145	$	69,249
SBA Bonds	59,496,936		479,955		25,054,861		410,882		84,551,797		890,837
Tax Exempt Municipal Bonds	4,585,849		91,281		9,626,613		238,488		14,212,462		329,769
Taxable Municipal Bond	—		—		980,520		23,919		980,520		23,919
Mortgage-Backed Securities	38,168,598		249,050		81,947,249		1,654,869		120,115,847		1,903,919
	$	110,635,528	$	889,535	$	117,609,243	$	2,328,158	$	228,244,771	$	3,217,693

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

	June 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	32,833,351	$	267,097	$	2,025,945	$	33,582	$	34,859,296	$	300,679
SBA Bonds	5,500,585		35,593		54,691,034		491,186		60,191,619		526,779
Tax Exempt Municipal Bonds	—		—		1,145,730		1,659		1,145,730		1,659
Mortgage-Backed Securities	22,979,022		142,857		22,160,286		199,993		45,139,308		342,850
	$	61,312,958	$	445,547	$	80,022,995	$	726,420	$	141,335,953	$	1,171,967

XML

Loans Receivable, Net (Tables)

6 Months Ended

Jun. 30, 2019

Loans Receivable, Net [Abstract]

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

The following table shows non-accrual loans by category at June 30, 2019 compared to December 31, 2018:

	June 30, 2019				December 31, 2018				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	1,377,567	0.3	%	$	2,084,870	0.5	%	$	(707,303	)	(33.9)%
Consumer	354,381		0.1		1,274,673		0.3		$	(920,292	)	(72.2)
Commercial Business	115,375		—		124,458		—		(9,083		)	(7.3)
Commercial Real Estate	2,614,607		0.6		3,564,494		0.8		(949,887		)	(26.6)
Total Non-accrual Loans	$	4,461,930	1.0	%	$	7,048,495	1.5	%	$	(2,586,565	)	(36.7)%

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

Impaired Financing Receivables [Table Text Block]

The following tables present information related to impaired loans by loan category at June 30, 2019 and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018.

	June 30, 2019						December 31, 2018
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With No Related Allowance Recorded:
Residential Real Estate	$	1,142,165	$	1,142,165	$	—	$	1,700,861	$	1,700,861	$	—
Consumer	134,817		143,117		—		986,380		994,680		—
Commercial Business	72,406		967,406		—		77,206		972,206		—
Commercial Real Estate	2,383,766		2,676,723		—		5,084,458		6,116,761		—
With an Allowance Recorded:
Consumer	71,301		71,301		71,301		73,662		73,662		73,662
Commercial Real Estate	996,990		1,396,990		565,000		1,441,558		1,441,558		665,000
Total
Residential Real Estate	1,142,165		1,142,165		—		1,700,861		1,700,861		—
Consumer	206,118		214,418		71,301		1,060,042		1,068,342		73,662
Commercial Business	72,406		967,406		—		77,206		972,206		—
Commercial Real Estate	3,380,756		4,073,713		565,000		6,526,016		7,558,319		665,000
Total	$	4,801,445	$	6,397,702	$	636,301	$	9,364,125	$	11,299,728	$	738,662

8.    Loans Receivable, Net, Continued

	Three Months Ended June 30,
	2019				2018
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Residential Real Estate	$	1,157,380	$	—	$	1,963,932	$	—
Consumer	137,233		—		177,644		—
Commercial Business	73,606		—		85,804		—
Commercial Real Estate	2,481,028		14,085		10,285,113		56,646
With an Allowance Recorded:
Consumer	71,554		—		—		—
Commercial Real Estate	996,990		—		252,821		2,509
Total
Residential Real Estate	1,157,380		—		1,963,932		—
Consumer	208,787		—		177,644		—
Commercial Business	73,606		—		85,804		—
Commercial Real Estate	3,478,018		14,085		10,537,934		59,155
Total	$	4,917,791	$	14,085	$	12,765,314	$	59,155

	Six Months Ended June 30,
	2019				2018
Impaired Loans	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Residential Real Estate	$	1,347,984	$	—	$	2,089,364	$	1,078
Consumer	982,404		—		179,177		—
Commercial Business	75,149		—		91,260		—
Commercial Real Estate	2,866,245		28,332		10,325,567		117,215
With an Allowance Recorded:
Consumer	72,072		—		—		—
Commercial Real Estate	1,181,152		—		252,821		2,849
Total
Residential Real Estate	1,347,984		—		2,089,364		1,078
Consumer	1,054,476		—		179,177		—
Commercial Business	75,149		—		91,260		—
Commercial Real Estate	4,047,397		28,332		10,578,388		120,064
Total	$	6,525,006	$	28,332	$	12,938,189	$	121,142

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

0

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent [Table Text Block]

The following tables show the activity in the allowance for loan losses by category for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,147,670		$	1,121,205		$	991,982		$	5,537,698		$	8,798,555
Provision for Loan Losses	(23,308		)	69,702			(95,635		)	49,241			—
Charge-Offs	—			(135,286		)	—			(28,079		)	(163,365		)
Recoveries	1,450			36,706			496			79,697			118,349
Ending Balance	$	1,125,812		$	1,092,327		$	896,843		$	5,638,557		$	8,753,539

	Six Months Ended June 30, 2019
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,191,443		$	1,203,593		$	923,600		$	5,853,081		$	9,171,717
Provision for Loan Losses	(35,958		)	74,508			(40,189		)	101,639			100,000
Charge-Offs	(34,599		)	(265,480		)	(1,132		)	(428,164		)	(729,375		)
Recoveries	4,926			79,706			14,564			112,001			211,197
Ending Balance	$	1,125,812		$	1,092,327		$	896,843		$	5,638,557		$	8,753,539

	Three Months Ended June 30, 2018
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,207,254		$	1,042,150		$	1,128,680		$	4,825,932		$	8,204,016
Provision for Loan Losses	104,394			185,314			(40,216		)	(249,492		)	—
Charge-Offs	(2,579		)	(73,774		)	(11,031		)	(9,890		)	(97,274		)
Recoveries	—			60,084			—			444,350			504,434
Ending Balance	$	1,309,069		$	1,213,774		$	1,077,433		$	5,010,900		$	8,611,176

	Six Months Ended June 30, 2018
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,233,843		$	1,144,815		$	1,011,227		$	4,831,733		$	8,221,618
Provision for Loan Losses	88,949			72,381			98,724			(260,054		)	—
Charge-Offs	(13,930		)	(91,026		)	(32,518		)	(9,890		)	(147,364		)
Recoveries	207			87,604			—			449,111			536,922
Ending Balance	$	1,309,069		$	1,213,774		$	1,077,433		$	5,010,900		$	8,611,176

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Loans receivable, net, consisted of the following as of the dates indicated below:

	June 30, 2019		December 31, 2018
Residential Real Estate Loans	$	86,342,461	$	83,965,416
Consumer Loans	55,487,981		56,907,555
Commercial Business Loans	28,644,611		28,086,686
Commercial Real Estate Loans	284,436,448		275,960,438
Total Loans Held For Investment	454,911,501		444,920,095
Loans Held For Sale	3,750,815		1,781,985
Total Loans Receivable, Gross	$	458,662,316	$	446,702,080
Less:
Allowance For Loan Losses	8,753,539		9,171,717
Loans in Process	7,976,939		7,225,271
Deferred Loan Fees	356,170		251,575
	17,086,648		16,648,563
Total Loans Receivable, Net	$	441,575,668	$	430,053,517

Schedule of Allowance for Loan Losses

Financing Receivable Credit Quality Indicators [Table Text Block]

The tables below summarize the balance within each risk category by loan type, excluding loans held for sale, at June 30, 2019 and December 31, 2018.

June 30, 2019	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	77,215,699	$	4,408,390	$	1,258,332	$	3,460,040	$	86,342,461
Consumer	45,116,336		8,043,951		476,096		1,851,598		55,487,981
Commercial Business	22,838,747		5,210,616		329,530		265,718		28,644,611
Commercial Real Estate	211,766,521		51,632,311		16,617,403		4,420,213		284,436,448
Total	$	356,937,303	$	69,295,268	$	18,681,361	$	9,997,569	$	454,911,501

December 31, 2018	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	75,558,544	$	3,369,776	$	958,354	$	4,078,742	$	83,965,416
Consumer	46,948,251		6,899,912		567,682		2,491,710		56,907,555
Commercial Business	22,670,318		4,708,036		339,533		368,799		28,086,686
Commercial Real Estate	204,197,354		45,653,796		18,492,785		7,616,503		275,960,438
Total	$	349,374,467	$	60,631,520	$	20,358,354	$	14,555,754	$	444,920,095

Past Due Financing Receivables [Table Text Block]

The following tables present an age analysis of past due balances, including loans on non-accrual status, by category at June 30, 2019 and December 31, 2018:

	June 30, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential Real Estate	$	317,819	$	—	$	55,844	$	373,663	$	85,968,798	$	86,342,461
Consumer	346,110		170,596		44,051		560,757		54,927,224		55,487,981
Commercial Business	60,945		35,448		42,968		139,361		28,505,250		28,644,611
Commercial Real Estate	1,576,388		16,509		2,071,736		3,664,633		280,771,815		284,436,448
Total	$	2,301,262	$	222,553	$	2,214,599	$	4,738,414	$	450,173,087	$	454,911,501

	December 31, 2018
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential Real Estate	$	—	$	332,000	$	497,713	$	829,713	$	83,135,703	$	83,965,416
Consumer	555,798		247,894		1,120,462		1,924,154		54,983,401		56,907,555
Commercial Business	205,613		106,163		18,648		330,424		27,756,262		28,086,686
Commercial Real Estate	1,556,863		424,103		1,634,770		3,615,736		272,344,702		275,960,438
Total	$	2,318,274	$	1,110,160	$	3,271,593	$	6,700,027	$	438,220,068	$	444,920,095

Allowance for Credit Losses on Financing Receivables [Table Text Block]

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

	Allowance For Loan Losses
June 30, 2019	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,125,812	$	1,125,812
Consumer	71,301		1,021,026		1,092,327
Commercial Business	—		896,843		896,843
Commercial Real Estate	565,000		5,073,557		5,638,557
Total	$	636,301	$	8,117,238	$	8,753,539

	Allowance For Loan Losses
December 31, 2018	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	—	$	1,191,443	$	1,191,443
Consumer	73,662		1,129,931		1,203,593
Commercial Business	—		923,600		923,600
Commercial Real Estate	665,000		5,188,081		5,853,081
Total	$	738,662	$	8,433,055	$	9,171,717

	Loans Receivable
June 30, 2019	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	1,142,166	$	85,200,295	$	86,342,461
Consumer	206,117		55,281,864		55,487,981
Commercial Business	72,407		28,572,204		28,644,611
Commercial Real Estate	3,380,756		281,055,692		284,436,448
Total	$	4,801,446	$	450,110,055	$	454,911,501

	Loans Receivable
December 31, 2018	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	1,700,861	$	82,264,555	$	83,965,416
Consumer	1,060,043		55,847,512		56,907,555
Commercial Business	77,206		28,009,480		28,086,686
Commercial Real Estate	6,526,015		269,434,423		275,960,438
Total	$	9,364,125	$	435,555,970	$	444,920,095

XML

Regulatory Matters (Tables)

6 Months Ended

Jun. 30, 2019

Banking and Thrift [Abstract]

Regulatory capital amounts and ratios

	Actual			For Capital Adequacy			To Be "Well-Capitalized"
(Dollars in Thousands)	Amount		Ratio	Amount		Ratio	Amount		Ratio
	June 30, 2019
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	90,261	16.0%	$	33,775	6.0%	$	45,033	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	97,319		17.3%	45,033		8.0%	56,292		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	90,261		16.0%	25,331		4.5%	36,590		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	90,261		9.6%	37,528		4.0%	46,910		5.0%
	December 31, 2018
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	89,188	16.2%	$	33,005	6.0%	$	44,007	8.0%
Total Risk-Based Capital (To Risk Weighted Assets)	96,092		17.5%	44,007		8.0%	55,009		10.0%
Common Equity Tier 1 Capital (To Risk Weighted Assets)	89,188		16.2%	24,754		4.5%	35,756		6.5%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	89,188		9.8%	36,486		4.0%	45,608		5.0%

XML

Carrying Amounts and Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair value measurements, recurring basis

Assets measured at fair value on a recurring basis were as follows at June 30, 2019 and December 31, 2018:

	June 30, 2019						December 31, 2018
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Student Loan Pools	$	—	$	41,802,666	$	—	$	—	$	12,885,501	$	—
SBA Bonds	—		127,862,904		—		—		125,446,531		—
Tax Exempt Municipal Bonds	—		46,927,077		—		—		61,330,369		—
Taxable Municipal Bonds	—		1,034,330		—		—		1,977,885		—
Mortgage-Backed Securities	—		216,411,424		—		—		184,460,551		—
Equity Securities	—		155,000		—		—		155,000		—
Total	$	—	$	434,193,401	$	—	$	—	$	386,255,837	$	—

Fair value measurements, nonrecurring basis

The tables below present assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall. 

	June 30, 2019
Assets:	Level 1		Level 2		Level 3		Total
Mortgage Loans Held For Sale	$	—	$	3,750,815	$	—	$	3,750,815
Collateral Dependent Impaired Loans (1)	—		—		4,155,630		4,155,630
Foreclosed Assets	—		—		734,140		734,140
Total	$	—	$	3,750,815	$	4,889,770	$	8,640,585

	December 31, 2018
Assets:	Level 1		Level 2		Level 3		Total
Mortgage Loans Held For Sale	$	—	$	1,781,985	$	—	$	1,781,985
Collateral Dependent Impaired Loans (1)	—		—		8,613,570		8,613,570
Foreclosed Assets	—		—		722,442		722,442
Total	$	—	$	1,781,985	$	9,336,012	$	11,117,997

^{(1) COLLATERAL IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $636,000 AND $739,000 AT JUNE 30, 2019 AND DECEMBER 31, 2018, RESPECTIVELY.}

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 at June 30, 2019, the significant unobservable inputs used in the fair value measurements were as follows:

			Valuation	Significant
Level 3 Assets	Fair Value		Technique	Unobservable Inputs	Range
Collateral Dependent Impaired Loans	$	4,155,630	Appraised Value	Discount Rates/ Discounts to Appraised Values	4% - 97%
Foreclosed Assets	$	734,140	Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	16% - 68%

Summary of the carrying value and estimated fair value of financial instruments

The following tables provide a summary of the carrying value and estimated fair value of the Company’s financial instruments at June 30, 2019 and December 31, 2018 presented in accordance with the applicable accounting guidance.

June 30, 2019	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	11,019	$	11,019	$	11,019	$	—	$	—
Certificates of Deposits with Other Banks	950		950		—		950		—
Investment and Mortgage-Backed Securities	456,707		457,063		—		457,063		—
Loans Receivable, Net	441,576		438,290		—		—		438,290
FHLB Stock	3,401		3,401		3,401		—		—
Financial Liabilities:
Deposits:
Checking, Savings & Money Market Accounts	$	535,901	$	535,901	$	535,901	$	—	$	—
Certificate Accounts	250,547		250,222		—		250,222		—
Advances from FHLB	60,700		60,785		—		60,785		—
Other Borrowed Money	15,754		15,754		15,754		—		—
Senior Convertible Debentures	6,044		6,044		—		6,044		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—

December 31, 2018	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash and Cash Equivalents	$	12,706	$	12,706	$	12,706	$	—	$	—
Certificates of Deposits with Other Banks	1,200		1,200		—		1,200		—
Investment and Mortgage-Backed Securities	409,894		409,505		—		409,505		—
Loans Receivable, Net	430,054		421,379		—		—		421,379
FHLB Stock	2,204		2,204		2,204		—		—
Financial Liabilities:
Deposits:
Checking, Savings & Money Market Accounts	$	529,043	$	529,043	$	529,043	$	—	$	—
Certificate Accounts	238,454		236,103		—		236,103		—
Advances from FHLB	34,030		33,771		—		33,771		—
Other Borrowed Money	10,698		10,698		10,698		—		—
Note Payable	2,363		2,363		—		2,363		—
Senior Convertible Debentures	6,064		6,064		—		6,064		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—

XML

Non-interest Income (Tables)

6 Months Ended

Jun. 30, 2019

Other Income and Expenses [Abstract]

Schedule of Other Nonoperating Income, by Component [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Non-interest income:
Service fees on deposit accounts	$	254,610	$	250,493	$	506,627	$	507,672
Check card fee income	355,321		338,611		697,655		645,657
Trust income	258,600		243,500		517,200		476,000
Insurance commissions (1)	175,693		149,111		326,993		328,336
Gain on sale of investment securities, net (1)	670,134		—		960,902		436,304
Gain on sale of loans, net (1)	372,048		367,646		546,331		653,649
BOLI income (1)	135,000		135,000		270,000		270,000
Grant income (1)	17,414		—		277,029		—
Other non-interest income (1)	253,741		260,185		585,656		470,948
Total non-interest income	$	2,492,561	$	1,744,546	$	4,688,393	$	3,788,566
(1) Not within the scope of ASC 606

XML

Earnings Per Common Share (Reconciliation of Net Income to Net Income Available to Common Shareholders) (Details) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Available To Common Shareholders
Net Income	$ 1,884,031	$ 2,088,873	$ 1,819,954	$ 1,730,117	$ 3,972,904	$ 3,550,071
Income	$ 1,884,031		$ 1,819,954		$ 3,972,904	$ 3,550,071

XML

Earnings Per Common Share (Narrative) (Details) - shares	3 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Weighted Average Number Diluted Shares Outstanding Adjustment	0	432

XML

Earnings Per Common Share Diluted EPS (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net Income (Loss) Available to Common Stockholders, Basic	$ 1,884,031	$ 1,819,954	$ 3,972,904	$ 3,550,071
Weighted Average Shares Outstanding (Basic)	2,955,650	2,953,412	2,955,086	2,953,297
Net Income Per Common Share (Basic)	$ 0.64	$ 0.62	$ 1.34	$ 1.20
Dilutive Securities, Effect on Basic Earnings Per Share, Dilutive Convertible Securities	$ 90,660	$ 90,960	$ 181,320	$ 181,920
Weighted Average Shares Outstanding, Senior Convertible Debentures	302,200	303,200	302,200	303,200
Weighted Average Number Diluted Shares Outstanding Adjustment	0	432
Incremental Common Shares Attributable to Dilutive Effect of Conversion of Debt Securities	(0.03)	(0.03)	(0.06)	(0.05)
Net Income (Loss) Available to Common Stockholders, Diluted	$ 1,974,691	$ 1,910,914	$ 4,154,224	$ 3,731,991
Weighted Average Shares Outstanding (Diluted)	3,257,850	3,257,017	3,257,286	3,256,929
Net Income Per Common Share (Diluted)	$ 0.61	$ 0.59	$ 1.28	$ 1.15

XML

Stock-Based Compensation (Stock Option Plans) (Details) - $ / shares	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance, Beginning of Period, Shares		4,500
Options Exercised, Shares	(100)	(450)
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	(2,400)	(2,400)
Balance, End of Period, Shares	1,650	1,650
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		$ 22.91
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price	$ 22.91	22.91
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price	22.91	22.91
Balance, End of Period, Weighted Avg. Exercise Price	$ 22.91	$ 22.91

XML

Stock-Based Compensation (Options Outstanding) (Details) - $ / shares	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Mar. 31, 2019	Dec. 31, 2017
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	1,650	1,650	4,150	4,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price	$ 22.91	$ 22.91	$ 22.91	$ 22.91
Options Exercised, Shares	(100)	(450)
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price	$ 22.91	$ 22.91
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	(2,400)	(2,400)
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price	$ 22.91	$ 22.91

XML

Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Available for Sale Securities) (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Gross Realized Losses	$ 283,000	$ 67,000
Available For Sale Securities Pledged as Collateral, Amortized Cost Basis	149,000,000		$ 111,800,000
Pledged Assets Separately Reported, Other Debt Securities Available-for-sale or Held-for-investment	150,900,000		111,700,000
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	427,407,791		386,296,513
Available-for-sale Securities, Gross Unrealized Gains	7,957,577		3,177,017
Available-for-sale Securities, Gross Unrealized Losses	1,171,967		3,217,693
Available-for-sale Securities, Fair Value Disclosure	434,193,401		386,255,837
Proceeds From Sale of Available For Sale Securities Including Mortgage Backed Securities	61,900,000	28,600,000
US States and Political Subdivisions Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	43,719,725		60,141,164
Available-for-sale Securities, Gross Unrealized Gains	3,209,011		1,518,974
Available-for-sale Securities, Gross Unrealized Losses	1,659		329,769
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	27,500,000		29,700,000
Available-for-sale Securities, Fair Value Disclosure	27,800,000
Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Gross Realized Gains	1,200,000	$ 503,000	20,713
Collateralized Loan Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	42,103,107		12,934,037
Available-for-sale Securities, Gross Unrealized Losses	300,679		69,249
Available-for-sale Securities, Gross Realized Gains	238
SBA Bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	127,569,964		125,777,016
Available-for-sale Securities, Gross Unrealized Gains	819,719		560,352
Available-for-sale Securities, Gross Unrealized Losses	526,779		890,837
Mortgage-Backed Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	212,865,678		185,291,038
Available-for-sale Securities, Gross Unrealized Gains	3,888,596		1,073,432
Available-for-sale Securities, Gross Unrealized Losses	342,850		1,903,919
Equity Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	155,000		155,000
Available-for-sale Securities, Gross Unrealized Gains	0		0
Available-for-sale Securities, Gross Unrealized Losses	0		0
Taxable Municipal Bonds [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	994,317		1,998,258
Available-for-sale Securities, Gross Unrealized Gains	40,013		3,546
Available-for-sale Securities, Gross Unrealized Losses	0		23,919
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Fair Value Disclosure	46,927,077		61,330,369
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized Loan Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Fair Value Disclosure	41,802,666		12,885,501
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | SBA Bonds
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Fair Value Disclosure	127,862,904		125,446,531
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-Backed Securities
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Fair Value Disclosure	216,411,424		184,460,551
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Equity Securities
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Fair Value Disclosure	155,000		155,000
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Taxable Municipal Bonds [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 1,034,330		$ 1,977,885

XML

Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Held to Maturity Securities, Contractual Maturities) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Investments, Debt and Equity Securities [Abstract]
Available-for-sale Securities, Gross Realized Losses	$ 283,000	$ 67,000
Debt Securities, Available-for-sale, Amortized Cost, Fiscal Year Maturity [Abstract]
Less Than One Year, Amortized Cost	557,354
One – Five Years, Amortized Cost	7,115,134
Five – Ten Years, Amortized Cost	53,034,809
After Ten Years, Amortized Cost	153,834,816
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	427,407,791
Debt Securities, Available-for-sale, Fair Value, Fiscal Year Maturity [Abstract]
Less Than One Year, Fair Value	557,305
One – Five Years, Fair Value	7,184,250
Five – Ten Years, Fair Value	53,245,373
After Ten Years, Fair Value	156,795,049
Debt Securities, Available-for-sale, Maturity, without Single Maturity Date, Fair Value	$ 434,193,401

XML

Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Temporarily Impaired Securities, Fair Value and Unrealized losses) (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Available For Sale, Percent of Unrealized Losses for Securities in a Continuous Loss Position, 12 Months or Longer	62.00%	72.40%
Debt Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 61,312,958	$ 110,635,528
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	80,022,995	117,609,243
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	141,335,953	228,244,771
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	445,547	889,535
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	726,420	2,328,158
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	1,171,967	3,217,693
Collateralized Loan Obligations [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	32,833,351	8,384,145
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	2,025,945	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	34,859,296	8,384,145
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	267,097	69,249
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	33,582	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	300,679	69,249
SBA Bonds
Debt Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	5,500,585	59,496,936
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	54,691,034	25,054,861
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	60,191,619	84,551,797
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	35,593	479,955
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	491,186	410,882
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	526,779	890,837
Tax Exempt Municipal Bonds
Debt Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	4,585,849
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,145,730	9,626,613
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	1,145,730	14,212,462
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	0	91,281
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	1,659	238,488
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	1,659	329,769
Taxable Municipal Bonds [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value		980,520
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value		980,520
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		0
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses		23,919
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses		23,919
Mortgage-Backed Securities
Debt Securities, Available-for-sale, Unrealized Loss Position [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	22,979,022	38,168,598
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	22,160,286	81,947,249
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	45,139,308	120,115,847
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	142,857	249,050
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	199,993	1,654,869
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	$ 342,850	$ 1,903,919

XML

Investment and Mortgage-Backed Securities, Available for Sale (Narrative) (Details)	6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($) security	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) security
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 427,407,791		$ 386,296,513
Available-for-sale Securities, Fair Value Disclosure	434,193,401		386,255,837
Available For Sale Securities Pledged as Collateral, Amortized Cost Basis	149,000,000		$ 111,800,000
Proceeds From Sale of Available For Sale Securities Including Mortgage Backed Securities	$ 61,900,000	$ 28,600,000
Percent of unrealized losses for securities in a continuous loss position for 12 months or more	62.00%		72.40%
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | security	73		92
Available-for-sale Securities, Gross Realized Losses	$ 283,000	67,000
GNMA Mortgage-Backed Securities
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	88,400,000		$ 80,400,000
Available-for-sale Securities, Fair Value Disclosure	89,300,000		80,200,000
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	27,500,000		29,700,000
Available-for-sale Securities, Fair Value Disclosure	27,800,000
Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Available-for-sale Securities, Gross Realized Gains	$ 1,200,000	$ 503,000	$ 20,713

XML

Investment and Mortgage-Backed Securities, Held to Maturity (Schedule of investment and mortgage-backed securities held to maturity) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Schedule of Held-to-maturity Securities [Line Items]
Held to maturity, gross unrealized gains	$ 387,029
Debt Securities, Held-to-maturity, Amortized Cost, before Other-than-temporary Impairment	22,513,877
Held to maturity, gross unrealized losses	31,366
Debt Securities, Held-to-maturity, Fair Value	22,869,540		$ 23,249,400
Available-for-sale Securities, Gross Realized Losses	283,000	$ 67,000
Federal Home Loan Mortgage Corporation Certificates and Obligations (FHLMC) [Member]
Schedule of Held-to-maturity Securities [Line Items]
Debt Securities, Held-to-maturity	998,764
Held to maturity, gross unrealized gains	1,565
Held to maturity, gross unrealized losses	0
Debt Securities, Held-to-maturity, Fair Value	1,000,329
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Schedule of Held-to-maturity Securities [Line Items]
Debt Securities, Held-to-maturity	21,515,113
Held to maturity, gross unrealized gains	385,464
Held to maturity, gross unrealized losses	31,366
Debt Securities, Held-to-maturity, Fair Value	$ 21,869,211

XML

Investment and Mortgage-Backed Securities, Held to Maturity (Schedule of Held-to-maturity Securities) (Details)	Jun. 30, 2019 USD ($)
Schedule of Held-to-maturity Securities [Line Items]
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	$ 0
Debt Securities, Held-to-maturity, Unrealized Loss Position, Accumulated Loss	31,366
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, Fair Value [Abstract]
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value	4,802,482
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	31,366
Debt Securities, Held-to-maturity, Unrealized Loss Position, Fair Value	4,802,482
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Schedule of Held-to-maturity Securities [Line Items]
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, Less than 12 Months, Fair Value	0
Debt Securities, Held-to-maturity, Unrealized Loss Position, Accumulated Loss	31,366
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, Fair Value [Abstract]
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Fair Value	4,802,482
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	31,366
Debt Securities, Held-to-maturity, Unrealized Loss Position, Fair Value	$ 4,802,482

XML

Investment and Mortgage-Backed Securities, Held to Maturity (Narrative) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Proceeds from Sale of Held-to-maturity Securities	$ 0
Debt Securities, Held-to-maturity, Fair Value	22,869,540	$ 23,249,400
Pledged Financial Instruments, Not Separately Reported, Other Debt Securities Held-to-maturity	18,700,000	19,800,000
Held to maturity pledged as collateral, fair value	19,000,000
US Government Agencies Debt Securities [Member]
Debt Securities, Held-to-maturity, Fair Value	12,800,000	13,100,000
Held-to-maturity Securities, Amortized Cost before Other than Temporary Impairment	$ 12,500,000	$ 13,300,000

XML

Loans Receivable, Net (Schedule of Accounts, Notes, Loans and Financing Receivable) (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Gross	$ 454,911,501	$ 444,920,095
Loans Held For Sale	3,750,815	1,781,985
Total Loans Receivable, Gross	458,662,316	446,702,080
Allowance For Loan Losses	8,753,539	9,171,717
Loans and Leases Receivable, Loans in Process	7,976,939	7,225,271
Loans and Leases Receivable, Deferred Income	356,170	251,575
Loans Receivable, Allowance, Loans in Process, and Deferred Loan Fees	17,086,648	16,648,563
Total Loans Receivable, Net	441,575,668	430,053,517
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Gross	86,342,461	83,965,416
Consumer Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Gross	55,487,981	56,907,555
Commercial Loan [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Gross	28,644,611	28,086,686
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Financing Receivable, Gross	$ 284,436,448	$ 275,960,438

XML

Loans Receivable, Net (Schedule of Allowance for Loan Losses) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance At Beginning of Period	$ 8,798,555	$ 8,204,016	$ 9,171,717	$ 8,221,618
Provision for Loan Losses	0	0	100,000	0
Charge Offs	(163,365)	(97,274)	(729,375)	(147,364)
Recoveries	118,349	504,434	211,197	536,922
Balance At End of Period	8,753,539	8,611,176	8,753,539	8,611,176
Residential Real Estate 1 [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance At Beginning of Period	1,147,670	1,207,254	1,191,443	1,233,843
Provision for Loan Losses	(23,308)	104,394	(35,958)	88,949
Charge Offs	0	(2,579)	(34,599)	(13,930)
Recoveries	1,450	0	4,926	207
Balance At End of Period	1,125,812	1,309,069	1,125,812	1,309,069
Consumer [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance At Beginning of Period	1,121,205	1,042,150	1,203,593	1,144,815
Provision for Loan Losses	69,702	185,314	74,508	72,381
Charge Offs	(135,286)	(73,774)	(265,480)	(91,026)
Recoveries	36,706	60,084	79,706	87,604
Balance At End of Period	1,092,327	1,213,774	1,092,327	1,213,774
Commercial Business [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance At Beginning of Period	991,982	1,128,680	923,600	1,011,227
Provision for Loan Losses	(95,635)	(40,216)	(40,189)	98,724
Charge Offs	0	(11,031)	(1,132)	(32,518)
Recoveries	496	0	14,564	0
Balance At End of Period	896,843	1,077,433	896,843	1,077,433
Commercial Real Estate 1 [Member]
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance At Beginning of Period	5,537,698	4,825,932	5,853,081	4,831,733
Provision for Loan Losses	49,241	(249,492)	101,639	(260,054)
Charge Offs	(28,079)	(9,890)	(428,164)	(9,890)
Recoveries	79,697	444,350	112,001	449,111
Balance At End of Period	$ 5,638,557	$ 5,010,900	$ 5,638,557	$ 5,010,900

XML

Loans Receivable, Net (Financing Receivable Credit Quality Indicators) (Details) - USD ($)

6 Months Ended

Jun. 30, 2019

Dec. 31, 2018

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable Credit Quality Indicators [Table Text Block]

The tables below summarize the balance within each risk category by loan type, excluding loans held for sale, at June 30, 2019 and December 31, 2018.

June 30, 2019	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	77,215,699	$	4,408,390	$	1,258,332	$	3,460,040	$	86,342,461
Consumer	45,116,336		8,043,951		476,096		1,851,598		55,487,981
Commercial Business	22,838,747		5,210,616		329,530		265,718		28,644,611
Commercial Real Estate	211,766,521		51,632,311		16,617,403		4,420,213		284,436,448
Total	$	356,937,303	$	69,295,268	$	18,681,361	$	9,997,569	$	454,911,501

December 31, 2018	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	75,558,544	$	3,369,776	$	958,354	$	4,078,742	$	83,965,416
Consumer	46,948,251		6,899,912		567,682		2,491,710		56,907,555
Commercial Business	22,670,318		4,708,036		339,533		368,799		28,086,686
Commercial Real Estate	204,197,354		45,653,796		18,492,785		7,616,503		275,960,438
Total	$	349,374,467	$	60,631,520	$	20,358,354	$	14,555,754	$	444,920,095

Financing Receivable, Gross

$ 454,911,501

$ 444,920,095

Residential Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

86,342,461

83,965,416

Consumer [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

55,487,981

56,907,555

Commercial Business [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

28,644,611

28,086,686

Commercial Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

284,436,448

275,960,438

Substandard [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

9,997,569

14,555,754

Substandard [Member] | Residential Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

3,460,040

4,078,742

Substandard [Member] | Consumer [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

1,851,598

2,491,710

Substandard [Member] | Commercial Business [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

265,718

368,799

Substandard [Member] | Commercial Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

4,420,213

7,616,503

Special Mention [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

18,681,361

20,358,354

Special Mention [Member] | Residential Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

1,258,332

958,354

Special Mention [Member] | Consumer [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

476,096

567,682

Special Mention [Member] | Commercial Business [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

329,530

339,533

Special Mention [Member] | Commercial Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

16,617,403

18,492,785

Caution [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

69,295,268

60,631,520

Caution [Member] | Residential Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

4,408,390

3,369,776

Caution [Member] | Consumer [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

8,043,951

6,899,912

Caution [Member] | Commercial Business [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

5,210,616

4,708,036

Caution [Member] | Commercial Real Estate [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

51,632,311

45,653,796

Pass [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

356,937,303

349,374,467

Pass [Member] | Residential Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

77,215,699

75,558,544

Pass [Member] | Consumer [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

45,116,336

46,948,251

Pass [Member] | Commercial Business [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

22,838,747

22,670,318

Pass [Member] | Commercial Real Estate 1 [Member]

Financing Receivable, Recorded Investment [Line Items]

Financing Receivable, Gross

$ 211,766,521

$ 204,197,354

XML

Loans Receivable, Net (Past Due Financing Receivables) (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	$ 4,738,414	$ 6,700,027
Financing Receivable, Recorded Investment, Current	450,173,087	438,220,068
Financing Receivable, Gross	454,911,501	444,920,095
Residential Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	373,663	829,713
Financing Receivable, Recorded Investment, Current	85,968,798	83,135,703
Financing Receivable, Gross	86,342,461	83,965,416
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	560,757	1,924,154
Financing Receivable, Recorded Investment, Current	54,927,224	54,983,401
Financing Receivable, Gross	55,487,981	56,907,555
Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	139,361	330,424
Financing Receivable, Recorded Investment, Current	28,505,250	27,756,262
Financing Receivable, Gross	28,644,611	28,086,686
Commercial Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	3,664,633	3,615,736
Financing Receivable, Recorded Investment, Current	280,771,815	272,344,702
Financing Receivable, Gross	284,436,448	275,960,438
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	2,301,262	2,318,274
Financing Receivables, 30 to 59 Days Past Due [Member] | Residential Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	317,819	0
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	346,110	555,798
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	60,945	205,613
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	1,576,388	1,556,863
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	222,553	1,110,160
Financing Receivables, 60 to 89 Days Past Due [Member] | Residential Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	0	332,000
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	170,596	247,894
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	35,448	106,163
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	16,509	424,103
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	2,214,599	3,271,593
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	55,844	497,713
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	44,051	1,120,462
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	42,968	18,648
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	$ 2,071,736	$ 1,634,770

XML

Loans Receivable, Net (Schedule of non-accrual loans by category) (Details) - USD ($)		6 Months Ended
		Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status		$ 4,461,930	$ 7,048,495
FInancing Receivable, Recorded Investment, Nonaccrual Status, Percentage	[1]	1.00%	1.50%
Financing Receivable Recorded Investment in Non-accrual Status, Increase (Decrease)		$ (2,586,565)
Financing Receivable Recorded Investment in Non-accrual Status, Percent, Increase (Decrease)		(36.70%)
Residential Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status		$ 1,377,567	$ 2,084,870
FInancing Receivable, Recorded Investment, Nonaccrual Status, Percentage	[1]	0.30%	0.50%
Financing Receivable Recorded Investment in Non-accrual Status, Increase (Decrease)		$ (707,303)
Financing Receivable Recorded Investment in Non-accrual Status, Percent, Increase (Decrease)		(33.90%)
Commercial Business [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status		$ 115,375	$ 124,458
FInancing Receivable, Recorded Investment, Nonaccrual Status, Percentage	[1]	0.00%	0.00%
Financing Receivable Recorded Investment in Non-accrual Status, Increase (Decrease)		$ (9,083)
Financing Receivable Recorded Investment in Non-accrual Status, Percent, Increase (Decrease)		(7.30%)
Commercial Real Estate 1 [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status		$ 2,614,607	$ 3,564,494
FInancing Receivable, Recorded Investment, Nonaccrual Status, Percentage	[1]	0.60%	0.80%
Financing Receivable Recorded Investment in Non-accrual Status, Increase (Decrease)		$ (949,887)
Financing Receivable Recorded Investment in Non-accrual Status, Percent, Increase (Decrease)		(26.60%)
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status		$ 354,381	$ 1,274,673
FInancing Receivable, Recorded Investment, Nonaccrual Status, Percentage	[1]	0.10%	0.30%
Financing Receivable Recorded Investment in Non-accrual Status, Increase (Decrease)		$ (920,292)
Financing Receivable Recorded Investment in Non-accrual Status, Percent, Increase (Decrease)		(72.20%)

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

XML

Loans Receivable, Net (Schedule of loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	$ 636,301		$ 636,301		$ 738,662
Balance At Beginning of Period	8,798,555	$ 8,204,016	9,171,717	$ 8,221,618
Provision for Loan Losses	0	0	100,000	0
Charge Offs	163,365	97,274	729,375	147,364
Recoveries	118,349	504,434	211,197	536,922
Balance At End of Period	8,753,539	8,611,176	8,753,539	8,611,176
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	8,117,238		8,117,238		8,433,055
Financing Receivable, Allowance for Credit Losses	8,753,539		8,753,539		9,171,717
Commercial Real Estate 1 [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	565,000		565,000		665,000
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	5,073,557		5,073,557		5,188,081
Financing Receivable, Allowance for Credit Losses	5,638,557		5,638,557		5,853,081
Commercial Business [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	0		0		0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	896,843		896,843		923,600
Financing Receivable, Allowance for Credit Losses	896,843		896,843		923,600
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	71,301		71,301		73,662
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	1,021,026		1,021,026		1,129,931
Financing Receivable, Allowance for Credit Losses	1,092,327		1,092,327		1,203,593
Residential Real Estate 1 [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	0		0		0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	1,125,812		1,125,812		1,191,443
Financing Receivable, Allowance for Credit Losses	1,125,812		1,125,812		$ 1,191,443
Residential Real Estate 1 [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance At Beginning of Period	1,147,670	1,207,254	1,191,443	1,233,843
Provision for Loan Losses	(23,308)	104,394	(35,958)	88,949
Charge Offs	0	2,579	34,599	13,930
Recoveries	1,450	0	4,926	207
Balance At End of Period	1,125,812	1,309,069	1,125,812	1,309,069
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance At Beginning of Period	1,121,205	1,042,150	1,203,593	1,144,815
Provision for Loan Losses	69,702	185,314	74,508	72,381
Charge Offs	135,286	73,774	265,480	91,026
Recoveries	36,706	60,084	79,706	87,604
Balance At End of Period	1,092,327	1,213,774	1,092,327	1,213,774
Commercial Business [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance At Beginning of Period	991,982	1,128,680	923,600	1,011,227
Provision for Loan Losses	(95,635)	(40,216)	(40,189)	98,724
Charge Offs	0	11,031	1,132	32,518
Recoveries	496	0	14,564	0
Balance At End of Period	896,843	1,077,433	896,843	1,077,433
Commercial Real Estate 1 [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance At Beginning of Period	5,537,698	4,825,932	5,853,081	4,831,733
Provision for Loan Losses	49,241	(249,492)	101,639	(260,054)
Charge Offs	28,079	9,890	428,164	9,890
Recoveries	79,697	444,350	112,001	449,111
Balance At End of Period	$ 5,638,557	$ 5,010,900	$ 5,638,557	$ 5,010,900

XML

Loans Receivable, Net (Schedule of loans evaluated individually for impairment and collectively evaluated for impairment in loans receivable) (Details) - USD ($)	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	$ 636,301	$ 738,662
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	8,117,238	8,433,055
Financing Receivable, Allowance for Credit Losses	8,753,539	9,171,717
Financing Receivable, Individually Evaluated for Impairment	4,801,446	9,364,125
Financing Receivable, Collectively Evaluated for Impairment	450,110,055	435,555,970
Financing Receivable, Gross	$ 454,911,501	444,920,095
Loans and Leases Receivable, Valuation Period for New Appraisal	24 months
Residential Real Estate 1 [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	$ 0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	1,125,812	1,191,443
Financing Receivable, Allowance for Credit Losses	1,125,812	1,191,443
Financing Receivable, Individually Evaluated for Impairment	1,142,166	1,700,861
Financing Receivable, Collectively Evaluated for Impairment	85,200,295	82,264,555
Financing Receivable, Gross	86,342,461	83,965,416
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	71,301	73,662
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	1,021,026	1,129,931
Financing Receivable, Allowance for Credit Losses	1,092,327	1,203,593
Financing Receivable, Individually Evaluated for Impairment	206,117	1,060,043
Financing Receivable, Collectively Evaluated for Impairment	55,281,864	55,847,512
Financing Receivable, Gross	55,487,981	56,907,555
Commercial Business [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	0	0
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	896,843	923,600
Financing Receivable, Allowance for Credit Losses	896,843	923,600
Financing Receivable, Individually Evaluated for Impairment	72,407	77,206
Financing Receivable, Collectively Evaluated for Impairment	28,572,204	28,009,480
Financing Receivable, Gross	28,644,611	28,086,686
Commercial Real Estate 1 [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Financing Receivable, Allowance for Credit Losses, Individually Evaluated for Impairment	565,000	665,000
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment	5,073,557	5,188,081
Financing Receivable, Allowance for Credit Losses	5,638,557	5,853,081
Financing Receivable, Individually Evaluated for Impairment	3,380,756	6,526,015
Financing Receivable, Collectively Evaluated for Impairment	281,055,692	269,434,423
Financing Receivable, Gross	$ 284,436,448	$ 275,960,438

XML

Loans Receivable, Net (Impaired Financing Receivables) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivables, Loans Defaulted		$ 607,000		$ 607,000
Impaired financing receivable, recorded investment	$ 4,801,445		$ 4,801,445		$ 9,364,125
Impaired Financing Receivable, Unpaid Principal Balance	6,397,702		6,397,702		11,299,728
Impaired Financing Receivable, Average Recorded Investment	4,917,791	12,765,314	6,525,006	12,938,189
Impaired Financing Receivable, Interest Income, Accrual Method	14,085	59,155	28,332	121,142
Residential Real Estate 1 [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	1,142,165		1,142,165		1,700,861
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	1,142,165		1,142,165		1,700,861
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	1,157,380	1,963,932	1,347,984	2,089,364
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	1,078
Impaired financing receivable, related allowance	0		0		0
Impaired financing receivable, recorded investment	1,142,165		1,142,165		1,700,861
Impaired Financing Receivable, Unpaid Principal Balance	1,142,165		1,142,165		1,700,861
Impaired Financing Receivable, Average Recorded Investment	1,157,380	1,963,932	1,347,984	2,089,364
Impaired Financing Receivable, Interest Income, Accrual Method	0	0	0	1,078
Consumer [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	134,817		134,817		986,380
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	143,117		143,117		994,680
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	137,233	177,644	982,404	179,177
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0
Impaired Financing Receivable, with Related Allowance, Recorded Investment	71,301		71,301		73,662
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	71,301		71,301		73,662
Impaired financing receivable, related allowance	71,301		71,301		73,662
Impaired financing receivable, recorded investment	206,118		206,118		1,060,042
Impaired Financing Receivable, Unpaid Principal Balance	214,418		214,418		1,068,342
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	71,554	0	72,072	0
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	0	0	0
Impaired Financing Receivable, Average Recorded Investment	208,787	177,644	1,054,476	179,177
Impaired Financing Receivable, Interest Income, Accrual Method	0	0	0	0
Commercial Business [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	72,406		72,406		77,206
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	967,406		967,406		972,206
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	73,606	85,804	75,149	91,260
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	0	0	0	0
Impaired financing receivable, related allowance	0		0		0
Impaired financing receivable, recorded investment	72,406		72,406		77,206
Impaired Financing Receivable, Unpaid Principal Balance	967,406		967,406		972,206
Impaired Financing Receivable, Average Recorded Investment	73,606	85,804	75,149	91,260
Impaired Financing Receivable, Interest Income, Accrual Method	0	0	0	0
Commercial Real Estate 1 [Member]
Financing Receivable, Impaired [Line Items]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,383,766		2,383,766		5,084,458
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	2,676,723		2,676,723		6,116,761
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	2,481,028	10,285,113	2,866,245	10,325,567
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	14,085	56,646	28,332	117,215
Impaired Financing Receivable, with Related Allowance, Recorded Investment	996,990		996,990		1,441,558
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	1,396,990		1,396,990		1,441,558
Impaired financing receivable, related allowance	565,000		565,000		665,000
Impaired financing receivable, recorded investment	3,380,756		3,380,756		6,526,016
Impaired Financing Receivable, Unpaid Principal Balance	4,073,713		4,073,713		7,558,319
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	996,990	252,821	1,181,152	252,821
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	0	2,509	0	2,849
Impaired Financing Receivable, Average Recorded Investment	3,478,018	10,537,934	4,047,397	10,578,388
Impaired Financing Receivable, Interest Income, Accrual Method	14,085	$ 59,155	28,332	$ 120,064
Fair Value, Measurements, Nonrecurring | Impaired Loans [Member]
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, related allowance	$ 636,301		$ 636,301		$ 738,662

XML

Loans Receivable, Net (Narrative) (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($) loan payments	Jun. 30, 2019 USD ($) loan	Dec. 31, 2018 USD ($)	Jun. 30, 2018 loan
Financing Receivable, Recorded Investment, Past Due [Line Items]
Nonperforming Loans, Accrual Status, Minimum Consecutive Payments	6	90
TDRs included in impaired loans	$ 896,000	$ 896,000	$ 1,400,000.0
Financing Receivable, Modifications, Subsequent Default, Aggregate Number of Contracts | loan	0	0		2
Days Past Due to Be Considered In Default		30
Review period to request a new third party appraisal		24 months
Impaired Financing Receivable, Recorded Investment	$ 4,801,445	$ 4,801,445	$ 9,364,125

XML

Regulatory Matters (Regulatory capital amounts and ratios) (Details) - Security Federal Bank [Member] - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)
Actual, Amount	$ 90,261,000	$ 89,188,000
Actual, Ratio	16.03451%	16.21346%
For Capital Adequacy, Amount	$ 33,775,020	$ 33,005,160
For Capital Adequacy, Ratio	6.00%	6.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 45,033,000	$ 44,007,000
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	8.00%	8.00%
Total Risk-Based Capital (To Risk Weighted Assets)
Actual, Amount	$ 97,319,000	$ 96,092,000
Actual, Ratio	17.28834%	17.46854%
For Capital Adequacy, Amount	$ 45,033,360	$ 44,006,880
For Capital Adequacy, Ratio	8.00%	8.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 56,292,000	$ 55,009,000
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Common Equity Tier One Capital	$ 90,261,000	$ 89,188,000
Common Equity Tier One Capital Ratio	16.03451%	16.21346%
Common Equity Tier One Capital Required for Capital Adequacy	$ 25,331,265	$ 24,753,870
Common Equity Tier One Capital Required to be Well-Capitalized	36,590,000	35,756,000
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)
Actual, Amount	$ 90,261,000	$ 89,188,000
Actual, Ratio	9.6206%	9.77765%
For Capital Adequacy, Amount	$ 37,528,240	$ 36,486,480
For Capital Adequacy, Ratio	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 46,910,000	$ 45,608,000
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%

XML

Carrying Amounts and Fair Value of Financial Instruments (Fair value measurements, recurring basis) (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Liabilities, Fair Value Disclosure, Recurring (Deprecated 2018-01-31)	$ 0
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	434,193,401	$ 386,255,837
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure	434,193,401	386,255,837
Taxable Municipal Bonds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	1,034,330	1,977,885
US Government Agencies Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	89,300,000	80,200,000
Equity Securities | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	155,000	155,000
Collateralized Mortgage Backed Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	216,411,424	184,460,551
US States and Political Subdivisions Debt Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	46,927,077	61,330,369
SBA Bonds | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	127,862,904	125,446,531
Collateralized Loan Obligations [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Fair Value Disclosure	$ 41,802,666	$ 12,885,501

XML

Carrying Amounts and Fair Value of Financial Instruments (Fair value measurements, nonrecurring basis) (Details) - USD ($)		Jun. 30, 2019		Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Other Real Estate, Foreclosed Assets, and Repossessed Assets		$ 734,140		$ 722,442
Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		8,640,585		11,117,997
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		0		0
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		3,750,815		1,781,985
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		4,889,770		9,336,012
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		3,750,815		1,781,985
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]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		0		0
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		3,750,815		1,781,985
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]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		0		0
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value	[1]			8,613,570
Impaired financing receivable, related allowance		636,301		738,662
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]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		0	[2]	0	[1]
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		0	[2]	0	[1]
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]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		4,155,630	[2]	8,613,570	[1]
Foreclosed Assets | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		734,140		722,442
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		0		0
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value		$ 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]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value				$ 722,442

[1] IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $636,000 AND $739,000 AT JUNE 30, 2019 AND DECEMBER 31, 2018, RESPECTIVELY.

[2] 10. Carrying Amounts and Fair Value of Financial InstrumentsGAAP requires the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet and to measure that fair value using an exit price notion, the price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions. 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).Level 1 - Quoted Market Price in Active MarketsValuation 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 -Significant Other Observable InputsValuation 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 - Significant Unobservable InputsValuation 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 SaleInvestment securities available for sale are recorded at fair value on a recurring basis. At June 30, 2019, the Company’s investment portfolio was comprised of student loan pools, government and agency bonds, mortgage-backed securities issued by government agencies or GSEs, private label CMO mortgage-backed securities, municipal securities, and one equity investment. 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 a result, these securities are classified as Level 2.Mortgage Loans Held for SaleThe Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with the FHLMC or other 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 a commitment 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 2.10. Carrying Amounts and Fair Value of Financial Instruments, ContinuedImpaired LoansThe 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 impaired, management measures the impairment by determining the fair value of the collateral for the loan.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 June 30, 2019, our impaired loans were generally 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. At June 30, 2019 and December 31, 2018, the recorded investment in impaired loans was $4.8 million and $9.4 million, respectively. Foreclosed AssetsForeclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Foreclosed assets are recorded as nonrecurring Level 3. Assets measured at fair value on a recurring basis were as follows at June 30, 2019 and December 31, 2018: June 30, 2019 December 31, 2018 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3Student Loan Pools$— $41,802,666 $— $— $12,885,501 $—SBA Bonds— 127,862,904 — — 125,446,531 —Tax Exempt Municipal Bonds— 46,927,077 — — 61,330,369 —Taxable Municipal Bonds— 1,034,330 — — 1,977,885 —Mortgage-Backed Securities— 216,411,424 — — 184,460,551 —Equity Securities— 155,000 — — 155,000 —Total$— $434,193,401 $— $— $386,255,837 $—There were no liabilities measured at fair value on a recurring basis at either June 30, 2019 or December 31, 2018. 10. Carrying Amounts and Fair Value of Financial Instruments, ContinuedThe Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. The tables below present assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall. June 30, 2019Assets:Level 1 Level 2 Level 3 TotalMortgage Loans Held For Sale$— $3,750,815 $— $3,750,815Collateral Dependent Impaired Loans (1)— — 4,155,630 4,155,630Foreclosed Assets— — 734,140 734,140Total$— $3,750,815 $4,889,770 $8,640,585 December 31, 2018Assets:Level 1 Level 2 Level 3 TotalMortgage Loans Held For Sale$— $1,781,985 $— $1,781,985Collateral Dependent Impaired Loans (1)— — 8,613,570 8,613,570Foreclosed Assets— — 722,442 722,442Total$— $1,781,985 $9,336,012 $11,117,997

XML

Carrying Amounts and Fair Value of Financial Instruments (Significant unobservable inputs used in the fair value measurements) (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2019		Jun. 30, 2019		Dec. 31, 2018
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Other Real Estate Owned (OREO)		$ 734,140		$ 734,140		$ 722,442
Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring (Deprecated 2018-01-31)		$ 8,640,585		8,640,585		11,117,997
Impaired Loans [Member] | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring (Deprecated 2018-01-31)	[1]					8,613,570
Significant Unobservable Inputs		Discount Rates/ Discounts to Appraised Values
Foreclosed Assets | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring (Deprecated 2018-01-31)		$ 734,140		$ 734,140		722,442
Significant Unobservable Inputs		Discount Rates/ Discounts to Appraised Values
Minimum | Impaired Loans [Member] | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range				7.00%
Minimum | Foreclosed Assets | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range				13.00%
Maximum | Impaired Loans [Member] | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range				97.00%
Maximum | Foreclosed Assets | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range				100.00%
Fair Value, Inputs, Level 3 | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring (Deprecated 2018-01-31)		$ 4,889,770		$ 4,889,770		9,336,012
Fair Value, Inputs, Level 3 | Impaired Loans [Member] | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring (Deprecated 2018-01-31)		$ 4,155,630	[2]	$ 4,155,630	[2]	8,613,570	[1]
Fair Value, Inputs, Level 3 | Foreclosed Assets | Fair Value, Measurements, Nonrecurring
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring (Deprecated 2018-01-31)						$ 722,442

[1] IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $636,000 AND $739,000 AT JUNE 30, 2019 AND DECEMBER 31, 2018, RESPECTIVELY.

[2] 10. Carrying Amounts and Fair Value of Financial InstrumentsGAAP requires the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet and to measure that fair value using an exit price notion, the price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions. 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).Level 1 - Quoted Market Price in Active MarketsValuation 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 -Significant Other Observable InputsValuation 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 - Significant Unobservable InputsValuation 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 SaleInvestment securities available for sale are recorded at fair value on a recurring basis. At June 30, 2019, the Company’s investment portfolio was comprised of student loan pools, government and agency bonds, mortgage-backed securities issued by government agencies or GSEs, private label CMO mortgage-backed securities, municipal securities, and one equity investment. 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 a result, these securities are classified as Level 2.Mortgage Loans Held for SaleThe Company originates fixed rate residential loans on a servicing released basis in the secondary market. Loans closed but not yet settled with the FHLMC or other 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 a commitment 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 2.10. Carrying Amounts and Fair Value of Financial Instruments, ContinuedImpaired LoansThe 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 impaired, management measures the impairment by determining the fair value of the collateral for the loan.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 June 30, 2019, our impaired loans were generally 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. At June 30, 2019 and December 31, 2018, the recorded investment in impaired loans was $4.8 million and $9.4 million, respectively. Foreclosed AssetsForeclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. Foreclosed assets are recorded as nonrecurring Level 3. Assets measured at fair value on a recurring basis were as follows at June 30, 2019 and December 31, 2018: June 30, 2019 December 31, 2018 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3Student Loan Pools$— $41,802,666 $— $— $12,885,501 $—SBA Bonds— 127,862,904 — — 125,446,531 —Tax Exempt Municipal Bonds— 46,927,077 — — 61,330,369 —Taxable Municipal Bonds— 1,034,330 — — 1,977,885 —Mortgage-Backed Securities— 216,411,424 — — 184,460,551 —Equity Securities— 155,000 — — 155,000 —Total$— $434,193,401 $— $— $386,255,837 $—There were no liabilities measured at fair value on a recurring basis at either June 30, 2019 or December 31, 2018. 10. Carrying Amounts and Fair Value of Financial Instruments, ContinuedThe Company may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. The tables below present assets measured at fair value on a nonrecurring basis at June 30, 2019 and December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall. June 30, 2019Assets:Level 1 Level 2 Level 3 TotalMortgage Loans Held For Sale$— $3,750,815 $— $3,750,815Collateral Dependent Impaired Loans (1)— — 4,155,630 4,155,630Foreclosed Assets— — 734,140 734,140Total$— $3,750,815 $4,889,770 $8,640,585 December 31, 2018Assets:Level 1 Level 2 Level 3 TotalMortgage Loans Held For Sale$— $1,781,985 $— $1,781,985Collateral Dependent Impaired Loans (1)— — 8,613,570 8,613,570Foreclosed Assets— — 722,442 722,442Total$— $1,781,985 $9,336,012 $11,117,997

XML

Carrying Amounts and Fair Value of Financial Instruments (Summary of the carrying value and estimated fair value of financial instruments) (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Financial Assets:
Cash And Cash Equivalents	$ 11,019,000	$ 12,706,000
Cash and Cash Equivalents	11,019,027	12,705,910	$ 17,126,709	$ 10,319,624
Certificates of Deposits With Other Banks	950,000	1,200,000
Investments	456,707,278	409,893,850
Certificates of Deposit with Other Banks	950,005	1,200,010
Investment And Mortgage-Backed Securities	457,063,000	409,505,000
Loans Receivable, Net	441,575,668	430,053,517
Loans Receivable, Net	438,290,000	421,379,000
FHLB Stock	3,401,000	2,204,000
Federal Home Loan Bank (FHLB) Stock, at Cost	3,401,200	2,204,000
Financial Liabilities:
Checking, Savings, And Money Market Accounts	535,901,000	529,043,000
Certificate Accounts, Carrying Value	250,547,000	238,454,000
Certificate Accounts	250,222,000	236,103,000
Advances From FHLB	60,700,000	34,030,000
Advances From FHLB	60,785,000	33,771,000
Other Borrowed Money	15,754,000	10,698,000
Notes Payable	0	2,362,500
Other Borrowings	15,753,586	10,698,429
Notes Payable, Fair Value Disclosure		2,363,000
Senior Convertible Debentures	6,044,000	6,064,000
Junior Subordinated Debentures	5,155,000	5,155,000
Fair Value, Inputs, Level 1
Financial Assets:
Cash And Cash Equivalents		12,706,000
Cash and Cash Equivalents	11,019,000
Certificates of Deposits With Other Banks	0	0
Investment And Mortgage-Backed Securities	0	0
Loans Receivable, Net	0	0
FHLB Stock		2,204,000
Federal Home Loan Bank (FHLB) Stock, at Cost	3,401,000
Financial Liabilities:
Checking, Savings, And Money Market Accounts	535,901,000	529,043,000
Certificate Accounts	0	0
Advances From FHLB	0	0
Other Borrowed Money		10,698,000
Other Borrowings	15,754,000
Senior Convertible Debentures	0	0
Junior Subordinated Debentures	0	0
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Cash And Cash Equivalents	0	0
Certificates of Deposits With Other Banks		1,200,000
Certificates of Deposit with Other Banks	950,000
Investment And Mortgage-Backed Securities	457,063,000	409,505,000
Loans Receivable, Net	0	0
FHLB Stock	0	0
Financial Liabilities:
Checking, Savings, And Money Market Accounts	0	0
Certificate Accounts	250,222,000	236,103,000
Advances From FHLB	60,785,000	33,771,000
Other Borrowed Money	0	0
Notes Payable, Fair Value Disclosure		2,363,000
Senior Convertible Debentures	6,044,000	6,064,000
Junior Subordinated Debentures	5,155,000	5,155,000
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	438,290,000	421,379,000
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
Senior Convertible Debentures	0	0
Junior Subordinated Debentures	$ 0	$ 0

XML

Carrying Amounts and Fair Value of Financial Instruments (Narrative) (Details)	6 Months Ended
	Jun. 30, 2019 USD ($) investment	Dec. 31, 2018 USD ($)
Fair Value Disclosures [Abstract]
Number of equity investments | investment	1
Investor funding period	30 days
Review period to request a new third party appraisal	24 months
Impaired financing receivable, recorded investment | $	$ 4,801,445	$ 9,364,125

XML

Non-interest Income (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other Income and Expenses [Abstract]
Service Fees on Deposit Accounts	$ 254,610	$ 250,493	$ 506,627	$ 507,672
Check card revenue	355,321	338,611	697,655	645,657
Trust Income	258,600	243,500	517,200	476,000
Commissions From Insurance Agency	175,693	149,111	326,993	328,336
Gain on Sale of Investment Securities	670,134	0	960,902	436,304
Gain on Sale of Loans	372,048	367,646	546,331	653,649
BOLI Income	135,000	135,000	270,000	270,000
Other	253,741	260,185	585,656	470,948
Noninterest Income	$ 2,492,561	$ 1,744,546	$ 4,688,393	$ 3,788,566