UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
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Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): May 24, 2022
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SECURITY FEDERAL CORPORATION
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(Exact name of registrant as specified in its charter)
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South Carolina
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000-16120
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57-0858504
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(State or other jurisdiction
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(Commission
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(IRS Employer
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of incorporation)
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File Number)
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Identification No.)
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238 Richland Avenue NW,
Aiken, South Carolina
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29801
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number (including area code): (803) 641-3000
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
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☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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☐ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this
chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
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. [ ]
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Item 1.01 Entry into a Material Definitive Agreement.
On May 24, 2022, Security Federal Corporation (the “Company”), the holding company of Security Federal Bank (the “Bank”), entered into
a Letter Agreement (the “Purchase Agreement”) with the U.S. Department of Treasury (the “Treasury”) under the Emergency Capital Investment Program (“ECIP”). Pursuant to the Agreement, the Company agreed to issue and sell 82,949 shares of the
Company’s Preferred Stock as Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP (the “Preferred Stock”) for an aggregate purchase price of $82,949,000 in cash. The Purchase Agreement is attached as Exhibit 10.1 hereto and is incorporated
herein by reference.
The Preferred Stock bears no dividend for the first 24 months following the investment date. Thereafter, the annual dividend rate will
be adjusted, not higher than 2%, based on our extension of credit of qualified lending as defined in the terms of the ECIP Interim Final Rule and the Agreement. After the tenth anniversary of the investment, the dividend rate will be fixed based on
the average annual amount of lending in years 2 through 10 compared to the baseline qualified lending. Dividend will be payable quarterly in arrears on March 15, June 15, September 15, and December 15.
The Preferred Stock may be redeemed at the option of the Company on or after the fifth anniversary of issuance (or earlier in the event
of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations. The restrictions on redemption are set forth in the
Certificate of Determination described in Item 5.03 below.
The Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended.
In the Purchase Agreement, the Company also agreed that, within ninety (90) days of the closing date, the Board of Directors shall
adopt an excessive or luxury expenditures policy in accordance with the ECIP Interim Final Rule.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under “Item 1.01 Entry into a Material Definitive Agreement” is incorporated by reference into this Item
3.02.
Item 3.03 Material Modification to Rights of Shareholders.
Pursuant to the Agreement and the Certificate of Determination, the ability of the Company to declare or pay dividends or
distributions on, or repurchase, redeem or otherwise acquire for consideration, shares of its Junior Stock (as defined below) and Parity Stock (as defined below) will be subject to restrictions in the event that the Company fails to declare and pay
full dividends during the most recently completed dividend period on its Preferred Stock. These restrictions are set forth in the Certificate of Determination described in Item 5.03. “Junior Stock” means the Common Stock and any other class or
series of stock of the Company the terms of which expressly provide that it ranks junior to the Preferred Stock as to dividend rights and/or as to rights on liquidation, dissolution or winding up of the Company. “Parity Stock” means any class or
series of stock of the Company that ranks on a parity with the Preferred Stock as to dividend rights (without regard to whether dividends accrue cumulatively or non-cumulatively) and any other class or series of stock of the
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Company (other than Common Stock, Preferred Stock or any class or series of stock identified in the definition of Junior Stock) the
terms of which do not expressly provide that such class or series will rank senior or junior to the Preferred Stock as to dividend rights.
Item 5.03. Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On April 21, 2022, the Company filed a Certificate of Determination (the “Certificate of Determination”) with the South Carolina
Secretary of State for the purpose of amending its Articles of Incorporation to fix the designations, preferences, limitations and relative rights of the Preferred Stock. The Certificate of Determination is attached hereto as Exhibit 3.1 and is
incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
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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, hereunto duly authorized.
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SECURITY FEDERAL CORPORATION
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Date: June 7, 2022
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By:
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/s/ Darrell Rains |
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Darrell Rains
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Chief Financial Officer
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