10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

__________________________

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2014
	OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period _________ to _________
Commission File Number: 0-16120
SECURITY FEDERAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
South Carolina		57-08580504
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
238 Richland Avenue Northwest, Aiken, South Carolina		29801
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number, including area code:		(803) 641-3000
Securities registered pursuant to Section 12(b) of the Act:		None
Securities registered pursuant to Section 12(g) of the Act:		Common Stock, par value $0.01 per share
		(Title of Class)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes     X       No 

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

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

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

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

As of March 20, 2015, there were issued and outstanding 2,945,474 shares of the registrant's Common Stock, which are traded on the over-the-counter market through the OTC "Electronic Bulletin Board" under the symbol "SFDL."  The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of the bid and asked price of such stock as of June 30, 2014, was $30.2 million.  (The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the registrant that such person is an affiliate of the registrant.)

DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Registrant's Annual Report to Stockholders for the Fiscal Year Ended December 31, 2014.  (Part II)

2. Portions of the Registrant's Proxy Statement for the 2015 Annual Meeting of Stockholders.  (Part III)

Forward-Looking Statements

This Form 10-K, including information included or incorporated by reference, contents, and future filings by Security Federal Corporation ("Company") on Form 10-Q, and Form 8-K, and future oral and written statements by the Company and its management may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements often include 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." These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated, 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 loan loss reserves;

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

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

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

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

• results of examinations of the Company by the Board of Governors of the Federal Reserve and our bank subsidiary by the Federal Deposit Insurance Corporation and the South Carolina State Board of Financial Institutions, or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, 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; and any changes in rules affecting our ability to comply with the requirements of the U. S. Department of Treasury Community Development Capital Initiative;

• our ability to attract and retain deposits;

• increases in premiums for deposit insurance;

• our ability to control operating costs and expenses;

• our ability to implement our business strategies;

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

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

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

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

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

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

• our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

• increased competitive pressures among financial services companies;

• changes in consumer spending, borrowing and savings habits;

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

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

i

• adverse changes in the securities markets;

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

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

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

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

Any forward-looking statements are based upon management's beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur, and you should not put undue reliance on any forward-looking statements.

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

Available Information

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

ii

PART I

Item 1.  Business

Security Federal Corporation

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

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

At December 31, 2014, the Company had assets of $825.4 million, deposits of $660.1 million and shareholders' equity of $87.4 million.

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

Security Federal Bank

General.  Security Federal is a South Carolina chartered commercial bank headquartered in Aiken, South Carolina.  Security Federal, with 13 branch offices in Aiken, Richland and Lexington counties, South Carolina and Columbia County, Georgia, was originally chartered under the name Aiken Building and Loan Association on March 27, 1922.  It received its federal charter and changed its name to Security Federal Savings and Loan Association of Aiken on March 7, 1962, and later changed its name to Security Federal Savings Bank of South Carolina, on November 11, 1986.  Effective April 8, 1996, the Bank changed its name to Security Federal Bank.  The Bank converted from the mutual to the stock form of organization on October 30, 1987.  As mentioned above, effective December 28, 2011, Security Federal converted from a federally chartered stock savings bank to a South Carolina chartered commercial bank. As a result of the conversion to a South Carolina commercial bank, the Bank is regulated by the South Carolina State Board of Financial Institutions ("State Board") and the Federal Deposit Insurance Corporation ("FDIC").

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

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

1

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

Corporate Overview

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

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

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

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

On July 31, 2013, the Company repurchased its outstanding warrant at a fair market value of $50,000 from the U.S. Treasury. As a result of the transaction, the warrant was canceled which reduced warrants outstanding by $400,000 and increased additional paid in capital by $350,000. For additional information regarding the CDCI transaction and the TARP CPP transaction, see Note 16 of the Notes to Consolidated Financial Statements contained in the 2014 Annual Report to Stockholders ("Annual Report").

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

Yields Earned and Rates Paid.  This information is incorporated by reference to page21 of the Annual Report.

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

Lending Activities

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

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

2

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

	At December 31,													At March 31,
	2014				2013					2012				2012				2011					2010
	Amount		Percent		Amount			Percent		Amount		Percent		Amount		Percent		Amount			Percent		Amount		Percent
	(Dollars in Thousands)
TYPE OF LOAN:
Real estate loans:
Residential real estate	$	75,099	21.5	%	$	77,169		20.7	%	$	88,895	21.6	%	$	90,998	20.4	%	$	99,219		19.8	%	$	105,170	17.9	%
Owner occupied residential construction	4,049		1.2		7,069			1.9		6,553		1.6		9,482		2.1		16,975			3.4		16,248		2.8
Total residential real estate loans	79,148		22.7		84,238			22.6		95,448		23.2		100,480		22.5		116,194			23.2		121,418		20.7
Commercial loans:
Commercial business	10,564		3.0		7,775			2.1		8,064		2.0		9,553		2.1		13,530			2.7		17,813		3.0
Commercial real estate	196,107		56.1		220,311			59.1		241,268		58.8		263,936		59.3		296,901			59.2		366,002		62.4
Multi-family	13,424		3.8		8,089			2.2		9,656		2.3		12,381		2.8		10,055			2.0		12,718		2.2
Total commercial loans	220,095		62.9		236,175			63.4		258,988		63.1		285,870		64.2		320,486			63.9		396,533		67.6
Consumer loans:
Deposit account	627		0.2		656			0.2		942		0.2		926		0.2		869			0.2		985		0.2
Home equity lines	24,157		6.9		25,156			6.7		26,330		6.4		26,996		6.1		28,776			5.7		29,944		5.1
Consumer first and second mortgages	7,905		2.3		9,385			2.5		11,393		2.8		11,973		2.7		13,741			2.7		18,545		3.1
Premium finance	3,260		0.9		2,626			0.7		2,644		0.6		2,916		0.7		2,947			0.6		406		0.1
Other	14,442		4.1		14,383			3.9		15,286		3.7		15,874		3.6		18,530			3.7		18,646		3.2
Total consumer loans	50,391		14.4		52,206			14.0		56,595		13.7		58,685		13.3		64,863			12.9		68,526		11.7
Total loans	349,634		100.0	%	372,619			100.0	%	411,031		100.0	%	445,035		100.0	%	501,543			100.0	%	586,477		100.0	%
Less:
Loans in process	1,379				3,465					2,002				1,887				4,580					5,620
Deferred fees and discount	24				(5		)			5				22				(10		)			151
Allowance for loan losses	8,357				10,242					11,318				14,615				12,502					12,307
Total loans receivable	$	339,874			$	358,917				$	397,706			$	428,511			$	484,471				$	568,399

3

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

	At December 31,													At March 31,
	2014				2013					2012				2012				2011					2010
	Amount		Percent		Amount			Percent		Amount		Percent		Amount		Percent		Amount			Percent		Amount		Percent
	(Dollars in Thousands)
TYPE OF LOAN:
Fixed rate loans
Residential real estate	$	12,832	3.7%		$	11,061		3.0%		$	15,479	3.8	%	$	13,511	3.0	%	$	15,435		3.1	%	$	11,488	2.0	%
Commercial business and commercial real estate	185,862		53.2		201,048			54.0		208,604		50.7		226,407		50.9		251,766			50.2		280,702		47.9
Consumer	21,983		6.2		22,482			6.0		24,503		6.0		25,704		5.8		28,786			5.7		30,223		5.1
Total fixed rate loans	220,677		63.1		234,591			63.0		248,586		60.5		265,622		59.7		295,987			59.0		322,413		55.0
Adjustable rate loans
Residential real estate	66,316		19.0		73,177			19.6		79,969		19.5		86,969		19.5		100,759			20.1		109,930		18.7
Commercial business and commercial real estate	34,233		9.8		35,127			9.4		50,384		12.2		59,463		13.4		68,720			13.7		115,831		19.8
Consumer	28,408		8.1		29,724			8.0		32,092		7.8		32,981		7.4		36,077			7.2		38,303		6.5
Total adjustable rate loans	128,957		36.9		138,028			37.0		162,445		39.5		179,413		40.3		205,556			41.0		264,064		45.0
Total loans	349,634		100.0	%	372,619			100.0	%	411,031		100.0	%	445,035		100.0	%	501,543			100.0	%	586,477		100.0	%
Less
Loans in process	1,379				3,465					2,002				1,887				4,580					5,620
Deferred fees and discounts	24				(5		)			5				22				(10		)			151
Allowance for loan losses	8,357				10,242					11,318				14,615				12,502					12,307
Total loans receivable	$	339,874			$	358,917				$	397,706			$	428,511			$	484,471				$	568,399

The total amount of loans due after December 31, 2015, which have predetermined or fixed interest rates is $148.6 million, while the total amount of loans due after that date which have floating or adjustable interest rates is $116.2 million.

4

The following schedule illustrates the maturities of Security Federal's loan portfolio, including loans held for sale, at December 31, 2014.  Mortgages which have adjustable or renegotiable interest rates are shown as maturing in the period when the contract is due.  This schedule does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.

	Residential Real Estate		Owner Occupied Residential Real Estate Construction Loans		Consumer		Commercial Construction and Acquisition and Development Loans		Commercial Business and Commercial Real Estate		Total
	(In Thousands)
Six months or less (1)	$	2,110	$	2,428	$	9,216	$	6,963	$	17,747	$	38,464
Over six months to one year	1		1,621		1,145		11,259		32,325		46,351
Over one year to three years	145		—		5,255		3,424		76,639		85,463
Over three to five years	464		—		6,025		—		44,856		51,345
Over five to ten years	1,383		—		6,796		—		11,417		19,596
Over ten years	70,996		—		21,954		—		15,465		108,415
Total	$	75,099	$	4,049	$	50,391	$	21,646	$	198,449	$	349,634

___________

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

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

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

	Years Ended December 31,						Nine Months Ended December 31,			Years Ended March 31,
	2014			2013			2012			2012			2011			2010
	(In Thousands)
Originated/ Renewed:
Adjustable rate - residential real estate	$	11,758		$	13,021		$	6,986		$	17,051		$	26,539		$	27,644
Fixed rate - residential real estate (1)	23,617			28,892			24,136			37,862			74,776			65,229
Consumer	10,635			10,840			7,315			12,134			12,381			19,450
Commercial business and commercial real     estate	116,169			172,694			113,629			192,809			200,459			289,246
Total consumer/commercial business real   estate	126,804			183,534			120,944			204,943			212,840			308,696
Total loans originated/ renewed	162,179			225,447			152,066			259,856			314,155			401,569
Less:
Sold:
Fixed rate - residential real estate	22,986			32,272			22,037			40,356			73,971			67,779
Adjustable rate- residential real estate	—			—			725			—			—			—
Fixed rate - commercial real estate	—			—			996			—			—			—
Transfers to other real estate owned	1,638			3,861			2,456			4,277			15,582			10,574
Principal repayments	160,540			227,726			159,856			271,730			309,537			363,892
Increase (decrease) in other items, net	(3,942		)	377			(3,199		)	(547		)	(1,007		)	2,015
Net increase (decrease)	$	(19,043	)	$	(38,789	)	$	(30,805	)	$	(55,960	)	$	(83,928	)	$	(42,691	)

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

5

In addition to interest earned on loans, the Bank receives loan origination fees or "points" for originating loans.  Loan points are a percentage of the principal amount of the mortgage loan which are charged to the borrower for the creation of the loan.  The Bank's loan origination fees are generally 1% on conventional residential mortgages, and 0.25% to 1% on commercial real estate loans and commercial business loans.  The total fee income (including amounts amortized to income as yield adjustments) for the year ended December 31, 2014 was $498,000.

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

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

	At or For the Year Ended December 31,						At or For the Nine Months Ended December 31,			At or For the Year Ended March 31,
	2014			2013			2012			2012
				(Dollars in Thousands)
Net deferred mortgage loan origination fees earned during the    period (1)	$	23		$	27		$	37		$	72
Mortgage loan origination fees earned as a percentage of total    portfolio mortgage loans originated during the period	0.2		%	0.2		%	0.5		%	0.4		%
Net deferred mortgage loan origination fees in loan portfolio at end of period	$	23		$	30		$	33		$	47

___________

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

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

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

Secondary market sales are made to other banks or institutional investors.  Generally all loans sold to investors are without recourse.  For the past several years, substantially all loans have been sold on a servicing released basis. During the year ended December 31, 2014, Security Federal sold $23.6 million in fixed rate residential loans on a servicing released basis in the secondary market.  Loans closed but not yet settled with banks or other investors, are carried in the Bank's "loans held for sale" portfolio.  At December 31, 2014, the Bank had $1.9 million of loans held for sale.  These loans are fixed rate residential loans that have been originated in the Bank's name and have closed.  Virtually all of these loans have commitments to be purchased by investors and the majority of these loans were locked in by price with the investors on the same day or shortly thereafter that the loan was locked in with the Bank's customers.  Therefore, these loans present very little market risk for the Bank.  The Bank usually delivers to, and receives funding from, the investor within 30 days.  Security Federal originates all of its loans held for sale on a "best efforts" basis which means that the Bank suffers no penalty if it is unable to deliver a loan to a potential investor.

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

Detailed loan applications are obtained to determine the borrower's creditworthiness and ability to repay.  The more significant items on loan applications are verified through the use of credit reports, financial statements and confirmations.  After

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

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

The general policy of Security Federal is to issue loan commitments to qualified borrowers for a specified term. These commitments are generally for a period of 45 days or less.  With management approval, commitments may be extended for up to an additional 45 days.  As of December 31, 2014,  the Bank also had outstanding commitments on mortgage loans not yet closed of $571,000 compared to none at December 31, 2013. Security Federal had outstanding commitments available on all lines of credit (including letters of credit, commercial, undisbursed loans in process, home equity, VISA, and other consumer loans) totaling $51.1 million as of December 31, 2014.  See Note 18 of the Notes to Consolidated Financial Statements contained in the Annual Report.

Permanent Residential Mortgage Lending.  Permanent residential real estate mortgage loans constituted 21.5% of the Bank's total outstanding loan portfolio at December 31, 2014.

Security Federal offers a variety of ARMs which offer adjustable rates of interest, payments, loan balances or terms to maturity which vary according to specified indices.  The Bank's ARMs generally have a loan term of 15 to 30 years with initial rate adjustments every one, three, five or seven years during the term of the loan.  After the initial rate adjustment, the loan rate then adjusts annually.  Most of the Bank's ARMs contain a 200 basis point limit as to the maximum amount of change in the interest rate at any adjustment period and a 500 or 600 basis point limit over the life of the loan. The Bank generally originates ARMs to retain in its portfolio. These  loans are generally made consistent with Freddie Mac and Fannie Mae guidelines.  AtDecember 31, 2014, residential ARMs totaled $66.3 million, or 19.0% of the Bank's loan portfolio.  For the year ended December 31, 2014, the Bank originated $35.4 million in residential real estate loans, 33.2% of which had adjustable rates of interest. At December 31, 2014, the Bank also held approximately $10.2 million in longer term fixed rate residential mortgage loans.  These loans were 2.9% of the entire loan portfolio at December 31, 2014. Currently, the Bank sells the majority of its longer term fixed rate mortgage loans at origination with a few exceptions.

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

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

The Bank also provides construction financing for single family dwellings to owner-occupants.  Construction loans are generally made for periods of six months to one year with either adjustable or fixed rates.  At December 31, 2014, residential construction loans on one- to four-family dwellings to owner-occupants totaled $4.0 million, or 1.2%, of the Bank's loan portfolio.

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

Commercial Real Estate, Commercial Business and Multi-Family Loans.  The commercial business loans originated by the Bank are primarily secured by business equipment, furniture and fixtures, inventory and receivables, or are unsecured. At December 31, 2014, the Bank had $10.6 million, or 3.0%, of the Bank's total loan portfolio, in commercial business loans.  A totalof $2.0 million, or 18.6% of these loans were unsecured at December 31, 2014.

The commercial real estate loans originated by the Bank are primarily secured by non-residential commercial properties, churches, hotels, residential developments, single family construction loans to builders for speculative or pre-sold homes, lot loans to builders, income property developments, and undeveloped land.  At December 31, 2014, the Bank had $196.1 million, or 56.1%,of the Bank's total loan portfolio, in commercial real estate loans. Included in these loans at December 31, 2014was $8.8 millionin A&D loans with terms of typically two to three years. Also included in commercial real estateloans was $11.4 million in loans for the construction of single family dwellings to builders with a term of typically one year.

The multi-family loans originated by the Bank are primarily secured by commercial residential properties including apartment complexes, condominiums or townhouses, and loans for acquisition and development of, or improvements to multi-family residential properties. At December 31, 2014, the Bank had $13.4 million, or 3.8%, of the Bank's total loan portfolio, in multi-family loans.

The following table summarizes the Bank's commercial real estate, multi-family, and commercial business loans by geographic market area at December 31, 2014.

	Aiken County Area		Midlands Area SC		Metro Augusta, GA		Other		Total
	(In Thousands)
Commercial real estate	$	86,778	$	37,942	$	44,882	$	26,505	$	196,107
Multi-family	2,573		8,014		1,632		1,205		13,424
Commercial business	7,357		961		1,741		505		10,564
Total	$	96,708	$	46,917	$	48,255	$	28,215	$	220,095

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

Commercial real estate lending entails significant additional credit risk when compared to residential lending. Commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers.  Because payments on loans secured by commercial properties often depend upon the successful operation and management of the properties, repayment of these loans may be affected by adverse conditions in the real estate market or the economy.  In order to minimize the risks associated with this type of loan, the Bank generally limits the maximum loan-to-value ratio for commercial real estate to 65% to80%, based on appraisals of the property at the time of the loan by appraisers designated by the Bank, and strictly scrutinizes the credit history, financial condition and cash flow of the borrower, the quality of the collateral and the expertise of management of the property securing the loan. Although the creditworthiness of the business and its principals is of primary consideration, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount. A&D loans secured by improved lots generally involve greater risks than residential mortgage lending because these loans are more

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

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

Federal law restricts the Bank's permissible lending limits to one borrower to the greater of $500,000 or 15% of unimpaired capital and surplus.  At December 31, 2014, the Bank's legal lending limit under this restriction was $14.3 million.  At that date, the Bank's largest loan relationship to a single borrower was $10.8 million.  South Carolina law restricts the Bank's permissible lending limits to one borrower to 10% of unimpaired capital unless prior approval is granted by a two-thirds vote of the Board of Directors, in which case the limit is increased to 15% of unimpaired capital.  The Bank's lending limit at 10% of unimpaired capitalwas $9.6 million at December 31, 2014. The $10.8 million loan relationship mentioned above was approved by the full Board.

Consumer Loans.  The Bank originates consumer loans for any personal, family or household purpose, including the financing of home improvements, loans to individuals for residential lots for a future home, automobiles, boats, mobile homes, recreational vehicles and education.  The Bank also makes consumer first and second mortgage loans secured by residences.  These loans typically do not qualify for sale in the secondary market, but are generally not considered sub-prime lending. In addition, the Bank offers home equity lines of credit.  Home equity loans are secured by mortgage liens on the borrower's principal or second residence. Home equity lines are open end lines of credit where the borrowers pay a minimum of interest only monthly on drawn lines.  The terms are for a maximum period of 20 years and the rate is a variable rate tied to prime and floats monthly.  Margins range from zero to one percent.  In 2012, the Bank instituted a floor of 5% on new originations and a maximum loan-to-value ratio of 80% for first mortgages originated by Security Federal and 60% for first mortgages originated by other lenders. Previously, the maximum loan-to-value ratio was 90%, but was decreased because of the current economic environment.  At December 31, 2014, the Bank had $24.2 million of home equity lines of credit outstanding and $19.1 million of additional commitments of home equity lines of credit.  The Bank also makes secured and unsecured lines of credit available.  Although consumer loans involve a higher level of risk than one- to four-family residential mortgage loans, they generally provide higher yields and have shorter terms to maturity than one- to four-family residential mortgage loans.  At December 31, 2014, the Bank had total consumer loans of $50.4 million, or 14.4% of the Bank's loan portfolio.

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

The Bank also has a credit card program.  As of December 31, 2014, the Bank had issued 3,319 Visa credit cards withtotal approved credit lines of $7.0 million, of which $2.3 million was outstanding on that date.

Loan Delinquencies and Defaults

General.  The Bank's collection procedures provide that when a real estate loan is approximately 20 days past due, the borrower is contacted by mail and payment is requested.  If the delinquency continues for another 10 days, subsequent efforts are made to contact the delinquent borrower and establish a program to bring the loan current.  In certain instances, the Bank may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize his financial affairs.  If the loan continues in a delinquent status for 60 days or more, the Bank generally initiates foreclosure proceedings after the customer has been notified by certified mail.  The Bank institutes the same collection procedure for its commercial real estate loans.  At December 31, 2014, the Bank had other real estate owned ('OREO') valued at $3.2 million.

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Delinquent Loans.  The following table sets forth information concerning delinquent loans at December 31, 2014.  The amounts presented represent the total remaining principal balances of the delinquent loans (before specific reserves for losses), rather than the actual payment amounts which are overdue.

	Real Estate						Non-Real Estate
	Residential			Commercial			Consumer			Commercial Business
	Number	Amount		Number	Amount		Number	Amount		Number	Amount		Total
Loans delinquent for:	(Dollars in Thousands)
30 - 59 days	—	$	—	26	$	4,545	68	$	1,869	8	$	162	$	6,576
60 - 89 days	6	1,087		10	1,095		4	91		5	100		2,373
90 days and over	27	3,062		46	9,859		19	574		3	247		13,742
Total delinquent loans	33	$	4,149	82	$	15,499	91	$	2,534	16	$	509	$	22,691

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

The Company uses a risk based approach based on the following credit quality measures consistent with regulatory guidelines when analyzing the loan portfolio: pass, caution, special mention, and substandard. These indicators are used to rate the credit quality of loans for the purposes of determining the Company’s allowance for loan losses. Pass loans are loans that are performing and are deemed adequately protected by the net worth of the borrower or the underlying collateral value. These loans are considered the least risky in terms of determining the allowance for loan losses. Substandard loans are considered the most risky category. These loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans 60 days or more past due are automatically classified in this category. The other two categories fall in between these two grades.

At December 31, 2014, $24.3 million, or 6.9%, of the Bank's loans were classified "substandard" compared to $31.9 million, or 8.6%, at December 31, 2013. At December 31, 2014, $36.1 million were designated as "special mention" compared to $26.7 million at December 31, 2013. At December 31, 2014, $34.9 million were designated as “caution” compared to $45.4 million at December 31, 2013. The Bank had no loans classified as "doubtful" or "loss" at December 31, 2014 and December 31, 2013. According to generally accepted accounting principles, the Bank is required to account for certain loan modifications or restructuring as a “troubled debt restructuring.” In general, the modification or restructuring of a debt is considered a troubled debt restructuring if the Bank, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that would not otherwise be considered. As of December 31, 2014, there were loans totaling $9.6 million which were troubled debt restructurings compared to $12.4 million at December 31, 2013.  The Bank's classification of assets is consistent with FDIC regulatory classifications.

Non-performing Assets.  Loans are placed on non-accrual status when the collection of principal and/or interest becomes doubtful.  In addition, all loans are placed on non-accrual status when the loan becomes 90 days or more contractually delinquent.  All consumer loans more than 90 days delinquent are charged against the consumer loan allowance for loan losses unless there is adequate collateral which is in the process of being repossessed or foreclosed on.  At December 31, 2014, the Bankhad $9.6 million in troubled debt restructurings which involve forgiving a portion of interest or principal on any loans or making loans at a rate materially less than market rate.  Other loans of concern are those loans (not delinquent more than 60 days) that management has determined need to be closely monitored as the potential exists for increased risk on these loans in the future.  Non-performing loans are reviewed monthly on a loan by loan basis.  Charge-offs, whether partial or in full, associated with these loans will vary based on estimates of recovery for each loan.

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

	At December 31,									At March 31,
	2014			2013			2012			2012			2011			2010
				(Dollars in Thousands)
Loans Delinquent 60 to 89 Days:
Residential	$	1,087		$	1,363		$	1,795		$	742		$	—		$	559
Consumer	91			235			212			352			197			925
Commercial business	100			—			36			209			133			1
Commercial real estate	1,095			2,047			4,852			4,684			2,709			2,724
Total	$	2,373		$	3,645		$	6,895		$	5,987		$	3,039		$	4,209
Total as a percentage of total assets	0.29		%	0.43		%	0.77		%	0.65		%	0.33		%	0.44		%
Non-Accruing Loans Delinquent 90 Days    or More:
Residential	$	3,061		$	4,608		$	3,758		$	3,639		$	1,810		$	4,344
Consumer	574			398			646			620			1,194			703
Commercial business	247			33			87			21			172			699
Commercial real estate	9,860			4,973			13,913			18,378			9,337			25,480
Total	$	13,742		$	10,012		$	18,404		$	22,658		$	12,513		$	31,226
Total as a percentage of total assets	1.66		%	1.18		%	2.07		%	2.45		%	1.34		%	3.27		%
Troubled debt restructurings  (1)	$	9,630		$	12,394		$	15,941		$	18,029		$	12,197		$	336
OREO	$	3,230		$	3,947		$	6,754		$	14,160		$	14,434		$	10,773
Allowance for loan losses	$	8,357		$	10,242		$	11,318		$	14,615		$	12,502		$	12,307

(1) Includes $2.4 million of TDRs in default, which are also included in the Non-Accruing Loans section of this table.

Non-performing commercial real estate loans increased $4.9 million to $9.9 million at December 31, 2014 from $5.0 million at December 31, 2013 primarily due to an increase in non-performing commercial real estate loans. The balance in non-performing commercial real estate loans at December 31, 2014 consisted of 46 loans to 28 borrowers with an average loan balance of $214,000 compared to 37 loans to 19 borrowers with an average loan balance of $134,000 at December 31, 2013.

Of the non-performing commercial real estate category, $4.0 million consisted of 15 loans secured by commercial buildings to 14 different borrowers; $1.9 million consisted of two loans to two separate borrowers related to the acquisition and development of two subdivisions; $1.3 million consisted of 10 loans secured by builder lots or speculative houses in varying degrees of completion throughout South Carolina and Georgia to four separate borrowers; $786,000 consisted of eight loans secured by raw land to six separate borrowers; and $702,000 consisted of two loans secured by a church building to one borrower. The majority of the remaining non-performing loans in the commercial real estate category were secured by first mortgages on principal residences throughout the Bank's market area.

Non-performing residential real estate loans decreased $1.5 million to $3.1 million at December 31, 2014 from $4.6 million at December 31, 2013. The balance in non-performing residential real estate loans at December 31, 2014 consisted of 27 loans to 27 different borrowers with an average loan balance of $113,000. The balance in non-performing residential real estate loans at December 31, 2013 consisted of 29 loans to 29 different borrowers with an average loan balance of $159,000.

Also included in non-accruing loans at December 31, 2014 were 19 consumer loans totaling $574,000 and three commercial business loans totaling $247,000.  Of the 19 consumer loans on non-accrual status at December 31, 2014, no loan or total relationship exceeded $101,000.  

At December 31, 2014, there were no accruing loans equal to or more than 90 days delinquent. For the year ended December 31, 2014, the interest income that was not recognized and would have been recognized with respect to non-accruing loans, had such loans been current in accordance with their original terms and with respect to troubled debt restructurings, had such loans been current in accordance with their original terms, totaled $920,000 compared to $480,000 for the year ended December 31, 2013.  For the year ended December 31, 2014 actual interest recorded on these loans amounted to $327,000 compared to $533,000 for the year ended December 31, 2013.

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

Not all loan modifications are TDRs. The Bank designates a loan modification as a TDR when the following two conditions are present: the borrower is experiencing financial difficulty, and because of this difficulty, the Bank grants a concession it would not otherwise consider. Typically these concessions involve a change in the interest rate, maturity date or payment amount or some combination of each. These concessions rarely result in the forgiveness of principal or interest.

TDRs are considered impaired and generally reported as non-performing loans on non-accrual status. Non-performing TDRs may be returned to accrual status when payment in full of all amounts due under the restructured terms is anticipated and the borrower has demonstrated a sustained payment history which is typically six months.

During the year ended December 31, 2014, the Bank modified two loans that were considered to be TDRs. The Bank had 18 loans totaling $9.6 million at December 31, 2014 which were TDRs compared to 22 loans totaling $12.4 million at December 31, 2013. The 18 TDRs included one consumer loan secured by a first mortgage on a residential dwelling and one consumer auto loan totaling $4,000. The remaining TDRs consisted of 16 commercial real estate loans to 11 separate borrowers. The commercial real estate loans were secured primarily by first mortgages on three single family residences, four commercial buildings, three hotels, one church and five parcels of land.  

Seven of the TDRs to four borrowers totaling $2.4 million were in default at December 31, 2014. All of the remaining TDRs were current at December 31, 2014.The Bank considers any loan 30 days or more past due to be in default.

Potential Problem Loans. Potential problem loans include substandard loans that are not already included as non-accrual loans or TDRs and special mention loans where management has become aware of information regarding possible credit issues for borrowers that could potentially cause doubt about their ability to comply with current repayment terms. At December 31, 2014 and December 31, 2013, the Bank had identified $46.7 million and $48.5 million, respectively, of potential problem loans through its internal loan review procedures.

Repossessed Assets.  OREO was $3.2 million at December 31, 2014 and consisted of the following real estate properties: nine single-family residences and 24 lots within residential subdivisions located throughout our market area in South Carolina and Georgia; eight lots within a subdivision and adjacent 22.96 acres of land in Aiken, South Carolina; two parcels of land, one commercial lot, and one commercial building in South Carolina; one commercial building in Augusta, Georgia; and 34.8 acres of land in Bluffton, South Carolina which was originally acquired as a participation loan from another financial institution.

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

At December 31, 2014, the allowance for loan losses or reserve was $8.4 million.  In determining the adequacy of the reserve for loan losses, management reviews past experience of loan charge-offs, the level of past due and non-accrual loans, the size and mix of the portfolio, general economic conditions in the market area, and individual loans to identify potential credit problems.  Commercial business, commercial real estate and consumer loans were $270.5 million, or 77.4% of the Bank's total loan portfolio at December 31, 2014.  Although these types of loans carry a higher level of credit risk than conventional residential mortgage loans, the level of reserves reflects management's continuing evaluation of this risk based on the Bank's past loss experience.  At December 31, 2014, the Bank's ratio of loans delinquent more than 60 days to total assets was 1.95%.  The reserve is management's best estimate for offsetting risk for our estimated possible losses. There can be no guarantee that the estimate is adequate or accurate.  

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

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

	For the Years Ended December 31,						For the Nine Months Ended December 31,			For the Years Ended March 31,
	2014			2013			2012			2012			2011			2010
Balance at beginning of period	$	10,242		$	11,318		$	14,615		$	12,502		$	12,307		$	10,182
Provision for loan losses	450			2,645			1,975			8,650			7,800			8,155
Charge-offs:
Residential real estate	359			1,118			647			564			1,010			283
Commercial business and commercial real estate	2,383			3,884			6,488			4,830			6,524			5,380
Consumer	372			207			287			1,250			583			405
Total charge-offs	3,114			5,209			7,422			6,644			8,117			6,068
Recoveries:
Residential real estate	136			273			57			—			125			3
Commercial business and commercial real estate	585			1,156			2,075			51			318			6
Consumer	59			59			18			56			68			29
Total recoveries	780			1,488			2,150			107			511			38
Balance at end of period	$	8,358		$	10,242		$	11,318		$	14,615		$	12,502		$	12,307
Ratio of net charge-offs during the period to average loans outstanding during the period (1)	0.66		%	0.99		%	1.72		%	1.43		%	1.42		%	1.01		%

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

13

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

	At December 31,												At March 31,
	2014				2013				2012				2012				2011				2010
	Amount		% of Loans in Each Cate-gory to Total Loans		Amount		% of Loans in Each Cate-gory to Total Loans		Amount		% of Loans in Each Cate-gory to Total Loans		Amount		% of Loans in Each Cate-gory to Total Loans		Amount		% of Loans in Each Cate-gory to Total Loans		Amount		% of Loans in Each Cate-gory to Total Loans
	(Dollars in Thousands)
Residential	$	1,392	22.2	%	$	1,706	22.6	%	$	1,522	23.2	%	$	1,929	22.6	%	$	1,703	23.2	%	$	2,044	20.7	%
Consumer	887		14.5		848		14.0		1,001		13.7		1,498		13.2		1,122		12.9		1,039		11.7
Commercial business	159		3.0		427		2.1		619		2.0		645		2.1		924		2.7		714		3.0
Commercial real estate	5,920		60.3		7,261		61.3		8,176		61.1		10,543		62.1		8,753		61.2		8,510		64.6
Total	$	8,358	100.0	%	$	10,242	100.0	%	$	11,318	100.0	%	$	14,615	100.0	%	$	12,502	100.0	%	$	12,307	100.0	%

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Subsidiaries

At December 31, 2014, Security Federal's net investment in its subsidiaries (including loans to subsidiaries) totaled $4.7 million.  In addition to investments in subsidiaries, federal institutions are permitted to invest an unlimited amount in operating subsidiaries engaged solely in activities which a commercial bank may engage in directly.

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

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

Investment Activities

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

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

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

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The following table sets forth the composition of the Company's portfolio of securities and other investments, not including mortgage-backed securities.

	At December 31,						At March 31,
	2014		2013		2012		2012
			(In Thousands)
Interest bearing deposit at FHLB	$	2,252	$	321	$	226	$	577
Certificates of deposits at a financial institutions	2,095		2,100		1,729		1,727
Total other investments	$	4.347	$	2,421	$	1,955	$	2,304
Investment Securities:
Available for Sale:
FHLB securities	$	13,247	$	12,671	$	6,165	$	2,699
Federal Farm Credit Bank securities	5,668		5,366		—		—
Fannie Mae bonds	1,004		1,975		—		—
Freddie Mac bonds	—		—		—		2,922
Small Business Administration bonds	108,127		100,824		96,462		86,279
Tax exempt municipal bonds	62,495		61,315		37,482		24,126
Equity securities	307		256		75		75
Total securities available for sale	190,848		182,407		140,184		116,101
Held to Maturity:
FHLB securities	—		—		7,996		11,555
Federal Farm Credit Bank securities	—		—		6,796		1,999
Fannie Mae bonds	—		—		2,022		2,992
Freddie Mac bonds	—		—		1,998		3,991
Small Business Administration bonds	—		—		5,866		3,251
Equity securities	—		—		155		155
Total securities held to maturity	—		—		24,833		23,943
Total securities (1)	190,848		182,407		165,017		140,044
FHLB stock	3,145		5,017		6,179		8,471
Total securities and FHLB stock (1)	$	193,993	$	187,424	$	171,196	$	148,515

___________

(1)      Does not include mortgage-backed securities.

At December 31, 2014, the Company did not have any investment securities (exclusive of obligations of the U.S. Government and federal agencies) issued by any one entity with a total book value in excess of 10% of its shareholders' equity.SBA bonds are backed by the full faith and credit of the U.S. government and carry a zero percent risk base when calculating risk based assets for regulatory capital purposes.

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

The following table sets forth the maturities or repricing of investment securities, not including mortgage-backed securities, and FHLB stock at December 31, 2014, and the weighted average yields of such securities and FHLB stock (calculated on the basis of the cost and effective yields weighted for the scheduled maturity of each security).  Tax equivalent yields on taxexempt municipal bonds are calculated using a 34% tax rate.  Callable securities are shown at their likely call dates based on

16

current interest rates.  The table was prepared using amortized cost.  Small Business Administration securities are based on maturity dates without the effect of scheduled payments or anticipated prepayments.

	Maturing or Repricing
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)
U.S. Government sponsored enterprises	$	13,317	1.89	%	$	997	1.78	%	$	5,750	2.41	%	$	—	—	%
Small Business Administration bonds	81,102		1.59		1,590		1.33		15,549		2.41		8,396		3.46
Tax exempt municipal bonds	1,020		2.55		8,533		2.54		47,757		3.10		2,651		4.17
FHLB stock (1)	3,145		4.91		—		—		—		—		—		—
Other equity securities	250		1.49		—		—		—		—		—		—
Total (2)	$	98,834	1.72	%	$	11,120	2.30	%	$	69,056	2.88	%	$	11,047	3.63	%

___________

(1)   FHLB stock has no stated maturity date.

(2)   Excludes mortgage-backed securities with a total amortized cost of $234.0 million and a yield of 2.42%.

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

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

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

	At December 31,						At March 31,
	2014		2013		2012		2012
	(In Thousands)
Available for sale:
Freddie Mac	$	41,348	$	40,721	$	28,560	$	41,047
Fannie Mae	36,882		34,339		45,002		47,510
Ginnie Mae	160,623		173,537		141,170		149,297
Total	$	238,853	$	248,597	$	214,732	$	237,854
Held to maturity:
Freddie Mac	—		—		4,060		$	1,548
Fannie Mae	—		—		—		—
Ginnie Mae	—		—		47,179		42,185
Total	$	—	$	—	$	51,239	$	43,733

At December 31, 2014, the Company did not have any mortgage-backed securities (exclusive of obligations of agencies of the U.S. Government) issued by any one entity with a total book value in excess of 10% of shareholders equity.

Freddie Mac and Fannie Mae mortgage-backed securities are GSE issued securities.  GSE securities are not backed by the full faith and credit of the United States government.  Ginnie Mae mortgage-backed securities are backed by the full faith and credit of the United States government.

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

The following table sets forth the final maturities or initial repricings, whichever occurs first, and the weighted average yields of the mortgage-backed securities at December 31, 2014.  Not considered in the preparation of the table below is the effect of scheduled payments or anticipated prepayments.  The table is prepared using amortized cost.

	The Earliest of Maturing or Repricing																At December 31, 2014
	Less Than 1 Year				1 to 5 Years				5 to 10 Years				Over Ten Years				Balance Outstanding
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)
Fannie Mae	$	10,728	1.71	%	$	1,655	3.20	%	$	4,991	3.00	%	$	18,736	3.01	%	$	36,110	2.63	%
Freddie Mac	—		—		287		4.66		14,238		2.49		26,526		2.86		41,051		2.74
Ginnie Mae	70,432		1.14		3,597		3.80		5,270		4.23		77,504		3.36		156,803		2.40
Total	$	81,160	0.98	%	$	5,539	3.66	%	$	24,499	2.96	%	$	122,766	3.20	%	$	233,964	2.42	%

Sources of Funds

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

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

At December 31, 2014, the Bank had $38.8 million in brokered deposits.   The Bank believes that, based on its experience over the past several years, its savings and transaction accounts are stable sources of deposits.

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

	At December 31,												At March 31,
	2014				2013				2012				2012
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
	(Dollars in Thousands)
Interest Rate Range for 2014:
Savings accounts 0% - 0.10%	$	28,623	4.3	%	$	24,485	3.7	%	$	22,411	3.3	%	$	22,349	3.2	%
NOW and other transaction accounts 0% - 0.10%	143,422		21.7		136,697		20.8		126,741		18.7		124,750		17.9
Money market funds 0.10% - 0.20%	234,819		35.6		240,631		36.5		234,383		34.7		224,196		32.2
Total non-certificates	$	406,864	61.6	%	$	401,813	61.0	%	$	383,535	56.7	%	$	371,295	53.3	%
Certificates:
0.00-1.99%	$	227,473	34.5	%	$	226,750	34.4	%	$	255,423	37.8	%	$	267,556	38.4	%
2.00-2.99%	25,605		3.9		28,849		4.4		32,975		4.9		49,261		7.1
3.00-3.99%	173		—		1,285		0.2		2,381		0.3		2,937		0.4
4.00-4.99%	—		—		—		—		1,523		0.2		4,022		0.6
5.00-5.99%	—		—		—		—		502		0.1		1,130		0.2
Total certificates	253,251		38.4	%	256,884		39.0	%	292,804		43.3	%	324,906		46.7	%
Total deposits	$	660,115	100.0	%	$	658,697	100.0	%	$	676,339	100.0	%	$	696,201	100.0	%

The Bank relies upon locally obtained Jumbo CDs to maintain its deposit levels.  At December 31, 2014, Jumbo CDs constituted $140.0 million or 21.2% of the Bank's total deposits. At December 31, 2014, the Bank held $21.6 million in public funds which consisted of $9.3 million in certificates of deposit and $12.3 million in demand deposit accounts.

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

	Year Ended December 31,						Nine Months Ended December 31,			Year Ended March 31,
	2014			2013			2012			2012
	(In Thousands)
Opening balance	$	658,697		$	676,339		$	696,201		$	690,357
Net deposits	1,418			(17,642		)	(19,862		)	5,844
Ending balance	660,115			658,697			676,339			696,201
Net increase (decrease)	$	1,418		$	(17,642	)	$	(19,862	)	$	5,844
Percent increase (decrease)	0.22		%	(2.61		)%	(2.85		)%	0.85		%

19

The following table shows rate and maturity information for the Bank's certificates of deposit as of December 31, 2014.

	0- 1.99%		2.00- 2.99		3.00- 3.99		Total
Certificate accounts maturing in quarter ending:			(In Thousands)
March 31, 2015	$	35,389	$	4,299	$	173	$	39,861
June 30, 2015	39,353		1,764		—		41,117
September 30, 2015	24,583		3,295		—		27,878
December 31, 2015	30,239		3,396		—		33,635
March 31, 2016	20,576		4,312		—		24,888
June 30, 2016	11,287		2,822		—		14,109
September 30, 2016	11,590		1,584		—		13,174
December 31, 2016	5,310		—		—		5,310
March 31, 2017	3,764		—		—		3,764
June 30, 2017	5,479		—		—		5,479
September 30, 2017	7,193		—		—		7,193
December 31, 2017	5,837		—		—		5,837
Thereafter	26,873		4,133		—		31,006
Total	$	227,473	$	25,605	$	173	$	253,251

The following table indicates the amount of the Bank's deposits of $100,000 or more by time remaining until maturity at December 31, 2014.

	Certificates of Deposit		Savings, NOW and Money Market Accounts
	(In Thousands)
Maturity Period
Three months or less	$	19,481	$	232,181
Over three through six months	24,496		—
Over six through twelve month	26,076		—
Over twelve months	69,909		—
Total	$	139,962	$	232,181

Borrowings

As a member of the FHLB of Atlanta, the Bank is required to own capital stock in the FHLB of Atlanta and is authorized to apply for advances from the FHLB of Atlanta.  Each FHLB credit program has its own interest rate, which may be fixed or variable, and range of maturities.  The FHLB of Atlanta may prescribe the acceptable uses to which these advances may be put,as well as limitations on the size of the advances and repayment provisions.  At December 31, 2014, the Bank had $52.9 millionin outstanding advances from the FHLB of Atlanta.   See Note 10 of  the Notes to Consolidated Financial Statements contained in the Annual Report for information regarding the maturities and rate structure of the Bank's FHLB advances.  Federal law contains certain collateral requirements for FHLB advances.  See "Regulation - Regulation of the Bank - Federal Home Loan Bank System."

At December 31, 2014, the Company had $5.2 million in junior subordinated debentures.  The debentures accrue and pay distributions quarterly at a floating rate of three-month LIBOR plus 170 points which was equal to 1.94% at December 31, 2014.  The debentures were callable by the Company in September 2011, and quarterly thereafter, with a final maturity date of December 15, 2036.  See Note 11 of the Notes to Consolidated Financial Statements contained in the Annual Report for more information.

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

20

The convertible senior debentures are redeemable, in whole or in part, at the option of the Company at any time on or after December 1, 2019, at a price equal to 100% of the principal amount of the debentures to be purchased plus any accrued and unpaid interest to, but excluding, the date of redemption. See Note 12 of the Notes to Consolidated Financial Statements contained in the Annual Report for more information.

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

	Years Ended December 31,				Nine Months Ended December 31,		Year Ended March 31,
	2014		2013		2012		2012
	(In Thousands)
Maximum Balance:
FHLB advances	$	90,300	$	103,156	$	113,168	$	141,484
Other borrowings	10,781		9,873		10,226		11,669
Junior subordinated debentures	5,155		5,155		5,155		5,155
Senior convertible debentures	6,084		6,084		6,084		6,084
Average Balance:
FHLB advances	$	70,739	$	92,718	$	110,380	$	127,411
Other borrowings	9,450		9,270		9,669		10,423
Junior subordinated debentures	5,155		5,155		5,155		5,155
Senior convertible debentures	6,084		6,084		6,084		6,084

At December 31, 2014, the Bank had $8.5 million in retail repurchase agreements with an average rate of 0.15%.  These repurchase agreements are included in "Other Borrowings" in the Consolidated Financial Statements included in the Annual Report and in the table above.

21

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

	At December 31,									At March 31,
	2014			2013			2012			2012
	(Dollars in Thousands)
Balance:
FHLB advances	$	52,900		$	87,740		$	105,257		$	122,070
Other borrowings	8,523			8,003			9,317			9,801
Junior subordinated debentures	5,155			5,155			5,155			5,155
Senior convertible debentures	6,084			6,084			6,084			6,084
Weighted Average Interest Rate at Fiscal Year End:
FHLB advances	3.87		%	3.23		%	3.72		%	3.62		%
Other borrowings	0.15			0.15			0.20			0.25
Junior subordinated debentures	1.94			1.94			2.01			2.17
Senior convertible debentures	8.00			8.00			8.00			8.00
During Fiscal Year:
FHLB advances	3.71		%	3.79		%	3.97		%	3.86		%
Other borrowings	0.18			0.20			0.25			0.37
Junior subordinated debentures	1.96			2.00			2.17			3.24
Senior convertible debentures	8.00			8.00			8.00			8.00

Competition

The Bank serves the counties of Aiken, Richland, and Lexington, South Carolina, and Columbia County, Georgia through its 13 full service branch offices located in Aiken, North Augusta, Graniteville, Langley, Clearwater, Wagener, Lexington, Columbia, and West Columbia, South Carolina, and a branch office in Columbia County, Evans, Georgia which opened in December 2007. On January 15, 2015 the Bank began construction of a new branch in Ballentine, South Carolina. This new location, scheduled for opening in mid-2015, will be a full-service branch offering depository banking as well as commercial, personal and mortgage lending.

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

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

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

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Personnel

At December 31, 2014, the Company employed 183 full-time and 22 part-time employees.  The Bank employees are not represented by any collective bargaining agreement.  Management of the Bank considers its relations with its employees to be good.

Executive Officers.  

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

	Age at December 31,	Position
Name	2014	Company	Bank
J. Chris Verenes	58	Chief Executive Officer	Chief Executive Officer and Chairman of the Board
Timothy W. Simmons	69	Chairman of the Board	—
Roy G. Lindburg	54	President	—
Richard T. Harmon	59	—	President

Biographical Information.  

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

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

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

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

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

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REGULATION

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

The laws and regulations affecting depository institutions and their holding companies have changed significantly particularly in connection with the enactment of The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). Among other changes, the Dodd-Frank Act established the Consumer Protection Financial Bureau (“CFPB”) as an independent bureau of the Federal Reserve. The CFPB assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. The regulations governing the Company and the Bank may be amended from time to time by the State Board, the FDIC, the Federal Reserve or the SEC, as appropriate. Any such legislation or regulatory changes in the future could have an adverse effect on our operations and financial condition. We cannot predict whether any such changes may occur.

The following is a summary discussion of certain laws and regulations applicable to the Company and the Bank which is qualified in its entirety by reference to the actual laws and regulations.

Regulation of the Bank

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

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

Federal Deposit Insurance Corporation. The Bank's deposits are insured up to applicable limits by the Deposit Insurance Fund ("DIF") of the FDIC and such insurance is backed by the full faith and credit of the United States Government. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the insurance fund. The FDIC also has the authority to initiate enforcement actions against savings institutions and may terminate the deposit insurance if it determines that the institution has engaged in unsafe or unsound practices or is in an unsafe or unsound condition. Our deposit insurance premiums for the year ended December 31, 2014 were $692,000.

The Dodd-Frank Act requires the FDIC's deposit insurance assessments to be based on assets instead of deposits.  The FDIC issued rules which specify that the assessment base for a bank is equal to its total average consolidated assets less average tangible capital.  The FDIC revised assessment schedule established assessment rates that range from approximately 2.5 basis points to 45 basis points, depending on applicable adjustments for unsecured debt issued by an institution and brokered deposits (and a further adjustment for institutions that hold unsecured debt of other FDIC-insured institutions), until such time as the FDIC's reserve ratio equals 1.15%. Once the FDIC's reserve ratio reaches 1.15% and the reserve ratio for the immediately prior assessment period is less than 2.0%, the applicable assessment rates may range from 1.5 basis points to 40 basis points (subject to adjustments as described above).  If the reserve ratio for the prior assessment period is equal to, or greater than 2.0% and less than 2.5%, the assessment rates may range from two basis points to 28 basis points and if the reserve ratio for the prior assessment period is greater than 2.5%, the assessment rates may range from 0.5 basis points to 35 basis points (in each case subject to adjustments as described above).  No institution may pay a dividend if it is in default on its federal deposit insurance assessment.

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In addition, federally insured institutions are required to pay a Financing Corporation (“FICO”) assessment in order to fund the interest on bonds issued to resolve thrift failures in the 1980s. At December 31, 2014, the FICO assessment equaled 0.60 basis points of the assessment base, computed on assets. These assessments, which may be revised based upon the level of DIF deposits, will continue until the bonds mature in the years 2017 through 2019. For 2014, the Bank incurred approximately $46,000 in FICO assessments.

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

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

Prompt Corrective Action. Federal statutes establish a supervisory framework based on five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. An institution's category depends upon where its capital levels are in relation to relevant capital measures, which include a risk-based capital measure, a leverage ratio capital measure and certain other factors. The federal banking agencies have adopted regulations that implement this statutory framework. Under these regulations, an institution is treated as well capitalized if its total risk-based capital ratio is 10% or more, its Tier 1 risk-based capital ratio is 6% or more, its Tier 1 leverage capital ratio is 5% or more, and it is not subject to any federal supervisory order or directive to meet a specific capital level. In order to be adequately capitalized, an institution must have a total risk-based capital ratio of not less than 8%, a Tier 1 risk-based capital ratio of not less than 4%, and a Tier 1 leverage ratio of not less than 4%. An institution that is not well capitalized is subject to certain restrictions on brokered deposits, including restrictions on the rates it can offer on its deposits, generally. Any institution which is neither well capitalized nor adequately capitalized is considered undercapitalized. In connection with the new capital rules adopted by the federal banking agencies, the general structure of the prompt corrective action rules were maintained, but include a new common equity requirement for Tier 1 capital and incorporate an increased Tier 1 capital requirement into the prompt corrective action framework. See "Capital Requirements " below.

The FDIC may impose additional restrictions on institutions that are undercapitalized and generally is authorized to reclassify an institution into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

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

At December 31, 2014, the Bank was categorized as "well capitalized" under the prompt corrective action regulations of the FDIC. For additional information, see "Capital Requirements" below and Note 14 of the Notes to Consolidated Financial Statements included in the Annual Report.

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

Currently, FDIC regulations recognize two types, or tiers, of capital: core (Tier 1) capital and supplementary (Tier 2) capital. Tier 1 capital generally includes common stockholders' equity and qualifying noncumulative perpetual preferred stock, less most intangible assets. Tier 2 capital, which is limited to 100% of Tier 1 capital, includes such items as qualifying general loan loss reserves, cumulative perpetual preferred stock, mandatory convertible debt, term subordinated debt and limited life preferred stock; however, the amount of term subordinated debt and intermediate term preferred stock (original maturity of at least five years but less than 20 years) that may be included in Tier 2 capital is limited to 50% of Tier 1 capital.

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The FDIC currently measures an institution's capital using a leverage limit together with certain risk-based ratios. The FDIC's minimum leverage capital requirement specifies a minimum ratio of Tier 1 capital to average total assets. Most banks are required to maintain a minimum leverage ratio of at least 4% of total assets. At December 31, 2014, the Bank had a Tier 1 leverage capital ratio of 10.6%. The FDIC retains the right to require an institution to maintain a higher capital level based on an institution's particular risk profile.

FDIC regulations also establish a measure of capital adequacy based on ratios of qualifying capital to risk-weighted assets. Assets are placed in one of four categories and given a percentage weight based on the relative risk of the category. In addition, certain off-balance-sheet items are converted to balance-sheet credit equivalent amounts, and each amount is then assigned to one of the four categories. Under the guidelines, the ratio of total capital (Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least 8%, and the ratio of Tier 1 capital to risk-weighted assets must be at least 4%. In evaluating the adequacy of a bank's capital, the FDIC may also consider other factors that may affect the bank's financial condition. Such factors may include interest rate risk exposure, liquidity, funding and market risks, the quality and level of earnings, concentrations of credit risk, risks arising from nontraditional activities, loan and investment quality, the effectiveness of loan and investment policies, and management's ability to monitor and control financial operating risks.

At December 31, 2014, the Bank had a Tier 1 risk-based capital ratio of 23.2% and a total risk-based capital ratio of 24.4% and the Bank was classified as a well-capitalized institution. For additional information concerning the Bank's capital, see Note 14 of the Notes to the Consolidated Financial Statements included in the Annual Report. The Bank’s management believes that, under the current regulations, the Bank will continue to meet its minimum capital requirements in the foreseeable future. However, events beyond the control of the Bank, such as a downturn in the economy in areas where it has most of its loans, could adversely affect future earnings and, consequently, the ability of the Bank to meet its capital requirements.

On July 2, 2013, the Federal Reserve approved a final rule (“Final Rule”) to establish a new comprehensive regulatory capital framework for all U.S. financial institutions and their holding companies. On July 9, 2013, the Final Rule was approved as an interim final rule by the FDIC. The Final Rule implements the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. The final rule includes new risk-based capital and leverage ratios, which are effective January 1, 2015 (with some changes generally transitioned into full effectiveness over two to four years), and revise the definition of what constitutes “capital” for purposes of calculating those ratios.

The proposed new minimum capital level requirements applicable to the Bank will be: (i) a new common equity Tier 1 (“CETI”) capital ratio of 4.5% (with CET1 consisting of qualifying Tier 1 capital less all capital components that are not considered common equity); (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The rule eliminates the inclusion of certain instruments, such as trust preferred securities, from Tier 1 capital. Instruments issued prior to May 19, 2010 will be grandfathered for companies with consolidated assets of $15 billion or less. The rule also establishes a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital and would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement will be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase by that amount each year until fully implemented in January 2019. An institution would be subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations would establish a maximum percentage of eligible retained income that could be utilized for such actions. In addition, the Final Rules maintain the general structure of the prompt corrective action rules, but incorporate the new CETI requirement and the increased Tier 1 capital requirement into the prompt corrective action framework, as indicated above in “- Prompt Correction Action.”

The FDIC may impose additional restrictions on institutions that are undercapitalized and generally is authorized to reclassify an institution into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition. An institution is deemed “well capitalized” if it has at least a 5.0% Tier 1 capital ratio, a 6.0% Tier 1 risk-based capital ratio and 10.0% total risk-based capital ratio. At December 31, 2014, we believe that the Bank’s current capital levels meet the fully-phased in minimum capital requirements, including the related capital conservation buffers, as required by the Final Rule.

The application of these more stringent capital requirements could, among other things, result in lower returns on invested capital, over time require the raising of additional capital, and result in regulatory actions if we were to be unable to comply with such requirements.  Implementation of changes to asset risk weightings for risk based capital calculations, items included or deducted in calculating regulatory capital and/or additional capital conservation buffers could result in management modifying its business strategy and could limit our ability to make distributions, including paying out dividends or buying back shares.  Furthermore, the imposition of liquidity requirements in connection with the implementation of Basel III could result in

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our having to lengthen the term of our funding, restructure our business models, and/or increase our holdings of liquid assets. Any additional changes in our regulation and oversight, in the form of new laws, rules and regulations could make compliance more difficult or expensive or otherwise materially adversely affect our business, financial condition or prospects.

Federal Home Loan Bank System. The Bank is a member of the FHLB of Atlanta, which is one of 12 regional FHLBs that administer the home financing credit function of financial institutions. Each FHLB serves as a reserve or central bank for its members within its assigned region. It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB System. It makes loans or advances to members in accordance with policies and procedures, established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Board. All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB. In addition, all long-term advances are required to provide funds for residential home financing. At December 31, 2014, the Bank had $52.9 million of outstanding advances from the FHLB of Atlanta under an available credit facility of $248.6 million, which is limited to available collateral. See "Business - Sources of Funds - Borrowings."

As a member, the Bank is required to purchase and maintain stock in the FHLB of Atlanta. At December 31, 2014, the Bank had $3.1 million in FHLB stock, which was in compliance with this requirement. In past years, the Bank has received substantial dividends on its FHLB stock. These dividend yields have averaged 4.16% for the year ended December 31, 2014; 2.61% for the year ended December 31, 2013; and 1.94% for the nine months ended December 31, 2012.

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

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

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

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

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

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

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

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

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

Federal Reserve System. The Federal Reserve Board requires that all depository institutions maintain reserves on transaction accounts or non-personal time deposits. These reserves may be in the form of cash or non-interest-bearing deposits with the regional Federal Reserve Bank. Negotiable order of withdrawal (NOW) accounts and other types of accounts that permit payments or transfers to third parties fall within the definition of transaction accounts and are subject to the reserve requirements,as are any non-personal time deposits at a savings bank. As of December 31, 2014, the Bank's deposit with the Federal Reserve Bank and vault cash exceeded its reserve requirements.

Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the FDIC determines that a savings institution fails to meet any standard prescribed by the guidelines, it may require the institution to submit an acceptable plan to achieve compliance with the standard.

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

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

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

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

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

Regulation of the Company

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

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

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

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

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and personal property appraising; providing tax planning and preparation services; and, subject to certain limitations, providing securities brokerage services for customers.

Capital Requirements. The Federal Reserve has established capital adequacy guidelines for bank holding companies that generally parallel the capital requirements of the FDIC for the Bank, although the Federal Reserve regulations provide for the inclusion of certain trust preferred securities for up to 25% of Tier 1 capital in determining compliance with the guidelines.  The Federal Reserve regulations provide that capital standards will be applied on a consolidated basis in the case of a bank holding company with $500 million or more in total consolidated assets.  The guidelines require that a company's total risk-based capital must equal 8% of risk-weighted assets and one half of the 8% (4%) must consist of Tier 1 (core) capital.  As of December 31, 2014, the Company’s total risk-based capital was 23.9% of risk-weighted assets and its Tier 1 (core) capital was 20.6% of risk-weighted assets.  In July 2013, the Federal Reserve and the FDIC approved a new rule that will substantially amend the regulatory risk-based capital rules to implement the Basel III regulatory capital reforms and changes required by the Dodd-Frank Act. For a discussion of the new capital rules, see the section above entitled “- Regulation of the Bank - Capital Requirements.”

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

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

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

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

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

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

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

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

Sarbanes-Oxley Act of 2002.  As a public company that files periodic reports with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company is subject to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), which addresses, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information. The Sarbanes-Oxley Act represents significant federal involvement in matters traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate law, such as the relationship between a board of directors and management and between a board of directors and its committees.

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

TAXATION

Federal Taxation

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

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

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

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

Audits.  The Company, the Bank and its consolidated subsidiaries have been audited or their books closed without audit by the IRS with respect to consolidated federal income tax returns through March 31, 2010.  See Note 13 of the Notes to Consolidated Financial Statements contained in the Annual Report for additional information regarding income taxes.

State Taxation

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

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

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Item 1A. Risk Factors.

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

Risks Related to our Business

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

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

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

• loan delinquencies, problem assets and foreclosures may increase;

• we may increase our allowance for loan losses;

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

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

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

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

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

A return of recessionary conditions could result in increases in our level of non-performing loans and/or reduce demand for our products and services, which could have an adverse effect on our results of operations.

Economic conditions have improved since the end of the economic recession that officially ended in June, 2009, however, economic growth has been slow and uneven, unemployment remains high and concerns still exist over the federal deficit and government spending, which have all contributed to diminished expectations for the economy. A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment levels may result in higher than expected loan delinquencies and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity, and financial condition.

Furthermore, the Board of Governors of the Federal Reserve System, in an attempt to help the economy, has, among other things, kept interest rates low through its targeted federal funds rate and the purchase of U.S. Treasury and mortgage-backed securities. If the Federal Reserve Board increases the federal funds rate market interest rates would likely rise, which may negatively affect the housing markets and the U.S. economic recovery. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

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

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

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

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

• the duration of the loan;

• the character and creditworthiness of a particular borrower; and

• changes in economic and industry conditions.

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

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

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

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

The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. If our estimates are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in the need for additions to our allowance through an increase in the provision for loan losses. Deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may increase our loan charge-offs and/or may otherwise require an increase in the allowance for loan losses.Our allowance for loan losses was 2.41% of total loans outstanding and60.8% of non-performing loans at December 31, 2014.In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. Moreover, if charge-offs in future periods exceed the allowance for loan losses, we may need additional provisions to replenish the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material negative effect on our financial condition, results of operations and capital. In addition, proposed regulatory changes relating to the allowance for loan losses, including, but not limited to, the Financial Accounting Standards Board’s (“FASB'”) proposed Current Expected Credit Losses Model, could significantly impact the calculation and timing of amounts required to be included in the allowance for loan losses to cover expected losses over the entire life of a loan.

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

At December 31, 2014, our non-performing assets (which consist of non-accruing loans and other real estate owned ("OREO")) were $17.0 million, or 2.1% of total assets. Our non-performing assets adversely affect our net income in various ways:

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

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

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

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

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

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

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

At December 31, 2014, commercial real estate loans were $209.5 million or 59.9% of our total loan portfolio. These loans typically involve higher principal amounts than other types of loans. Repayment is dependent upon income being generated from the property securing the loan in amounts sufficient to cover operating expenses and debt service, which may be adversely affected by changes in the economy or local market conditions. In addition, some of our commercial real estate loans are not fully amortizing and contain large balloon payments upon maturity. These balloon payments may require the borrower to either sell or refinance the underlying property in order to make the balloon payment, which may increase the risk of default or non-payment. This risk was exacerbated in the recent recession and could remain an elevated risk in the current slow recovery economic environment. These loans also generally have relatively large balances to single borrowers or related groups of borrowers. Accordingly, if we make any errors in judgment in the collectibility of our commercial real estate loans, any resulting charge-offs may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.

Included within commercial real estate loans are acquisition and development ("A&D") loans. At December 31, 2014, A&D loans were $8.8 million or 2.5% of our total loan portfolio. Also included in commercial real estate loans was $11.4 million or 3.3% of our total loan portfolio in loans for the construction of single family dwellings to builders. This type of lending contains the inherent difficulty in estimating both a property's value at completion of the project and the estimated cost (including interest) of the project. If the estimate of construction cost proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of value upon completion proves to be inaccurate, we may be confronted at, or prior to, the maturity of the loan with a project the value of which is insufficient to assure full repayment. In addition, speculative construction loans to a builder are often associated with homes that are not pre-sold, and thus pose a greater potential risk to us than construction loans to individuals on their personal residences. Loans on land under development or held for future construction also poses additional risk because of the lack of income being produced by the property and the potential illiquid nature of the collateral. These risks can be significantly impacted by supply and demand conditions. As a result, this type of lending often involves the disbursement of substantial funds with repayment dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to independently repay principal and interest. While our origination of A&D loans have decreased significantly in recent years, we continue to have significant levels of construction loan balances. Most of our construction loans are for the construction of single family residences. Reflecting the current slowdown in the residential market, the secondary market for land and construction loans is not readily liquid, so we have less opportunity to mitigate our credit risk by selling part or all of our interest in these loans. If we foreclose on a construction loan, our holding period for the collateral typically may be longer than we have historically experienced because there are fewer potential purchasers of the collateral. The decline in the number of potential purchasers has contributed to the decline in the value of these loans. Accordingly, charge-offs on construction and land loans may be larger than those incurred by other segments of our loan portfolio.

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

At December 31, 2014, we had $10.6 million or 3.0% of our total loans in commercial business loans. Commercial business lending involves risks that are different from those associated with residential and commercial real estate lending. Real estate lending is generally considered to be collateral based lending with loan amounts based on predetermined loan to collateral values and liquidation of the underlying real estate collateral being viewed as the primary source of repayment in the event of borrower default. Our commercial business loans are primarily made based on the cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. The borrowers' cash flow may be unpredictable, and collateral securing these loans may fluctuate in value. Although commercial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories may be obsolete or of limited use, among other things. Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral provided by the borrower.

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

The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency, have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the guidance, a financial institution that, like us, is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors, (i) total reported loans for construction, land acquisition and development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multi-family and non-farm residential properties, loans for construction, land

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acquisition and development and other land, and loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. The particular focus of the guidance is on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment or as an abundance of caution). The purpose of the guidance is to guide banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations. The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing. Regulatory scrutiny of commercial real estate is generally at a ratio of 300% or more. At December 31, 2014, total commercial real estate loans represented 225% of risk based capital plus the excess allowance for loan losses; however, if the Bank paid back its $22 million CDCI preferred stock, the total commercial real estate to total risk based capital plus excess allowance would increase to approximately 294%. While we believe we have implemented policies and procedures with respect to our commercial real estate loan portfolio consistent with this guidance, bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us.

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

Many of our one- to four-family loans and home equity lines of credit are secured by liens on mortgage properties in which the borrowers have little or no equity because of the declines in home values in our primary market area. Residential loans with high combined loan-to-value ratios will be more sensitive to declining property values than those with lower combined loan-to-value ratios and therefore may experience a higher incidence of default and severity of losses. In addition, if the borrowers sell their homes, they may be unable to repay their loans in full from the sale proceeds. Further, the majority of our home equity lines of credit consist of second mortgage loans. For those home equity lines secured by a second mortgage, it is unlikely that we will be successful in recovering all or a portion of our loan proceeds in the event of default unless we are prepared to repay the first mortgage loan and such repayment and the costs associated with a foreclosure are justified by the value of the property. For these reasons, these loans may experience higher rates of delinquencies, defaults and losses.

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

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

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

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

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

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

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

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

Our earnings and cash flows are largely dependent upon our net interest income.  Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve.  Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, but these changes could also affect (i) our ability to originate loans and obtain deposits, (ii) the fair value of our financial assets and liabilities and (iii) the average duration of our mortgage-backed securities portfolio and other interest-earning assets.  If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected.  As a result of the relatively low interest rate environment, an increasing percentage of our deposits have been comprised of deposits bearing no or a relatively low rate of interest. We would incur a higher cost of funds to retain these deposits in a rising interest rate environment. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.  In addition, a substantial amount of our loans have adjustable interest rates.  As a result, these loans may experience a higher rate of default in a rising interest rate environment.Further, a significant portion of our adjustable rate loans have interest rate floors below which the loan's contractual interest rate may not adjust.  Approximately $129.0 million or 36.9% of our loan portfolio was comprised of adjustable or floating-rate loans at December 31, 2014, and approximately $83.3million, or 64.5%, of those loans contained interest rate floors, below which the loans' contractual interest rate may not adjust.  At December 31, 2014, the weighted average floor interest rate of these loans was 4.64%.  At that date, approximately $73.0million, or 87.6%, of these loans were at their floor interest rate.  The inability of our loans to adjust downward can contribute to increased income in periods of declining interest rates, although this result is subject to the risks that borrowers may refinance these loans during periods of declining interest rates.  Also, when loans are at their floors, there is a further risk that our interest income may not increase as rapidly as our cost of funds during periods of increasing interest rates which could have a material adverse effect on our results of operations.  

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

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

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

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

Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Although we consider our sources of funds adequate for our liquidity needs, we may seek additional debt in the future to achieve our long-term business objectives. Additional borrowings, if sought, may not be available to us or, if available, may not be available on reasonable terms. If additional financing sources are unavailable, or are not available on reasonable terms, our financial condition, results of operations, growth and future prospects could be materially adversely affected. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. Additionally, collateralized public funds are bank deposits of state and local municipalities. These deposits are required to be secured by certain investment grade securities to ensure repayment, which on the one hand tends to reduce our contingent liquidity risk by making these funds somewhat less credit sensitive, but on the other hand reduces standby liquidity by restricting the potential liquidity of the pledged collateral. Although these funds historically have been a relatively stable source of funds for us, availability depends on the individual municipality's fiscal policies and cash flow needs. At December 31, 2014, $21.6 million of our deposits were public funds.

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

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

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

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

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

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

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

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

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

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

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

New or changing tax, accounting, and regulatory rules and interpretations could significantly impact strategic initiatives, results of operations, cash flows, and financial condition.

The banking industry is extensively regulated. Federal and state banking regulations are designed primarily to protect the deposit insurance funds and consumers, not to benefit a company’s shareholders. These regulations may sometimes impose significant limitations on operations. The significant federal and state banking regulations that affect us are described in this report under the heading “Item 1. Business- How We are Regulated”. These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies, and interpretations control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. These laws, regulations, rules, standards, policies, and interpretations are constantly evolving and may change significantly over time. Any new regulations or legislation, change in existing regulations or oversight, whether a change in regulatory policy or a change in a regulator's interpretation of a law or regulation, could have a material impact on our operations, increase our costs of regulatory compliance and of doing business and or otherwise adversely affect us and our profitability. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firms. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of our operations as could our interpretation of those changes.

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

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

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

39

Legal and regulatory proceedings and related matters could adversely affect us or the financial services industry in general.

We, and other participants in the financial services industry upon whom we rely to operate, have been and may in the future become involved in legal and regulatory proceedings. Most of the proceedings we consider to be in the normal course of our business or typical for the industry, however it is inherently difficult to assess the outcome of these matters and there can be no assurance that anyone in particular, including us, will prevail in any proceeding or litigation. There could be substantial cost and management diversion in such litigation and proceedings, and any adverse determination could have a materially adversely affect on our business, brand or image, or our financial condition and results of our operations.

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

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

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

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

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

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

The occurrence of any failures or interruptions may require us to identify alternative sources of such services, and we cannot assure you that we could negotiate terms that are as favorable to us, or could obtain services with similar functionality as

40

found in our existing systems without the need to expend substantial resources, if at all. Further, the occurrence of any systems failure or interruption could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to legal liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

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

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

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

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

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

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

Item 1B. Unresolved Staff Comments

None.

Item 2.    Properties

At December 31, 2014, Security Federal owned the buildings and land for nine of its branch offices and the operations center, leased the land and owned the improvements thereon for one of its offices, and leased the remaining five offices, including its main office.  The property related to the offices owned by Security Federal had a depreciated cost (including land) of approximately $10.3 million at December 31, 2014.  At December 31, 2014, the aggregate net book value of leasehold improvements (excluding furniture and equipment) associated with leased premises was $1.9 million.  In addition to the properties related to current Company offices, Security Federal owned six other properties at December 31, 2014.  Four lots owned for future branch sites include one in Aiken County, South Carolina; one in Columbia County, Georgia; and two in Richland County, South Carolina, which had a combined book value of $3.4 million at December 31, 2014.   Another lot in Aiken County, to be used for a possible new Operations Center, had a book value of $236,000. The other property consisting of land and a building, located adjacent to the 1705 Whiskey Road office, is currently leased and had a book value of approximately $273,000 at December 31, 2014.  The Company also rents 234 Richland Avenue, which is adjacent to the Company's main office, and then subleases it to another business. See Note 5 of the Notes to Consolidated Financial Statements contained in the Annual Report.

The following table sets forth the net book value of the offices owned (including land) and leasehold improvements on properties leased by Security Federal at December 31, 2014.

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Location	Owned or Leased	Lease Expiration Date	Date Facility Opened/ Acquired	Gross Square Footage	Net Book Value
Main Office:
238 Richland Avenue, N.W.   Aiken, South Carolina	Leased	2016	2006	3,840	$	731,000
Full Service Branch Offices:
100 Laurens Street, N.W.   Aiken, South Carolina	Leased	2016	1959	3,840	731,000
1705 Whiskey Road S.   Aiken, South Carolina	Owned	N/A	1980	10,000	860,000
313 East Martintown Road   North Augusta, South Carolina	Owned	N/A	1973	4,356	748,000
1665 Richland Avenue, W.   Aiken, South Carolina	Owned	N/A	1984	1,942	142,000
Montgomery & Canal Streets   Masonic Shopping Center   Graniteville, South Carolina	Leased	2,017	1993 (1)	3,576	44,000
2812 Augusta Road   Langley, South Carolina	Owned	N/A	1993 (1)	2,509	26,000
4568 Jefferson Davis Highway   Clearwater, South Carolina	Owned	N/A	2008	2,287	1,379,000
118 Main Street North   Wagener, South Carolina	Owned	N/A	1993 (1)	3,600	107,000
1185 Sunset Boulevard   West Columbia, South Carolina	Leased	2015	2000	10,000	23,000
2587 Whiskey Road   Aiken, South Carolina	Owned	N/A	2006	4,000	1,259,000
5446 Sunset Boulevard   Lexington, South Carolina	Owned  (2)	N/A	2003	9,200	918,000
1900 Assembly Street Columbia, South Carolina	Leased  (3)	N/A	2007	6,000	374,000
7004 Evans Town Center Evans, Georgia	Owned	N/A	2007	18,000	3,792,000
Operations Center:
871 East Pine Log Road   Aiken, South Carolina	Owned	N/A	1988	14,460	1,107,000

____________

(1) Represents acquisition date.

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

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

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Item 3.     Legal Proceedings

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

Item 4.Mine Safety Disclosures

Not applicable.

PART II

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

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

Stock Repurchases.  The Company had no stock repurchases of its outstanding common stock during the year ended December 31, 2014.

The Company is subject to restrictions on its ability to repurchase its common stock pursuant to the terms of the securities purchase agreement between the Company and the U.S. Treasury.  Accordingly, no shares were repurchased during the year endedDecember 31, 2014.

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

Performance Graph.  The following graph compares the cumulative total shareholder return on the Company's Common Stock with the cumulative total return on the NASDAQ Composite Index and a peer group of the SNL All Thrift Index.  Total return assumes the reinvestment of all dividends and that the value of Common Stock and each index was $100 on December 31,2009.

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	Period Ending
Index	12/31/2009	12/31/2010	12/31/2011	12/31/2012	12/31/2013	12/31/2014
Security Federal Corporation	$100.00	123.64	85.29	89.56	133.38	202.99
NASDAQ Composite	100.00	118.15	117.22	138.02	193.47	222.16
SNL Bank Index	100.00	104.49	87.90	106.91	137.20	147.56

Source: SNL Financial LC, Charlottesville, VA

Item 6. Selected Financial Data

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

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

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

Item 8.  Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm*

Consolidated Balance Sheets at December 31, 2014 and December 31, 2013*

Consolidated Statements of Income For the Years Ended December 31, 2014 and 2013 and for the Nine Months Ended December 31, 2012*

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

the Nine Months Ended December 31, 2012*

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

the Nine Months Ended December 31, 2012*

Consolidated Statements of Cash Flows For the Years Ended December 31, 2014 and 2013 and for the the Nine Months

Ended December 31, 2012*

Notes to Consolidated Financial Statements*

Quarterly Financial Data (unaudited)*

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

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

None.

Item 9A. Controls and Procedures

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

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

Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2014, utilizing the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company's internal control over financial reporting as of December 31, 2014 is effective.

45

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the Company's financial statements are prevented or timely detected.

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

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

(c)      Changes in Internal Controls: There have been no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

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

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

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

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

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

Item 11. Executive Compensation

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

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

(a) Security Ownership of Certain Beneficial Owners.

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

(b) Security Ownership of Management.

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

(c) Changes In Control

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

(d) Equity Compensation Plan Information

The following table sets forth certain information with respect to securities to be issued under the Company's equitycompensation plans as of December 31, 2014.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights	(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders:
1999 Stock Option Plan	26,500	$23.03	—
2002 Stock Option Plan	13,000	20.81	—
2006 Stock Option Plan	8,000	22.96	—
2008 Equity Incentive Plan	—	—	50,000
Equity compensation plans not approved by security holders	—	—	—
Total	47,500	$22.41	50,000

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

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

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

Item 14. Principal Accounting Fees and Services

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

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PART IV

Item 15. Exhibits and Financial Statement Schedules

1. Financial Statements.

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

2. Financial Statement Schedules.

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

3.    Exhibits:

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

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23.0	Consent of Elliott Davis Decosimo, LLC
25.0	Form T-1; Statement of Eligibility of Trustee (5)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
32.0	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
99.1	Certification of Principal Executive Officer of Security Federal Corporation To Chief Compliance Officer Of The Troubled Asset Relief Program Pursuant to 31 CFR ' 30.15
99.2	Certification of Principal Financial Officer of Security Federal Corporation To Chief Compliance Officer Of The Troubled Asset Relief Program Pursuant to 31 CFR ' 30.15
101.0	The following materials from Security Federal Corporation's Annual Report on Form 10-K for the year ended December 31, 2014, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income (Loss); (4)Consolidated Statements of Changes in Shareholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements (16)

___________

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(16) Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

49

SIGNATURES

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

SECURITY FEDERAL CORPORATION

Date:  March 20, 2015	/s/ J. Chris Verenes
	J. Chris Verenes
	Chief Executive Officer and Director
	(Duly Authorized Representative)

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

By:	/s/ J. Chris Verenes	March 20, 2015
	J. Chris Verenes
	Chief Executive Officer and Director
	(Principal Executive Officer)

By:	/s/Jessica T. Cummins	March 20, 2015
	Jessica T. Cummins
	Chief  Financial Officer
	(Principal Financial and Accounting Officer)

By:	/s/Roy G. Lindburg	March 20, 2015
	Roy G. Lindburg
	President and Director

By:	/s/Richard T. Harmon	March 20, 2015
	Richard T. Harmon
	Director and President of Security Federal Bank

By:	/s/Timothy W. Simmons	March 20, 2015
	Timothy W. Simmons
	Chairman of the Board and Director

By:	/s/Frank M. Thomas, Jr.	March 20, 2015
	Frank M. Thomas, Jr.
	Director

By:	/s/Gasper L. Toole III	March 20, 2015
	Gasper L. Toole III
	Director

50

By:	/s/Robert E. Alexander	March 20, 2015
	Robert E. Alexander
	Director

By:	/s/Thomas L. Moore	March 20, 2015
	Thomas L. Moore
	Director

By:	/s/William Clyburn	March 20, 2015
	William Clyburn
	Director

By:	/s/Harry O. Weeks, Jr.	March 20, 2015
	Harry O. Weeks, Jr.
	Director

51

INDEX TO EXHIBITS

Exhibit Number

13	Annual Report to Stockholders
21	Subsidiaries of the Registrant
23	Consent of Elliott Davis Decosimo, LLC
31.1	Certification of Chief Executive Officer of Security Federal Corporation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer of Security Federal Corporation Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification of Chief Executive Officer and Chief Financial Officer of Security Federal Corporation Pursuant to Section 906 of the Sarbanes-Oxley Act
99.1	Certification of Principal Executive Officer of Security Federal Corporation To Chief Compliance Officer of the Troubled Asset Relief Program Pursuant to 31 CFR §30.15
99.2	Certification of Principal Financial Officer of Security Federal Corporation To Chief Compliance Officer of the Troubled Asset Relief Program Pursuant to 31 CFR §30.15
101	The following materials from Security Federal Corporation's Annual Report on Form 10-K for the year ended December 31, 2014, formatted in Extensible Business Reporting Language (XBRL): (1) Consolidated Balance Sheets; (2) Consolidated Statements of Income; (3) Consolidated Statements of Comprehensive Income (Loss); (4) Consolidated Statements of Changes in Shareholders' Equity; (5) Consolidated Statements of Cash Flows; and (6) Notes to Consolidated Financial Statements

52

EX-13

Exhibit 13

Annual Report to Stockholders

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Selected Consolidated Financial and Other Data

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

	At Or For The Years Ended December 31,				At Or For The Nine Months Ended December 31,		At Or For The Years Ended March 31,
	2014		2013		2012		2012		2011
Balance Sheet Data	(Dollars In Thousands, Except Per Share Data)
Total Assets	$	825,364	$	849,248	$	890,355	$	924,637	$	933,544
Cash And Cash Equivalents	10,193		7,630		7,904		9,331		7,836
Certificates Of Deposit With Other Banks	2,095		2,100		1,729		1,727		100
Investment And Mortgage-Backed Securities	429,701		431,003		430,988		421,631		372,418
Total Loans Receivable, Net (1)	339,874		358,917		397,706		428,511		484,471
Deposits	660,115		658,697		676,339		696,201		690,357
Advances From Federal Home Loan Bank	52,900		87,740		105,257		122,070		138,136
Total Shareholders' Equity	87,435		77,990		82,592		80,772		76,012
Income Data
Total Interest Income	$	29,482	$	30,447	$	24,791	$	38,529	$	43,742
Total Interest Expense	5,813		7,533		7,460		12,397		16,095
Net Interest Income	23,669		22,914		17,331		26,132		27,647
Provision For Loan Losses	450		2,645		1,975		8,650		8,155
Net Interest Income After Provision For Loan Losses	23,219		20,269		15,356		17,482		19,492
Non-Interest Income	6,163		6,896		4,365		6,942		6,795
General And Administrative Expense	21,268		22,033		17,062		20,717		23,841
Income Taxes	2,303		1,341		704		1,912		958
Net Income	5,811		3,791		1,955		1,795		1,843
Preferred Stock Dividends	440		440		330		440		666
Accretion Of Preferred Stock To Redemption Value	—		—		—		—		19
Net Income Available To Common Shareholders	$	5,371	$	3,351	$	1,625	$	1,355	$	1,158
Per Common Share Data
Net Income Per Common Share (Basic)	$	1.82	$	1.14	$	0.55	$	0.46	$	0.43
Cash Dividends	$	0.32	$	0.32	$	0.24	$	0.32	$	0.32

^{(1)INCLUDES LOANS HELD FOR SALE.} 

7

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Selected Consolidated Financial and Other Data

	At Or For The Years Ended December 31,				At Or For The Nine Months Ended December 31,		At Or For The Years Ended March 31,
	2014		2013		2012		2012		2011
Other Data
Interest Rate Spread Information:
Average During Period (4)	2.98	%	2.81	%	2.70	%	2.98	%	3.06	%
End Of Period	3.06	%	3.19	%	3.16	%	3.30	%	3.34	%
Net Interest Margin (Net Interest Income/Average Earning Assets) (4)	3.08	%	2.91	%	2.80	%	3.09	%	3.17	%
Average Interest-Earning Assets To Average Interest-Bearing Liabilities	113.01	%	110.71	%	108.08	%	107.08	%	106.35	%
Common Equity To Total Assets	7.93	%	6.59	%	6.81	%	6.36	%	5.79	%
Non-Performing Assets To Total Assets (2)	2.06	%	1.64	%	2.83	%	3.98	%	2.89	%
Return On Assets (Ratio Of Net Income To Average Total Assets) (4)	0.64	%	0.38	%	0.24	%	0.15	%	0.12	%
Return On Common Equity (Ratio Of Net Income To Average Common Equity) (4)	8.72	%	5.79	%	3.62	%	2.35	%	2.17	%
Common Equity To Assets Ratio (Ratio Of Average Common  Equity To Average Total Assets)	7.28	%	6.64	%	6.69	%	6.22	%	5.62	%
Dividend Pay-Out Ratio On Common Shares(3)	17.54	%	28.11	%	43.48	%	69.50	%	74.13	%
Number Of Full-Service Offices	13		13		13		13		13

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

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

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

8

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

General

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

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

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

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

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

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

9

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Forward-Looking Statements

This document, including information included or incorporated by reference, contents, and future filings by the Company on Form 10-K, Form 10-Q, and Form 8-K, and future oral and written statements by the Company and its management may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements often include 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.” These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated, 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 loan loss reserves;

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

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

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

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

• results of examinations of the Company by the Board of Governors of the Federal Reserve System (“Federal Reserve”), and our bank subsidiary by the Federal Deposit Insurance Corporation 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, which could adversely affect our liquidity and earnings;

• legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or  the interpretation of regulatory capital requirements, including changes as a result of Basel III, or other rules, and any changes in rules applicable to institutions participating in the U. S. Department of Treasury Community Development Capital Initiative;

• our ability to attract and retain deposits;

• increases in premiums for deposit insurance;

• our ability to control operating costs and expenses;

• our ability to implement our business strategies;

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

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

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

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

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

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

• our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto;

10

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

• increased competitive pressures among financial services companies;

• changes in consumer spending, borrowing and savings habits;

• the impact of new legislation, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations;

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

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

• adverse changes in the securities markets;

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

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

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

Some of these and other factors are discussed in our Annual Report on Form 10-K for the year ended December 31, 2014 under Item 1A, “Risk Factors.” Such developments could have an adverse impact on our financial position and our results of operations.

Any forward-looking statements are based upon management’s beliefs and assumptions at the time they are made. We undertake no obligation to publicly update or revise any forward-looking statements included or incorporated by reference in this document or to update the reasons why actual results could differ from those contained in such statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this document might not occur, and you should not put undue reliance on any forward-looking statements.

Critical Accounting Policies

The Company has adopted various accounting policies which govern the application of accounting principles generally accepted in the United States in the preparation of the Company’s consolidated financial statements.  The significant accounting policies of the Company are described in Note 1 of the Notes to the Consolidated Financial Statements included herein.

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

The Company believes the allowance for loan losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation of the consolidated financial statements.  The Company provides for loan losses using the allowance method.  Accordingly, all loan losses are charged to the related allowance and all recoveries are credited to the allowance for loan losses.

Additions to the allowance for loan losses are provided by charges to operations based on various factors, which, in management’s judgment, deserve current recognition in estimating possible losses.  Such factors considered by management include the fair value of the underlying collateral, stated guarantees by the borrower (if applicable), the borrower’s ability to repay from other economic resources, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to the outstanding loans, loss experience, delinquency trends, and general economic conditions.  Management evaluates the carrying value of the loans periodically and the allowance is adjusted accordingly.

11

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

While management uses the best information available to make evaluations, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making these evaluations.  The allowance for loan losses is subject to periodic evaluations by bank regulatory agencies that may require adjustments to the allowance based upon the information that is available at the time of their examination. For a further discussion of the Company’s estimation process and methodology related to the allowance for loan losses, see the discussion under the section entitled “Financial Condition” and “Comparison of the Years Ended December 31, 2014 and 2013-Provision for Loan Losses” included herein.

The Company values an impaired loan at the loan’s fair value if it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement at the present value of expected cash flows, the market price of the loan, if available, or the value of the underlying collateral.  Expected cash flows are required to be discounted at the loan’s effective interest rate.  When the ultimate collectibility of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal.  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 the Company or the income tax reported on the Consolidated Financial Statements will not be adjusted by either adverse rulings by the United States Tax Court, changes in the tax code, or assessments made by the Internal Revenue Service.

Asset and Liability Management

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

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

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

At December 31, 2014, the Bank's one-year gap position was a positive mismatch. Assets repricing exceeded liabilities repricing within one year by $46.5 million or 5.9% of total interest earning assets compared to a negative mismatch, or liabilities repricing exceeding assets repricing within one year by $17.1 million or 2.0% at December 31, 2013.  For more information on the Bank’s repricing position at December 31, 2014, see the tables on pages 14 and 15.

12

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

During the year ended December 31, 2014, Bank originated, for investment purposes, $11.8 million in adjustable rate residential real estate loans (“ARM’s”). The Bank’s loan portfolio included $129.0 million of adjustable rate consumer loans, commercial loans, and mortgage loans or 36.9% of total loans at December 31, 2014.  During the year ended December 31, 2014, the Bank originated $126.8 million in new and renewed consumer and commercial loans, which are usually short term in nature.  The Bank's portfolio of consumer and commercial loans was $270.5 million at December 31, 2014, $288.4 million at December 31, 2013, and $315.6 million at December 31, 2012.  Consumer and commercial loans combined were 77.4% of total loans at December 31, 2014 and December 31, 2013, and 76.8% of total loans at December 31, 2012.

At December 31, 2014, the Bank held approximately $10.2 million in longer term fixed rate residential mortgage loans. Typically, long term, newly originated fixed rate mortgage loans are not retained in the portfolio but are sold immediately. ARMs are typically retained in the portfolio.

Fixed rate residential loans sold to institutional investors, on a service-released basis totaled $23.6 million during the year ended December 31, 2014, $33.1 million during the year ended December 31, 2013, and $22.5 million during the nine months ended December 31, 2012.  The Bank sells all its fixed rate mortgage loans on a service-released basis.

Certificates of deposit of $100,000 or more, referred to as “Jumbo Certificates,” are normally considered to be interest rate sensitive because of their relatively short maturities.  At December 31, 2014, the Bank had $140.0 million outstanding in Jumbo Certificates compared to $129.9 million at December 31, 2013.  Brokered deposits totaled $38.8 million at December 31, 2014 compared to $25.6 million at December 31, 2013. The majority of the Bank’s deposits are originated within the Bank’s immediate market area.

The following table sets forth the maturity schedule of certificates of deposit with balances of $100,000 or greater at December 31, 2014:

	At December 31, 2014
	(In Thousands)
Within 3 Months	$	19,481
After 3 Months, Within 6 Months	24,496
After 6 Months, Within 12 Months	26,076
After 12 Months	69,909
	$	139,962

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

13

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

	At December 31,
	2014			2013
	(Dollars In Thousands)
Loans (1)	$	188,034		$	202,062
Mortgage-Backed Securities:
Available For Sale	105,128			91,856
Investment Securities:
Available For Sale	94,862			73,946
Other Interest-Earning Assets And FHLB Stock	5,497			5,338
Total Interest Rate Sensitive Assets Repricing Within 1 Year	$	393,521		$	373,202
Deposits	$	318,368		$	342,303
FHLB Advances And Other Borrowed Money	28,678			47,998
Total Interest Rate Sensitive Liabilities Repricing Within 1 Year	$	347,046		$	390,301
Gap	$	46,475		$	(17,099	)
Interest Rate Sensitive Assets/Interest Rate Sensitive Liabilities	113.4		%	95.6		%
Gap As A Percent Of Total Interest-Earning Assets	5.9		%	(2.0		)%

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

The following table sets forth the interest rate sensitivity of the Bank's assets and liabilities at December 31, 2014, on the basis of the factors and assumptions set forth in the table on the previous page.

14

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

	Three Months Or Less			Over 3 –12 Months			Over 1 – 3 Years			Over 3 – 5 Years			Over 5 – 10 Years			Over  10 Years			Total
	(Dollars In Thousands)
Interest-Earnings Assets
Loans (1)	$	100,529		$	87,505		$	92,031		$	45,733		$	13,367		$	9,090		$	348,255
Mortgage-Backed Securities:
Available For Sale, At Fair Value	87,309			17,819			54,244			27,982			43,230			8,269			238,853
Investment Securities:
Available For Sale, At Fair Value	87,954			6,908			9,048			11,790			53,607			21,541			190,848
FHLB Stock, At Cost	—			3,145			—			—			—			—			3,145
Other Interest-Earning Assets	2,252			100			1,995			—			—			—			4,347
Total Interest-Earning Assets	$	278,044		$	115,477		$	157,318		$	85,505		$	110,204		$	38,900		$	785,448
Interest-Bearing Liabilities
Deposits:
Certificate Accounts	$	39,860		$	102,630		$	79,755		$	31,006		$	—		$	—		$	253,251
NOW Accounts	4,380			13,142			70,089			—			—			—			87,611
Money Market Accounts	37,571			115,061			82,187			—			—			—			234,819
Statement Savings Accounts	1,431			4,293			22,899			—			—			—			28,623
Borrowings (2)	18,678			10,000			32,900			5,000			—			6,084			72,662
Total Interest-Bearing   Liabilities	$	101,920		$	245,126		$	287,830		$	36,006		$	—		$	6,084		$	676,966
Current Period Gap	$	176,124		$	(129,649	)	$	(130,512	)	$	49,499		$	110,204		$	32,816		$	108,482
Cumulative Gap	$	176,124		$	46,475		$	(84,037	)	$	(34,538	)	$	75,666		$	108,482		$	108,482
Cumulative Gap As A Percent Of Total Interest-Earning Assets	22.4		%	5.9		%	(10.7		)%	(4.4		)%	9.6		%	13.8		%	13.8		%

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

^{(2)  CALLABLE SECURITIES AND FHLB ADVANCES ARE SHOWN AT THEIR LIKELY CALL DATES BASED ON MANAGEMENT’S ESTIMATES AT DECEMBER 31, 2014.} 

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

15

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Financial Condition

Total assets at December 31, 2014 were $825.4 million, a decrease of $23.9 million or 2.8% from $849.2 million at December 31, 2013. This decrease was primarily the result of a decrease in net loans receivable.

Cash and cash equivalents increased $2.6 million or 33.6% to $10.2 million at December 31, 2014 compared to $7.6 million at December 31, 2013.  Total investments and mortgage-backed securities decreased $1.3 million or 0.3% to $429.7 million at December 31, 2014 from $431.0 million at December 31, 2013.  All of these securities were classified as available for sale at December 31, 2014. Investment and mortgage-backed securities with an amortized cost of $72.0 million were transferred from held to maturity to available for sale during 2013.   

Total net loans receivable were $339.9 million at December 31, 2014, a decrease of $19.0 million or 5.3% from $358.9 million at December 31, 2013.  This decrease was the result of increased loan paydowns combined with lower loan demand from creditworthy borrowers. Residential real estate loans held for investment decreased $5.7 million or 6.9% from $83.0 million at December 31, 2013 to $77.3 million at December 31, 2014.   Typically, long term, newly originated fixed rate mortgage loans are not retained in the portfolio but are sold immediately.  ARMs are typically retained in the portfolio.  At December 31, 2014, the Bank held 83.8% of its residential mortgage loans in ARMs, while it had 16.2% in fixed rate mortgages. Consumer loans decreased $1.8 million or 3.5% to $50.4 million at December 31, 2014 from $52.2 million at December 31, 2013. Commercial business loans increased $2.8 million or 35.9% to $10.6 million at December 31, 2014 from $7.8 million at December 31, 2013 while commercial real estate loans decreased $18.9 million or 8.3% to $209.5 million at December 31, 2014 from $228.4 million at December 31, 2013.  Loans held for sale, which were $1.9 million at December 31, 2014, increased $631,000 or 51.1% from $1.2 million at December 31, 2013.

Premises and equipment increased $990,000 or 5.7% to $18.2 million at December 31, 2014 compared to $17.2 million at December 31, 2013 as a result of land purchased for $1.3 million for a prospective future branch site in Columbia County, Georgia. The Bank held a groundbreaking ceremony on January 15, 2015 for its newest branch located in Irmo, South Carolina. The new location, scheduled for opening in mid-2015, will be a full-service branch offering depository banking as well as commercial, personal and mortgage lending.

The cash value of Bank Owned Life Insurance (“BOLI”) was $11.2 million at December 31, 2014 compared to $11.5 million at December 31, 2013 reflecting a $324,000 or 2.8% decrease. The decrease reflects the redemption of $624,000 in BOLI during the year ended December 31, 2014, which was partially offset by $300,000 in BOLI income. There were no additional BOLI purchases during the year ended December 31, 2014.  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 executive officers of the Company.

16

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

The Company’s non-performing assets increased $3.0 million or 21.6% to $17.0 million at December 31, 2014 from $14.0 million at December 31, 2013. The following table sets forth detailed information concerning our non-performing assets for the periods indicated:

	At December 31, 2014					At December 31, 2013					$ Increase			% Increase
	Amount			Percent (1)		Amount			Percent (1)		(Decrease)			(Decrease)
Loans 90 Days Or More Past Due Or Non-Accrual Loans:
Residential Real Estate	$	3,061,339		0.9	%	$	4,607,613		1.3	%	$	(1,546,274	)	(33.6	)%
Commercial Business	246,977			0.1		33,055			—		213,922			647.2
Commercial Real Estate	9,859,689			2.8		4,972,667			1.4		4,887,022			98.3
Consumer	573,644			0.2		399,062			0.1		174,582			43.7
Total Non-Performing Loans	13,741,649			4.0	%	10,012,397			2.7	%	3,729,252			37.2	%
Other Non-Performing Assets:
Other Real Estate Owned	3,229,710			0.9		3,947,226			1.1		(717,516		)	(18.2	)
Total Other Non-Performing Assets	3,229,710			0.9	%	3,947,226			1.1	%	(717,516		)	(18.2	)%
Total Non-Performing Assets	$	16,971,359		4.0	%	$	13,959,623		3.8	%	$	3,011,736		21.6	%
Total Non-Performing Assets As A Percentage Of Total Assets	2.1		%			1.6		%

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

The increase in non-performing assets was primarily concentrated in non-performing commercial real estate loans, which increased $4.9 million to $9.9 million at December 31, 2014 from $5.0 million at December 31, 2013. The balance in non-performing commercial real estate loans at December 31, 2014 consisted of 46 loans to 28 borrowers with an average loan balance of $214,000. At December 31, 2013, the balance in non-performing commercial real estate loans consisted of 37 loans to 19 borrowers with an average loan balance of $134,000.

Of the non-performing commercial real estate loans, $4.0 million consisted of 15 loans secured by commercial buildings to 14 different borrowers; $1.9 million consisted of two loans to two separate borrowers related to the acquisition and development of two subdivisions; $1.3 million consisted of 10 loans secured by builder lots or speculative houses in varying degrees of completion throughout South Carolina and Georgia to four separate borrowers; $786,000 consisted of eight loans secured by raw land to six separate borrowers; and $702,000 consisted of two loans secured by a church building to one borrower. At December 31, 2014, our largest non-performing commercial real estate loan was $1.3 million and was secured by a commercial building. The majority of the remaining non-performing loans in the commercial real estate category were secured by first mortgages on principal residences throughout the Bank's market area. These loans, even though secured by principal residences, considered commercial real estate because they were business purpose loans.

Non-performing residential real estate loans decreased $1.5 million to $3.1 million at December 31, 2014 from $4.6 million at December 31, 2013. The balance in non-performing residential real estate loans at December 31, 2014 consisted of 27 loans to 27 borrowers with an average loan balance of $113,000, the largest of which was $415,000. The balance in non-performing residential real estate loans at December 31, 2013 consisted of 29 loans to 29 borrowers with an average loan balance of $159,000.

Other real estate owned decreased $718,000 or 18.2% to $3.2 million at December 31, 2014 compared to $3.9 million at December 31, 2013. At December 31, 2014, the balance of other real estate owned consisted of the following real estate properties: nine single-family residences and 24 lots within residential subdivisions located throughout our market area in South Carolina and Georgia; eight lots within a subdivision and adjacent 22.96 acres of land in Aiken, South Carolina; two parcels of land, one commercial lot, and one commercial building in South Carolina; one commercial building in Augusta, Georgia; and 34.8 acres of land in Bluffton, South Carolina.

17

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

FHLB stock decreased $1.9 million or 37.3% to $3.1 million at December 31, 2014 compared to $5.0 million at December 31, 2013 as a result of stock redemptions by the FHLB of Atlanta. The Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to a membership component, which is 0.15% of total assets plus a transaction component which equals 4.5% of outstanding advances (borrowings) from the FHLB of Atlanta. As total assets and total advances have decreased, so has the Bank’s required investment in FHLB stock.

Other assets decreased $4.1 million or 53.9% to $3.5 million at December 31, 2014 compared to $7.5 million at December 31, 2013 primarily due to a decrease in net tax deferred assets of $3.9 million. The unrealized gain on investment securities available for sale increased $8.1 million during the year ended December 31, 2014 as a result of a decrease in market rates. The decrease in the deferred tax asset represents the tax impact of this change.

The Bank reviews its loan portfolio and allowance for loan losses on a monthly basis.  Future additions to the Bank's allowance for loan losses are dependent on, among other things, the performance of the Bank's loan portfolio, the economy, changes in real estate values, and interest rates.  There can be no assurance that additions to the allowance will not be required in future periods. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all of which may undergo material changes. Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for possible loan losses or the recognition of further loan charge-offs, based on judgments different than those of management. In addition, if charge-offs in future periods exceed the allowance for loan losses, we will need additional provisions to increase the allowance for loan losses. Any increases in the allowance for loan losses will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our financial condition and results of operations. Management continually monitors its loan portfolio for the impact of local economic changes.  The ratio of allowance for loan losses to totalloans was 2.41% and 2.78% at December 31, 2014 and 2013, respectively. The Bank closely monitors its past due loans.

The cumulative interest not accrued during the year ended December 31, 2014 and 2013 relating to all non-performing loans totaled $920,000 and $480,000, respectively. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the underlying collateral.  In the event an acceptable arrangement cannot be reached, we may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.

The balance of loans in troubled debt restructurings (“TDRs”) decreased $2.8 million or 22.3% during the year ended December 31, 2014. The Bank had 18 loans that were TDRs totaling $9.6 million at December 31, 2014 compared to 22 loans totaling $12.4 million at December 31, 2013. The 18 TDRs consisted of one consumer loan secured by a first mortgage on a residential dwelling and two automobiles totaling $66,000, and one consumer auto loan totaling $4,000. All of the remaining 16 restructurings consisted of commercial real estate loans to 11 separate borrowers, the largest of which had a balance of $2.4 million at December 31, 2014. The commercial real estate loans were secured primarily by first mortgages on three single family residences, four commercial buildings, three hotels, one church and five parcels of land.  At December 31, 2014, seven of the TDRs to four borrowers totaling $2.4 million were non-accruing. All of the remaining TDRs were current at December 31, 2014.

All TDRs are reviewed for impairment loss.  At December 31, 2014, the Bank held $20.2 million in impaired loans, including $9.6 million in TDRs, compared to $31.4 million of impaired loans, including $12.4 million of TDRs, at December 31, 2013.

In July 2006, the Company acquired Collier Jennings Financial Corporation, an insurance agency specializing in consumer automobile insurance and premium financing. The resulting goodwill was $1.2 million at December 31, 2014 and 2013. There were no other intangibles recorded at December 31, 2014 and $12,000 at December 31, 2013.  Collier Jennings is now a subsidiary of Security Federal Insurance Inc.

Deposits at the Bank decreased $1.4 million or 0.2% to $660.1 million at December 31, 2014 from $658.7 million at December 31, 2013. The Bank had brokered time deposits of $38.8 million at December 31, 2014 compared to $25.6 million at December 31, 2013. Brokered time deposits are appealing because rates paid on these deposits are typically lower than rates paid on time deposits obtained in the Bank’s primary market areas. In addition, a portion of these brokered time deposits give the Bank a call option that allows the Bank the choice to redeem them early should rates change. Total deposits at December 31, 2014, excluding brokered time deposits, decreased $11.9 million or 1.9% to $621.3 million from $633.1 million at December 31, 2013. Brokered time deposits were 5.9% of total deposits at December 31, 2014 and 3.9% of total deposits at December 31, 2013.

18

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Advances from the FHLB decreased $34.8 million or 39.7% to $52.9 million at December 31, 2014 from $87.7 million at December 31, 2013 due to prepayments and maturities. During the years ended December 31, 2014 and 2013, as part of the Company's strategy to lower its cost of funds, management elected to prepay $5.0 million and $30.0 million, respectively, in higher rate advances. Other borrowed money, which consists of retail repurchase agreements, increased $521,000 or 6.5% to $8.5 million at December 31, 2014 from $8.0 million at December 31, 2013.  

In September 2006, Security Federal Statutory Trust issued and sold capital securities of the Trust (the “Capital Securities”). The Trust used the net proceeds from the sale of the Capital Securities to purchase a like amount of junior subordinated debentures (the “Debentures”) of the Company which are reported on the Consolidated Balance Sheet as junior subordinated debentures. The Capital Securities accrue and pay distributions at a floating rate of three month LIBOR plus 170 basis points annually which was equal to 1.93% at December 31, 2014. The distribution rate payable on the Capital Securities is cumulative and payable quarterly in arrears. The Capital Securities mature or are mandatorily redeemable upon maturity on December 15, 2036, or upon earlier optional redemption as provided in the indenture. The Company has the right to redeem the Capital Securities in whole or in part.

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

Total shareholders' equity was $87.4 million at December 31, 2014, an increase of $9.4 million or 12.1% from $78.0 million at December 31, 2013. The Company’s net income for the year ended December 31, 2014 was $5.8 million. Preferred stock dividends were $440,000 resulting in net income available to common shareholders of $5.4 million. Other changes in shareholders’ equity during the period were:a net increase in other comprehensive income of $5.0 million, representing the unrecognized gain in value of investment and mortgage-backed securities, and $942,000 in dividends paid to common shareholders.

Results of Operations

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

19

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

	Year Ended December 31, 2014 Compared To Year Ended December 31, 2013									Year Ended December 31, 2013 Compared To Twelve Months Ended December 31, 2012
	Volume			Rate			Net			Volume			Rate			Net
	(In Thousands)
Interest-Earning Assets:
Loans: (1)
Mortgage Loans	$	(350	)	$	(184	)	$	(534	)	$	(491	)	$	(252	)	$	(743	)
Other Loans	(1,040		)	(593		)	(1,633		)	(1,857		)	(316		)	(2,173		)
Total Loans	(1,390		)	(777		)	(2,167		)	(2,348		)	(568		)	(2,916		)
Mortgage-Backed Securities (2)	46			724			770			(459		)	(929		)	(1,388		)
Investments (2)(3)	19			305			324			686			610			1,296
Other Interest-Earning Assets	(4		)	7			3			(2		)	3			1
Total Interest-Earning Assets	$	(1,329	)	$	259		$	(1,070	)	$	(2,123	)	$	(884	)	$	(3,007	)
Interest-Bearing Liabilities:
Deposits:
Certificate Accounts	$	(133	)	$	(443	)	$	(576	)	$	(482	)	$	(913	)	$	(1,395	)
NOW Accounts	1			6			7			14			(125		)	(111		)
Money Market Accounts	(15		)	(237		)	(252		)	25			(293		)	(268		)
Savings Accounts	3			(10		)	(7		)	4			(13		)	(9		)
Total Deposits	(144		)	(684		)	(828		)	(439		)	(1,344		)	(1,783		)
Borrowings	(771		)	(121		)	(892		)	(740		)	(218		)	(958		)
Total Interest-Bearing Liabilities	(915		)	(805		)	(1,720		)	(1,179		)	(1,562		)	(2,741		)
Effect On Net Interest Income	$	(414	)	$	1,064		$	650		$	(944	)	$	678		$	(266	)

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

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

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

20

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

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

	Yield/ Rate		Averages For The Years Ended December 31,
	At		2014						2013
	December 31, 2014		Average Balance		Interest		Annualized Yield/Rate		Average Balance		Interest		Annualized Yield/Rate
			(Dollars In Thousands)
Interest-Earning Assets:
Mortgage Loans	4.42	%	$	78,022	$	3,360	4.31	%	$	85,973	$	3,894	4.53	%
Other Loans	5.85	%	273,383		16,057		5.87	%	291,024		17,689		6.08	%
Total Loans (1)	5.53	%	351,405		19,417		5.53	%	376,997		21,583		5.72	%
Mortgage-Backed Securities(2)	2.47	%	249,066		6,037		2.42	%	246,921		5,267		2.13	%
Investments (2) (3)	2.54	%	181,419		4,517		2.49	%	180,588		4,193		2.32	%
Other Interest-Earning Assets	0.23	%	3,120		11		0.35	%	5,035		8		0.16	%
Total Interest-Earning Assets	3.83	%	$	785,010	$	29,982	3.82	%	$	809,541	$	31,051	3.84	%
Interest-Bearing Liabilities:
Certificate Accounts	0.79	%	$	256,315	$	1,990	0.78	%	$	271,002	$	2,566	0.95	%
NOW Accounts	0.07	%	86,553		65		0.08	%	84,230		58		0.07	%
Money Market Accounts	0.19	%	233,676		503		0.22	%	238,693		755		0.32	%
Savings Accounts	0.10	%	26,640		27		0.10	%	24,112		34		0.14	%
Total Interest-Bearing Accounts	0.42	%	603,184		2,585		0.43	%	618,037		3,413		0.55	%
Other Borrowings	0.15	%	9,450		17		0.18	%	9,270		19		0.20	%
Junior Subordinated Debt	1.94	%	5,155		101		1.96	%	5,155		103		2.00	%
Senior Convertible Debt	8.00	%	6,084		487		8.00	%	6,084		487		8.00	%
FHLB Advances	3.87	%	70,739		2,623		3.71	%	92,658		3,511		3.79	%
Total Interest-Bearing Liabilities	0.77	%	$	694,612	$	5,813	0.84	%	$	731,204	$	7,533	1.03	%
Net Interest Income					$	24,169					$	23,518
Interest Rate Spread	3.06	%					2.98	%					2.81	%
Net Yield On Earning Assets (Net Interest Margin)							3.08	%					2.91	%

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

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

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

21

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

	Yield/ Rate		Averages For The Year Ended December 31, 2013 And The Twelve Months Ended December 31, 2012
	At		2013						2012
	December 31, 2013		Average Balance		Interest		Annualized Yield/Rate		Average Balance		Interest		Annualized Yield/Rate
			(Dollars In Thousands)
Interest-Earning Assets:
Mortgage Loans	4.54	%	$	85,973	$	3,894	4.53	%	$	96,564	$	4,637	4.80	%
Other Loans	5.97	%	291,024		17,689		6.08	%	321,639		19,862		6.18	%
Total Loans (1)	5.65	%	376,997		21,583		5.72	%	418,203		24,499		5.86	%
Mortgage-Backed Securities(2)	2.61	%	246,921		5,267		2.13	%	266,431		6,655		2.50	%
Investments (2) (3)	3.02	%	180,588		4,193		2.32	%	148,856		2,897		1.95	%
Other Interest-Earning Assets	0.44	%	5,035		8		0.16	%	5,578		7		0.13	%
Total Interest-Earning Assets	4.07	%	$	809,541	$	31,051	3.84	%	$	839,068	$	34,058	4.06	%
Interest-Bearing Liabilities:
Certificate Accounts	0.83	%	$	271,002	$	2,566	0.95	%	$	312,609	$	3,961	1.27	%
NOW Accounts	0.07	%	84,230		58		0.07	%	77,530		169		0.22	%
Money Market Accounts	0.28	%	238,693		755		0.32	%	232,671		1,022		0.44	%
Savings Accounts	0.10	%	24,112		34		0.14	%	21,934		43		0.20	%
Total Interest-Bearing Accounts	0.48	%	618,037		3,413		0.55	%	644,744		5,195		0.81	%
Other Borrowings	0.15	%	9,270		19		0.20	%	9,614		25		0.26	%
Junior Subordinated Debt	1.94	%	5,155		103		2.00	%	5,155		113		2.19	%
Senior Convertible Debt	8.00	%	6,084		487		8.00	%	6,084		487		8.00	%
FHLB Advances	3.23	%	92,658		3,511		3.79	%	112,572		4,453		3.96	%
Total Interest-Bearing Liabilities	0.88	%	$	731,204	$	7,533	1.03	%	$	778,169	$	10,273	1.32	%
Net Interest Income					$	23,518					$	23,785
Interest Rate Spread	3.19	%					2.81	%					2.74	%
Net Yield On Earning Assets (Net Interest Margin)							2.91	%					2.83	%

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

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

^{(3)  TAX EQUIVALENT BASIS RECOGNIZES THE INCOME TAX SAVINGS WHEN COMPARING TAXABLE AND TAX-EXEMPT ASSETS AND WAS CALCULATED USING AN EFFECTIVE TAX RATE OF 34%. THE TAX-EQUIVALENT ADJUSTMENT RELATES TO THE TAX EXEMPT MUNICIPAL BONDS AND WAS $604,054 AND $315,568 FOR THE YEAR ENDED DECEMBER 31, 2013 AND TWELVE MONTHS ENDED DECEMBER 31, 2012.} 

22

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Comparison of the Years Ended December 31, 2014 and 2013

General

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

Net Interest Income

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

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

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

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

Provision for Loan Losses

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

23

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

The amount of the provision is determined by management’s on-going monthly analysis of the loan portfolio and the adequacy of the allowance for loan losses. The Company has established policies and procedures for evaluating and monitoring the overall credit quality of the loan portfolio and for the timely identification of potential problem loans including internal and external loan reviews. The adequacy of the allowance for loan losses is reviewed monthly by the Asset Classification Committee and quarterly by the Board of Directors. Management’s monthly review of the adequacy of the allowance includes three main components. The first component is an analysis of loss potential in various homogeneous segments of the portfolio based on historical trends and the risk inherent in each category. The historical loss periods used to calculate these ratios can range from 12 months to five years depending on which period is deemed a more relevant indicator of future losses.

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

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

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

Non-Interest Income

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

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

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

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

24

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

In 2012, the U.S. Treasury's Community Development Financial Institutions Fund ("CDFI Fund") awarded the Bank a grant totaling $1.5 million in recognition of its commitment to community development. The award is part of a CDFI program that recognizes organizations who serve low income and distressed communities. As part of the award, the Bank committed to establish a small business micro lending program that lends specifically in low to moderate income areas. The Bank was required to lend $1.2 million over a five year period to qualifying customers. The Bank recognized $295,000 in grant income related to this award during the year ended December 31, 2014 compared to $929,000 during the year ended December 31, 2013. The grant income is recognized during the period in which the loans are funded. At December 31, 2014, $230,000 in income remains to be recognized related to unfunded microloans. During the year ended December 31, 2014, the Bank also recognized $557,000 in grant income, which was awarded by the Bank Enterprise Award (BEA) Program in recognition of the Bank’s investments in distressed communities and its continued commitment to community development. The amount of the award increases as the Bank’s investment in these areas increases. There was no BEA grant income recognized during the year ended December 31, 2013.

General and Administrative Expenses

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

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

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

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

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

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

Income Taxes

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

25

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Comparison of the Year Ended December 31, 2013 and Twelve Months Ended December 31, 2012

General

As previously announced, our Board of Directors approved a change in fiscal year end from March 31 to December 31, effective for the reporting period ended December 31, 2012. As a result of this change, the Company's prior year Annual Report on Form 10-KT was a transition report and included financial information for the nine-month transition period from April 1, 2012 to December 31, 2012 (the “Transition Period”). The comparative financial information provided for the year ended December 31, 2012 is unaudited and includes all normal recurring adjustments necessary for a fair statement of the results for that period.

The Company’s earnings available to common shareholders were $3.4 million for the year ended December 31, 2013, compared to $1.9 million for the twelve months ended December 31, 2012.  The $1.5 million or 72.3% increase in earnings was attributable primarily to the decrease in the provision for loan losses combined with an increase in non-interest income. These factors were offset slightly by a decrease in net interest income.

Net Interest Income

Net interest margin on a tax equivalent basis for the year ended December 31, 2013 increased eight basis points to 2.91% from 2.83% for the twelve months ended December 31, 2012.  Despite the increase in margin, the significant decrease in the volume of interest earning assets, particularly loans, resulted in a decrease in net interest income. Net interest income decreased $555,000 or 2.4% to $22.9 million for the year ended December 31, 2013 compared to $23.5 million for the twelve months ended December 31, 2012. The decrease was attributable to a decrease in interest income offset by a decrease in interest expense. Average interest-earning assets decreased $29.5 million or 3.5% to $809.5 million while average interest-bearing liabilities decreased $47.0 million or 6.0% to $731.2 million. The interest rate spread was 2.81% for the year ended December 31, 2013 compared to 2.74% for the twelve months ended December 31, 2012.

Interest income on loans decreased $4.8 million to $21.6 million during the year ended December 31, 2013 from $24.5 million during the twelve months ended December 31, 2012.  The 11.9% decrease was attributable to a decrease in average total loans outstanding of $41.2 million combined with a 14 basis point decrease in the average yield earned on the Bank’s loans during the year ended December 31, 2013.  Tax equivalent interest income on investment securities, mortgage-backed securities, and other investments decreased $91,000 as a result of a decrease in the yield earned offset in part by a $37.0 million increase in the aggregate average balance in these interest-earning assets.

Interest expense on deposits decreased $1.8 million or 34.3% to $3.4 million during the year ended December 31, 2013.  Average interest bearing deposits decreased $26.7 million while the average cost of those deposits decreased 26 basis points during the year ended December 31, 2013.  Interest expense on FHLB advances and other borrowings decreased $958,000 or 21.2% to $3.5 million during 2013.  The decrease was a result of a decrease in average FHLB advances and other borrowings outstanding during the year ended December 31, 2013 of $20.3 million and a decrease in the average costs of those borrowings of 21 basis points to 3.46% compared to 3.67% during the twelve months ended December 31, 2012. During the year ended December 31, 2013, as part of the Company's strategy to lower cost of funds, management elected to prepay $30.0 million in higher rate advances.

Interest expense on junior subordinated debentures was $103,000 for the year ended December 31, 2013 compared to $113,000 during the year ended December 31, 2012. The average outstanding balance on these debentures remained constant at $5.2 million during both periods while the average cost decreased 19 basis points to 2.00% during the year ended December 31, 2013 compared to 2.19% for the twelve months ended December 31, 2012. Interest expense on senior convertible debentures was $487,000 for the year ended December 31, 2013 and the twelve months ended December 31, 2012. The senior convertible debentures were issued during December 2009 and have a fixed rate of 8%.

26

Provision for Loan Losses

Non-performing assets, which consist of non-accrual loans and repossessed assets, decreased $11.2 million or 44.5% to $14.0 million at December 31, 2013 from $25.2 million at December 31, 2012. Consistent with the decrease in non-performing assets, the provision for loan losses was $2.6 million for the year ended December 31, 2013, a $1.3 million or 32.6% decrease from $3.9 million for the twelve months ended December 31, 2012. Net charge offs were $3.7 million or 1.01% of gross loans during the year ended December 31, 2013 compared to 1.69% for the twelve months ended December 31, 2012. The allowance for loan losses represented 275.2% of net charge offs during the year ended December 31, 2013 compared to 166.0% of net charge offs during the twelve months ended December 31, 2012.

Non-Interest Income

Non-interest income increased $917,000 or 15.3% to $6.9 million for the year ended December 31, 2013 from $6.0 million for the comparable twelve month period in 2012. The increase was primarily a result of $929,000 in grant income received during the year ended December 31, 2013 in connection with the CDFI Fund compared to no grant income for the twelve months ended December 31, 2012.

Gain on sale of investments decreased $155,000 or 10.4% to $1.3 million during fiscal 2013 from $1.5 million during the twelve months ended December 31, 2012.  Gain on sale of loans increased $138,000 or 21.4% to $780,000 during the year ended December 31, 2013 compared to $642,000 during the twelve months ended December 31, 2012. Management was able to maximize gain on sale of loans by raising the rates slightly on these loans and therefore increasing the sales price. Service fees on deposit accounts remained relatively unchanged at $1.2 million during the year ended December 31, 2013 and the same period in 2012.

Income from insurance agency commissions was $453,000 during fiscal 2013, a decrease of $11,000 or 2.3% compared to $464,000 during the twelve months ended December 31, 2012. Trust income increased $14,000 or 2.8% to $520,000 during the year ended December 31, 2013 from $506,000 during the twelve months ended December 31, 2012. Income from BOLI decreased $81,000 or 19.3% to $339,000 during fiscal year 2013 from $420,000 during the twelve months ended December 31, 2012 as a result of a decrease in the portfolio yield of the underlying assets.

Check card fee income increased $39,000 or 4.8% to $853,000 for the year ended December 31, 2013 compared to $814,000 for the same period in 2012. Other miscellaneous income including annuity and investment brokerage commissions, bank credit life insurance on loans, and other miscellaneous income increased $48,000 or 9.6% to $543,000 during the year ended December 31, 2013 from $495,000 during the same period in 2012. During the year ended December 31, 2013, the Company recognized $929,000 in grant income in connection with the CDFI Fund compared to no grant income for the twelve months ended December 31, 2012.

General and Administrative Expenses

General and administrative expenses decreased $154,000 or 0.7% to $22.0 million during the year ended December 31, 2013 compared to $22.2 million during the same period one year earlier.  The decrease in non-interest expense was primarily a result of a decrease in the net costs associated with the operation of other real estate owned including write downs on these properties offset by increases in prepayment penalties on FHLB advances and other expenses.

Compensation and employee benefits increased $246,000 or 2.3% to $11.0 million from $10.7 million for the twelve months ended December 31, 2012 as a result of normal cost of living increases combined with an increase in the number of full-time equivalent employees, from 196 at December 31, 2012 to 197 at December 31, 2013. Occupancy expense increased $28,000 or 1.4% to $2.0 million from $1.9 million for the twelve months ended December 31, 2012, while depreciation and maintenance of equipment expense decreased $102,000 or 6.0% to $1.6 million for the year ended December 31, 2013 compared to $1.7 million for the same period in 2012. Advertising expense decreased $25,000 or 6.7% to $356,000 for the year ended December 31, 2013 from $381,000 for the twelve months ended December 31, 2012.

Net cost of operation of other real estate owned decreased $1.6 million or 50.0% to $1.6 million for the year ended December 31, 2013 from $3.2 million for the same period in 2012. Other real estate owned was $3.9 million at December 31, 2013 compared to $6.8 million at December 31, 2012. This decrease was the result of a decrease in foreclosures and a significant decrease in write downs on other real estate owned during the year. Other real estate owned is recorded at the lower of cost or estimated fair value less costs to sell. As local real estate values declined significantly in the prior years, the Bank was required to write down these

27

properties to their fair values. Write downs on real estate owned totaled $1.4 million for the year ended December 31, 2013 compared to $3.1 million for the twelve months ended December 31, 2012.

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

Other expenses increased $592,000, or 16.5% to $4.2 million for the year ended December 31, 2013 compared to $3.6 million for the same period in the prior year. Other expenses include legal, professional, and consulting expenses, stationary and office supplies and other miscellaneous expenses. During fiscal 2013, the Bank hired a consultant that specializes in reducing operating expense and increasing fee income. Although this resulted in increased consulting fees during the year, management believes this expense will be offset by the benefits realized in future periods.

Income Taxes

The provision for income taxes increased $389,000 or 40.9% to $1.3 million during the year ended December 31, 2013 compared to $951,000 for the twelve months ended December 31, 2012.  The effective tax rate was 26.1% for 2013 and 28.5% for 2012.

28

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

Regulatory Capital

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

	At December 31,
	2014		2013
	(In Thousands)
Bank’s Shareholders’ Equity (1)	$	88,422	$	84,642
Disallowed Deferred Tax Asset	—		1,806
Reduction For Goodwill And Other Intangibles	1,200		1,212
Tangible Capital	87,222		81,624
Core Capital	87,222		81,624
Supplemental Capital	4,751		5,028
Total Risk-Based Capital	$	91,973	$	86,652

^{(1)  THE YEARS ENDED DECEMBER 31, 2014 AND 2013 EXCLUDE UNREALIZED GAINS OF $5.4 MILLION and $474,000, RESPECTIVELY, ON AVAILABLE FOR SALE SECURITIES.} 

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

The capital adequacy requirements are quantitative measures established by regulation that require Security Federal Corporation and Security Federal Bank to maintain minimum amounts and ratios of capital.  Federally-insured state-chartered banks are required to maintain minimum levels of regulatory capital.  Through December 31 2014, FDIC regulations required Security Federal Bank to maintain (i) a ratio of Tier 1 leverage capital to total assets of at least 4.0%, (ii) a ratio of Tier 1 risk-based capital to risk weighted assets of at least 4.0% and (iii) a ratio of total risk-based capital to risk weighted assets of at least 8.0%.  Effective January 1, 2015, FDIC regulations will require insured state-chartered banks to maintain (i) a minimum ratio of Tier 1 capital to total assets of 4.00%, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, (iii) a minimum ratio of total-capital to risk-weighted assets of 8.00% and (iv) a minimum ratio of “Common Equity Tier 1 Capital” to risk-weighted assets of 4.50%. The Federal Reserve requires Security Federal Corporation to maintain capital adequacy that generally parallels the FDIC requirements.  At December 31, 2014, Security Federal Corporation and Security Federal Bank each exceeded all applicable capital requirements and the Company believes each will meet the new minimum capital requirements.

Through December 31, 2014, a well-capitalized institution had to maintain a minimum ratio of total risk-based capital to risk-weighted assets of at least 10.00%, a minimum ratio of Tier 1 risk-based capital to risk weighted assets of at least 6.00%, a minimum ratio of Tier 1 leverage capital to total assets of at least 5.00% and must not be subject to any written order, agreement or directive requiring it to meet or maintain a specific capital level. As of December 31, 2014, Security Federal Bank was “well capitalized” under the capital adequacy requirements then in effect. A bank holding company such as Security Federal Corporation does not have a “well-capitalized” measurement because “well-capitalized” only applies to banks. The following table compares Security Federal Corporation’s and Security Federal Bank’s actual capital amounts at the dates indicated December 31, 2014 to its minimum regulatory capital requirements at that date (dollars in thousands):

29

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

	Amount Required		Percent Required		Actual Amount		Actual Percent		Excess Amount		Excess Percent
	(Dollars In Thousands)
Tier 1 Leverage (Core) Capital:
Security Federal Corporation	$	32,778	4.0	%	$	77,746	9.5	%	$	44,968	5.5	%
Security Federal Bank	32,792		4.0	%	87,222		10.6	%	54,430		6.6	%
Tier 1 Risk-Based (Core) Capital:
Security Federal Corporation	15,073		4.0	%	77,746		20.6	%	62,673		16.6	%
Security Federal Bank	15,062		4.0	%	87,222		23.2	%	72,160		19.2	%
Total Risk-Based Capital:
Security Federal Corporation	30,147		8.0	%	89,915		23.9	%	59,768		15.9	%
Security Federal Bank	30,123		8.0	%	91,973		24.4	%	61,850		16.4	%

Liquidity and Capital Resources

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

The principal use of the Bank's funds is the origination of mortgages and other loans and the purchase of investments and mortgage-backed securities.  Originations of new loans and renewals of previously funded loans on loans held for investment were $139.2 million during the year ended December 31, 2014 compared to $193.2 million during the year ended December 31, 2013 and $130.0 million during the nine months ended December 31 2012.  The decrease in originations and renewals during the year endedDecember 31, 2014 was primarily the result of a decrease in commercial loan originations, which decreased $56.5 million. Purchases of investments and mortgage-backed securities were $119.3 million during the year ended December 31, 2014 comparedto $162.5 million during the year ended December 31, 2013, and $189.8 million during the twelve months ended December 31, 2012.  Other uses of the Bank's funds during the year ended December 31, 2014 included paying down FHLB advances and dividend payments to shareholders.

Unused lines of credit on home equity loans, credit cards, and commercial loans amounted to $44.5 million at December 31, 2014.  Home equity loans are made on a floating rate basis with final maturities of 10 to 15 years.  Credit cards are made on a fixed rate basis, currently at 9.99% and are renewed annually or every other year.  In addition to the above commitments, the Bank has undisbursed loans-in-process of $1.4 million at December 31, 2014, which will be disbursed over an average of 90 days.  These commitments to originate loans and future advances of lines of credit are expected to be funded from loan amortizations and prepayments, deposit inflows, maturing investments, and short-term borrowing capacity.

The following table sets forth the length of time until maturity for unused commitments to extend credit and standby letters of credit at December 31, 2014:

(In Thousands)	One Month Or Less		After One Through Three Months		After Three Through Twelve Months		Within One Year		One Year Or Greater		Total
Unused Lines Of Credit	$	966	$	1,620	$	13,048	$	15,634	$	28,878	$	44,512
Standby Letters Of Credit	—		510		269		779		23		802
Total	$	966	$	2,130	$	13,317	$	16,413	$	28,901	$	45,314

Management believes that future liquidity can be met through the Bank's deposit base, which increased $1.4 million during the year ended December 31, 2014, and from maturing investments.  In addition, at December 31, 2014 the Bank had another $195.7million in unused borrowing capacity at the FHLB.

30

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

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

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

Security Federal Corporation is a separate legal entity from Security Federal Bank and must provide for its own liquidity and pay its own operating expenses. Sources of capital and liquidity for Security Federal Corporation include distributions from Security Federal Bank and the issuance of debt or equity securities, although there are regulatory restrictions on the ability of the Security Federal Bank to pay dividends. At December 31, 2014, Security Federal Corporation (on an unconsolidated basis) had liquid assets of $4.7 million.

Contractual Obligations

In the normal course of business, the Company enters into contractual obligations that meet various business needs.  These contractual obligations include time deposits to customers, borrowings from the FHLB of Atlanta, other borrowings, junior subordinated debentures, senior convertible debentures and lease obligations for facilities.  See Notes 5, 9, 10, 11 and 12 of theNotes to the Consolidated Financial Statements included herein for additional information.  The following table summarizes the Company’s long-term contractual obligations at December 31, 2014. Contractual repayments may differ from actual repayments because some of the obligations may be subject to calls.

	One Year Or Less		Over One to Three Years		Over Three to Five Years		Thereafter		Total
	(In Thousands)
Time deposits	$	142,490	$	79,755	$	31,006	$	—	$	253,251
FHLB Advances	15,000		32,900		5,000		—		52,900
Other Borrowings	8,523		—		—		—		8,523
Jr. Sub. Debentures	—		—		—		5,155		5,155
Sr. Conv. Debentures	—		—		—		6,084		6,084
Operating Lease Obligations	360		493		248		908		2,009
Total	$	166,373	$	113,148	$	36,254	$	12,147	$	327,922

Off-Balance Sheet Arrangements

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

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

Impact of Inflation and Changing Prices

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

31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

Security Federal Corporation and Subsidiaries

Aiken, South Carolina

We have audited the accompanying consolidated balance sheets of Security Federal Corporation and Subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income (loss), shareholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Security Federal Corporation and Subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Elliott Davis Decosimo, LLC

Columbia, South Carolina

March 19, 2015

32

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets	December 31, 2014			December 31, 2013
ASSETS:
Cash And Cash Equivalents	$	10,192,702		$	7,629,771
Certificates Of Deposit With Other Banks	2,095,000			2,100,395
Investment And Mortgage-Backed Securities:
Available For Sale:  (Amortized Cost of $420,876,924 and $430,241,854 at December 31, 2014 and 2013, Respectively)	429,700,540			431,003,452
Loans Receivable, Net:
Held For Sale	1,864,999			1,234,158
Held For Investment:  (Net of Allowance of $8,357,496 and $10,241,970 at December 31, 2014 and December 31, 2013, Respectively)	338,009,496			357,682,507
Total Loans Receivable, Net	339,874,495			358,916,665
Accrued Interest Receivable:
Loans	971,569			1,031,747
Mortgage-Backed Securities	682,585			732,100
Investment Securities	1,408,924			1,393,156
Total Accrued Interest Receivable	3,063,078			3,157,003
Premises And Equipment, Net	18,233,226			17,243,390
Federal Home Loan Bank ("FHLB") Stock, At Cost	3,144,600			5,016,600
Other Real Estate Owned	3,229,710			3,947,226
Bank Owned Life Insurance	11,150,045			11,474,305
Intangible Assets, Net	—			11,970
Goodwill	1,199,754			1,199,754
Other Assets	3,480,676			7,547,528
Total Assets	$	825,363,826		$	849,248,059
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Liabilities:
Deposit Accounts	$	660,115,164		$	658,696,772
Advances From FHLB	52,900,000			87,740,058
Other Borrowings	8,523,348			8,002,739
Junior Subordinated Debentures	5,155,000			5,155,000
Advance Payments By Borrowers For Taxes And Insurance	266,352			255,364
Senior Convertible Debentures	6,084,000			6,084,000
Other Liabilities	4,884,577			5,324,046
Total Liabilities	737,928,441			771,257,979
Commitments (Notes 5 and 18)
Shareholders' Equity:
Serial Preferred Stock, $.01 Par Value; Authorized 200,000 Shares; Issued And Outstanding, 22,000 At December 31, 2014 and 2013, Respectively	22,000,000			22,000,000
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued And Outstanding, 3,144,934 Shares At December 31, 2014 and 2013, Respectively	31,449			31,449
Additional Paid-In Capital	11,990,813			11,978,137
Treasury Stock, At Cost (200,933 Shares At December 31, 2014 and 2013, Respectively)	(4,330,712		)	(4,330,712		)
Accumulated Other Comprehensive Income	5,476,375			472,406
Retained Earnings	52,267,460			47,838,800
Total Shareholders' Equity	87,435,385			77,990,080
Total Liabilities And Shareholders' Equity	$	825,363,826		$	849,248,059

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

33

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income	For The Years Ended December 31,				For The Nine Months Ended
	2014		2013		December 31, 2012
Interest Income:
Loans	$	19,416,904	$	21,583,028	$	17,907,415
Mortgage-Backed Securities	6,036,955		5,267,280		4,882,993
Investment Securities	4,017,705		3,588,794		1,994,411
Other	10,600		8,265		6,405
Total Interest Income	29,482,164		30,447,367		24,791,224
Interest Expense:
NOW And Money Market Accounts	568,397		813,278		832,856
Statement Savings Accounts	26,600		33,897		32,720
Certificate Accounts	1,990,003		2,566,220		2,838,292
FHLB Advances And Other Borrowed Money	2,640,197		3,529,553		3,306,898
Senior Convertible Debentures	486,720		486,720		365,040
Junior Subordinated Debentures	101,139		103,268		84,010
Total Interest Expense	5,813,056		7,532,936		7,459,816
Net Interest Income	23,669,108		22,914,431		17,331,408
Provision For Loan Losses	450,000		2,645,381		1,975,000
Net Interest Income After Provision For Loan Losses	23,219,108		20,269,050		15,356,408
Non-Interest Income:
Gain On Sale Of Investment Securities	436,871		1,325,823		945,476
Gain On Sale Of Loans	620,994		779,554		498,879
Service Fees On Deposit Accounts	1,176,849		1,152,875		880,209
Commissions From Insurance Agency	424,969		453,446		346,015
Trust Income	542,000		520,000		380,000
Bank Owned Life Insurance Income	554,364		339,000		315,000
Check Card Fee Income	901,998		853,027		615,815
Grant Income	851,999		929,346		—
Other	652,739		542,733		383,460
Total Non-Interest Income	6,162,783		6,895,804		4,364,854
General And Administrative Expenses:
Compensation And Employee Benefits	11,308,610		10,964,366		7,978,054
Occupancy	1,995,283		1,970,403		1,498,858
Advertising	484,056		355,678		303,754
Depreciation And Maintenance Of Equipment	1,665,454		1,598,067		1,271,609
FDIC Insurance Premiums	691,937		746,389		514,065
Amortization Of Intangibles	11,970		50,004		37,503
Net Cost Of Operation Of Other Real Estate Owned	541,840		1,582,168		2,745,667
Prepayment Penalties on FHLB Advances	178,067		589,023		—
Other	4,390,766		4,177,210		2,713,044
Total General And Administrative Expenses	21,267,983		22,033,308		17,062,554
Income Before Income Taxes	8,113,908		5,131,546		2,658,708
Provision For Income Taxes	2,303,168		1,340,384		703,759
Net Income	5,810,740		3,791,162		1,954,949
Preferred Stock Dividends	440,000		440,000		330,000
Net Income Available To Common Shareholders	$	5,370,740	$	3,351,162	$	1,624,949
Net Income Per Common Share (Basic)	$	1.82	$	1.14	$	0.55
Net Income Per Common Share (Diluted)	$	1.75	$	1.12	$	0.55
Cash Dividend Per Share On Common Stock	$	0.32	$	0.32	$	0.24
Weighted Average Shares Outstanding (Basic)	2,944,001		2,944,001		2,944,001
Weighted Average Shares Outstanding (Diluted)	3,248,201		3,248,201		2,944,001

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

34

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

	Years Ended December 31,						Nine Months Ended December 31,
	2014			2013			2012
Net Income	$	5,810,740		$	3,791,162		$	1,954,949
Other Comprehensive Income (Loss)
Unrealized Gains On Securities:
Unrealized Holding Gains (Losses) On Securities Available For Sale, Net Of Taxes Of $3,224,059; $4,286,481 and $909,507 At December 31, 2014, 2013 and 2012, Respectively	5,274,829			(7,002,827		)	1,483,932
Reclassification Adjustment For Gains Included In Net Income, Net Of Taxes Of $166,011; $503,813 and $359,281 At December 31, 2014, 2013 and 2012, Respectively	(270,860		)	(822,010		)	(586,195		)
Held To Maturity Transfer To Available For Sale, Net Of Taxes Of $0; $530,733 and $0 At December 31, 2014, 2013 and 2012, Respectively	—			865,933			—
Other Comprehensive Income (Loss)	5,003,969			(6,958,904		)	897,737
Comprehensive Income (Loss)	$	10,814,709		$	(3,167,742	)	$	2,852,686

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

35

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity

For the Years Ended December 31,2014 and 2013 and the Nine Months Ended December 31, 2012

	Preferred Stock		Warrants		Common Stock		Additional Paid – In  Capital		Treasury Stock			Accumulated Other Comprehensive Income		Retained Earnings			Total
Balance at March 31, 2012	$	22,000,000	$	400,000	$	31,449	$	11,626,245	$	(4,330,712	)	$	6,533,573	$	44,511,331		$	80,771,886
Net Income	—		—		—		—		—			—		1,954,949			1,954,949
Other Comprehensive Income, Net Of Tax:	—		—		—		—		—			897,737		—			897,737
Stock Compensation Expense	—		—		—		4,472		—			—		—			4,472
Cash Dividends On  Preferred Stock	—		—		—		—		—			—		(330,000		)	(330,000		)
Cash Dividends On Common Stock	—		—		—		—		—			—		(706,560		)	(706,560		)
Balance at December 31, 2012	$	22,000,000	$	400,000	$	31,449	$	11,630,717	$	(4,330,712	)	$	7,431,310	$	45,429,720		$	82,592,484

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

36

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity

For the Years Ended December 31,2014 and 2013 and the Nine Months Ended December 31, 2012, Continued

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

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

37

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	For the Years Ended December 31,						For the Nine Months Ended
	2014			2013			December 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	5,810,740		$	3,791,162		$	1,954,949
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Depreciation Expense	1,214,912			1,243,839			1,055,662
Amortization Of Intangible Assets	11,970			50,004			37,503
Stock Option Compensation Expense	12,676			(2,580		)	4,472
Discount Accretion And Premium Amortization	5,180,338			7,162,479			5,712,398
Provisions For Losses On Loans	450,000			2,645,381			1,975,000
Income From Bank Owned Life Insurance	(300,000		)	(339,000		)	(315,000		)
Gain On Sales Of Loans	(620,994		)	(779,554		)	(498,879		)
Gain On Sales Of Mortgage-Backed Securities	(503,288		)	(1,104,491		)	(804,959		)
(Gain) Loss On Sales Of Investment Securities	66,417			(221,332		)	(140,517		)
Gain On Sale Of Real Estate Owned	(303,440		)	(101,645		)	(694,650		)
Write Down On Other Real Estate Owned	505,000			1,394,378			2,933,000
Amortization Of Deferred Costs (Fees) On Loans	6,154			6,589			(8,994		)
Proceeds From Sale Of Loans Held For Sale	23,607,017			33,207,780			22,536,178
Origination Of Loans Held For Sale	(23,616,864		)	(28,891,624		)	(24,136,288		)
(Increase) Decrease In Accrued Interest Receivable:
Loans	60,178			210,325			476,180
Mortgage-Backed Securities	49,515			169,323			86,488
Investment Securities	(15,768		)	(261,894		)	(337,607		)
Increase (Decrease) In Advance Payments By Borrowers	10,988			65,940			(161,040		)
Decrease In Prepaid FDIC Assessment	—			1,781,476			359,681
Other, Net	575,230			335,386			1,261,763
Net Cash Provided By Operating Activities	12,200,781			20,361,942			11,295,340
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase Of Mortgage-Backed Securities Available For Sale	(54,673,351		)	(88,844,145		)	(57,808,416		)
Principal Repayments On Mortgage-Backed Securities     Available For Sale	32,752,039			56,166,594			43,332,870
Purchase Of Mortgage-Backed Securities Held To Maturity	—			—			(9,130,181		)
Principal Repayments On Mortgage-Backed Securities     Held To Maturity	—			942,806			1,144,542
Purchase Of Investment Securities Available For Sale	(64,593,473		)	(72,626,491		)	(44,272,326		)
Maturities Of Investment Securities Available For Sale	21,531,825			22,028,941			14,662,340
Purchase of Investment Securities Held To Maturity	—			(1,000,000		)	(14,513,829		)
Maturities Of Investment Securities Held To Maturity	—			3,501,978			13,592,535
Proceeds From Sale of Investment Securities Available For Sale	37,842,271			21,957,851			5,441,135
Proceeds From Sale of Mortgage-Backed Securities     Available For Sale	31,762,151			40,802,371			34,874,060
Investment In Certificates Of Deposits With Other Banks	—			(370,000		)	—
Purchase Of FHLB Stock	(5,905,180		)	(4,950,606		)	(657,887		)
Redemption Of FHLB Stock	7,777,180			6,112,706			2,950,287
Proceeds From Bank Owned Life Insurance	624,260			—			—
Decrease In Loans Receivable	17,578,222			28,739,400			28,481,291
Proceeds From Sale Of Other Real Estate Owned	2,154,091			5,375,648			7,623,802
Purchase And Improvement Of Premises And Equipment	(2,204,748		)	(567,582		)	(247,260		)
Net Cash Provided By Investing Activities	24,645,287			17,269,471			25,472,963

38

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

	For the Years Ended December 31,						For the Nine Months Ended
	2014			2013			December 31, 2012
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) In Deposit Accounts	1,418,392			(17,641,881		)	(19,862,403		)
Proceeds From FHLB Advances	253,630,000			150,800,000			60,400,000
Repayment Of FHLB Advances	(288,470,058		)	(168,317,124		)	(77,212,620		)
Proceeds From (Repayments Of) Other Borrowings, Net	520,609			(1,314,505		)	(484,142		)
Repayment Of Warrant Issued In Conjunction With Preferred Stock	—			(50,000		)	—
Dividends To Preferred Stock Shareholders	(440,000		)	(440,000		)	(330,000		)
Dividends To Common Stock Shareholders	(942,080		)	(942,082		)	(706,560		)
Net Cash Used By Financing Activities	(34,283,137		)	(37,905,592		)	(38,195,725		)
Net Increase (Decrease) In Cash And Cash Equivalents	2,562,931			(274,179		)	(1,427,422		)
Cash And Cash Equivalents At Beginning Of Year	7,629,771			7,903,950			9,331,372
Cash And Cash Equivalents At End Of Year	$	10,192,702		$	7,629,771		$	7,903,950
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During The Period For:
Interest	$	5,969,581		$	7,728,772		$	7,692,965
Income Taxes	$	1,464,350		$	448,419		$	274,656
Supplemental Schedule Of Non Cash Transactions:
Transfers From Loans Receivable	$	1,638,135		$	3,861,182		$	2,456,478
Increase (Decrease) in Unrealized Gains On Securities Available For Sale, Net Of Taxes	$	5,003,969		$	(6,958,904	)	$	897,737

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

39

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies

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

(a) Basis of Consolidation and Nature of Operations

The accompanying consolidated financial statements include the accounts of Security Federal Corporation (the “Company”) and its wholly owned subsidiary, Security Federal Bank (the “Bank”) and the Bank’s wholly owned subsidiaries, Security Federal Insurance, Inc. (“SFINS”) and Security Financial Services Corporation (“SFSC”).  Security Federal Corporation has a wholly owned subsidiary, Security Federal Statutory Trust (the “Trust”), which issued and sold fixed and floating rate capital securities of the Trust.  However, under current accounting guidance, the Trust is not consolidated in the financial statements.  The Bank is primarily engaged in the business of accepting savings and demand deposits and originating mortgage loans and other loans to individuals and small businesses for various personal and commercial purposes.  SFINS was formed during fiscal 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, and home insurance.  SFINS has a wholly owned subsidiary, Collier Jennings Financial Corporation which has as subsidiaries Security Federal Auto Insurance, The Auto Insurance Store Inc., and Security Federal Premium Pay Plans Inc. Security Federal Premium Pay Plans Inc. has one wholly owned premium finance subsidiary and also has an ownership interest in four other premium finance subsidiaries. SFSC was formed in 1975 and is currently inactive.

(b) Change in Fiscal Year

The Company's Board of Directors approved a change in the Company's fiscal year end from March 31 to December 31, effective December 31, 2012. As a result of this change, the consolidated financial statements for the period ended December 31, 2012 include the Company's financial results for the nine month transition period from April 1, 2012 to December 31, 2012. The following table presents certain comparative transition period condensed financial information for the periods ended December 31, 2014, 2013 and 2012.

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014		2013		2012		2014		2013		2012
					(Unaudited)		(Unaudited)		(Unaudited)
Interest Income	$	29,482,164	$	30,447,367	$	33,742,799	$	22,288,689	$	22,743,098	$	24,791,224
Interest Expense	5,813,056		7,532,936		10,273,737		4,262,965		5,419,314		7,459,816
Net Interest Income	23,669,108		22,914,431		23,469,062		18,025,724		17,323,784		17,331,408
Provision For Loan Losses	450,000		2,645,381		3,925,000		350,000		1,500,000		1,975,000
Net Interest Income After Provision For Loan Losses	23,219,108		20,269,050		19,544,062		17,675,724		15,823,784		15,356,408
Non-Interest Income	6,162,783		6,895,804		5,979,341		4,626,384		4,950,822		4,364,854
General And Administrative Expenses	21,267,983		22,033,308		22,187,423		15,941,304		16,520,424		17,062,554
Income Before Income Taxes	8,113,908		5,131,546		3,335,980		6,360,804		4,254,182		2,658,708
Provision For Income Taxes	2,303,168		1,340,384		951,084		1,852,584		1,134,389		703,759
Net Income	5,810,740		3,791,162		2,384,896		4,508,220		3,119,793		1,954,949
Preferred Stock Dividends	440,000		440,000		440,000		330,000		330,000		330,000
Net Income Available To Common Shareholders	$	5,370,740	$	3,351,162	$	1,944,896	$	4,178,220	$	2,789,793	$	1,624,949
Net Income Per Common Share (Basic)	$1.82		$1.14		$0.66		$1.42		$0.95		$0.55
Net Income Per Common Share (Diluted)	$1.75		$1.12		$0.66		$1.36		$0.93		$0.55
Cash Dividend Per Share On Common Stock	$0.32		$0.32		$0.32		$0.24		$0.24		$0.24

40

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

(c) Cash and Cash Equivalents

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

(d) Investment and Mortgage-Backed Securities

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

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

(e) Loans Receivable Held for Investment

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

(f) Allowance for Loan Losses

The Company provides for loan losses using the allowance method.  Accordingly, all loan losses are charged to the related allowance and all recoveries are credited to the allowance for loan losses.

Additions to the allowance for loan losses are provided by charges to operations based on various factors, which, in management’s judgment, deserve current recognition in estimating possible losses.  Such factors considered by management include the fair value of the underlying collateral, stated guarantees by the borrower (if applicable), the borrower’s ability to repay from other economic resources, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to the outstanding loans, loss experience, delinquency trends, and general economic conditions.  Management evaluates the carrying value of the loans periodically and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making these evaluations.  The allowance for loan losses is subject to periodic evaluations by bank regulatory agencies that may require adjustments to be made to the allowance based upon the information that is available at the time of their examination.

The Company values impaired loans at the loan’s fair value if it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement at the present value of expected cash flows, the market price of the loan, if available, or the value of the underlying collateral less estimated selling costs.  In accordance with our policy, non-accrual commercial loans with a balance less than $200,000 and non-accrual consumer loans with a balance less than $100,000 are deemed immaterial and therefore excluded from the individual impairment review. Expected cash flows are required to be discounted at the loan’s effective interest rate.  When the ultimate collectibility of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal.  When this doubt does not exist, cash receipts are applied under the contractual terms of the loan agreement first to interest and then to principal.  Once the recorded principal balance has been reduced to zero, future cash receipts are applied to interest income to the extent that any interest has been foregone.  Further cash receipts are recorded as recoveries of any amounts previously charged off.

41

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

(g) Loans Receivable Held for Sale

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

(h) Other Real Estate Owned

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

(i) Premises and Equipment

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

(j) Intangible Assets and Goodwill

Intangible Assets consist of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation in July 2006.  The goodwill also is a result of the excess of the cost over the fair value of net assets resulting from the Collier Jennings acquisition.

Intangible assets are amortized over their estimated economic lives using methods that reflect the pattern in which the economic benefits are utilized.  The intangible assets which consisted of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation, were fully amortized during the year ended December 31, 2014. Goodwill is reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

(k) Income Taxes

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

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

There have been no gross amounts of unrecognized tax benefits or interest or penalties related to uncertain tax positions since adoption. There are no unrecognized tax benefits that would, if recognized, affect the effective tax rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. Years prior to March 31, 2011 are closed for federal, state and local income tax matters.

42

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

(l) Loan Fees and Costs Associated with Originating Loans

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

(m) Interest Income

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

(n) Advertising Expense

Advertising and public relations costs are generally expensed as incurred.  External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent.  Advertising and public relations costs of$484,000, $356,000, and $304,000 were included in the Company’s results of operations for the year ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively.

(o) Stock-Based Compensation

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

(p) Earnings Per Share

Accounting guidance specifies computation and presentation requirements for both basic earnings per share ("EPS") and, for entities with complex capital structures, diluted EPS.  Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding.  Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.  The dilutive effect of options and warrants outstanding is reflected in diluted earnings per share by application of the treasury stock method.

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

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

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Earnings Available To Common Shareholders
Net Income	$	5,810,740	$	3,791,162	$	1,954,949
Preferred Stock Dividends	440,000		440,000		330,000
Net Income Available To Common Shareholders	$	5,370,740	$	3,351,162	$	1,624,949

43

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

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

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

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

There were no dilutive securities or options for the nine months ended December 31, 2012 therefore no reconciliation is provided.

The average market price used in calculating the assumed number of dilutive shares issued for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 was $14.56, $11.37, and $8.63 respectively. As a result of the average stock price being less than the exercise price of all options and warrants in years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, the options are not dilutive in calculating diluted earnings per share for those periods.

(q) Use of Estimates

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

(r) Recently Issued Accounting Standards

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

In January 2014, the FASB amended the Receivables topic of the Accounting Standards Codification. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned (OREO). In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement.

44

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

The amendments will be effective for the Company for annual periods, and interim periods within those annual period beginning after December 15, 2014, with early implementation of the guidance permitted. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company will apply the amendments prospectively. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2016. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments will be effective for the Company for the first interim or annual period beginning after December 15, 2014. The Company will apply the guidance by making a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

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

In August 2014, the FASB issued guidance that is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements, management will need to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the organization’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments will be effective for the Company for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In January 2015, the FASB issued guidance that eliminated the concept of extraordinary items from U.S. GAAP. Existing U.S. GAAP required that an entity separately classify, present, and disclose extraordinary events and transactions. The amendments will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, however, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

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

45

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(1) Significant Accounting Policies, Continued

(s)       Risks and Uncertainties

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

(t) Reclassifications

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

46

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

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

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,317,462	$	83,691	$	154,492	$	13,246,661
Federal Farm Credit Bank ("FFCB") Securities	5,750,000		—		82,006		5,667,994
Federal National Mortgage Association ("FNMA") Bonds	996,822		7,559		—		1,004,381
Small Business Administration (“SBA”) Bonds	106,637,400		1,796,943		307,649		108,126,694
Tax Exempt Municipal Bonds	59,960,960		2,579,543		45,080		62,495,423
Mortgage-Backed Securities	233,963,842		5,704,855		815,984		238,852,713
Equity Securities	250,438		56,236		—		306,674
	$	420,876,924	$	10,228,827	$	1,405,211	$	429,700,540
	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,538,723	$	25,695	$	893,968	$	12,670,450
FFCB Securities	5,750,000		—		383,820		5,366,180
FNMA Bonds	1,993,473		—		18,543		1,974,930
SBA Bonds	99,228,708		1,914,720		319,443		100,823,985
Tax Exempt Municipal Bonds	63,590,959		410,151		2,685,988		61,315,122
Mortgage-Backed Securities	245,882,053		5,843,365		3,128,883		248,596,535
Equity Securities	257,938		—		1,688		256,250
	$	430,241,854	$	8,193,931	$	7,432,333	$	431,003,452

FHLB securities, FFCB securities, FNMA bonds, and FNMA and FHLMC mortgage-backed securities are issued by government-sponsored enterprises (“GSEs”).  GSEs are not backed by the full faith and credit of the United States government.  SBA bonds are backed by the full faith and credit of the United States government. Included in the tables above and below in mortgage-backed securities are GNMA mortgage-backed securities, which are also backed by the full faith and credit of the United States government.  At December 31, 2014 and 2013, the Bank held an amortized cost and fair value of $156.8 million and $160.6 million, respectively, and $170.4 million and $173.5 million, respectively, in GNMA mortgage-backed securities included in mortgage-backed securities listed above. All mortgage-backed securities above are either GSEs or GNMA mortgage-backed securities. The Company has not invested in any private label mortgage-backed securities.

47

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

The amortized cost and fair value of investment and mortgage-backed securities available for sale at December 31, 2014 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.

	Amortized Cost		Fair Value
Less Than One Year	$	760,264	$	773,573
One – Five Years	13,588,753		13,819,295
Five – Ten Years	68,880,177		69,887,727
After Ten Years	103,683,888		106,367,232
Mortgage-Backed Securities	233,963,842		238,852,713
	$	420,876,924	$	429,700,540

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 $120.7 million and $124.4 million, respectively, at December 31, 2014 and $118.3 million and $121.1 million, respectively, at December 31, 2013.

The Bank received $69.6 million, $62.8 million and $40.3 million in proceeds from sales of available for sale securities during the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively. As a result, the Bank recognized $1.1 million in gross gains and $623,000 gross losses for the year ended December 31, 2014, $1.6 million in gross gains and $279,000 in gross losses for the year ended December 31, 2013, and $945,000 in gross gains and no gross losses for the nine months ended December 31, 2012.

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

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

48

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

	December 31, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	10,288,110	$	651,608	$	1,757,640	$	242,360	$	12,045,750	$	893,968
FFCB Securities	4,435,070		314,930		931,110		68,890		5,366,180		383,820
FNMA Bonds	1,974,930		18,543		—		—		1,974,930		18,543
SBA Bonds	12,183,961		288,678		3,541,453		30,765		15,725,414		319,443
Tax Exempt Municipal Bond	39,848,206		2,556,014		2,008,272		129,974		41,856,478		2,685,988
Mortgage-Backed Securities	88,516,030		2,756,216		6,436,369		372,667		94,952,399		3,128,883
Equity Securities	—		—		101,250		1,688		101,250		1,688
	$	157,246,307	$	6,585,989	$	14,776,094	$	846,344	$	172,022,401	$	7,432,333

Securities classified as available-for-sale are recorded at fair market value.  At December 31, 2014, 67.8% of the unrealized losses, or twenty-four individual securities, consisted of securities in a continuous loss position for 12 months or more.  At December 31, 2013, 11.4% of the unrealized losses, or eleven individual securities, consisted of securities in a continuous loss position for 12 months or more. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature.  The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”). Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value.

If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or 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 years ended December 31, 2014 and 2013.

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

On June 30, 2013, the Company transferred all of its investment and mortgage-backed securities classified as held to maturity to available for sale. Based on changes in the current rate environment, management elected this change in an effort to more effectively manage the investment portfolio, including subsequently selling some securities that were formerly classified as held to maturity. The amortized cost of the securities that were transferred totaled $72.0 million and the net unrealized gain related to these securities totaled $1.4 million on the date of the transfer. As a result of the transfer and subsequent sales, the Company believes its held to maturity classification process has been compromised and careful evaluation and analysis will be required going forward in determining when circumstances are suitable for management to assert with a great degree of credibility that it has the intent and ability to hold investment and mortgage-backed securities to maturity.

49

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net

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

	December 31, 2014		December 31, 2013
Residential Real Estate Loans	$	77,282,817	$	83,004,482
Consumer Loans	50,391,224		52,205,901
Commercial Business	10,564,467		7,775,098
Commercial Real Estate	209,530,209		228,399,555
Total Loans Held For Investment	347,768,717		371,385,036
Loans Held For Sale	1,864,999		1,234,158
Total Loans Receivable, Gross	349,633,716		372,619,194
Less:
Allowance For Loan Losses	8,357,496		10,241,970
Loans In Process	1,379,114		3,465,072
Deferred Loan Fees (Costs)	22,611		(4,513		)
	9,759,221		13,702,529
Total Loans Receivable, Net	$	339,874,495	$	358,916,665

Changes in the allowance for loan losses for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 are summarized as follows:

	Year Ended December 31,						Nine Months Ended December 31,
	2014			2013			2012
Balance At Beginning Of Period	$	10,241,970		$	11,318,371		$	14,615,198
Provision For Loan Losses	450,000			2,645,381			1,975,000
Charge Offs	(3,114,833		)	(5,209,830		)	(7,422,393		)
Recoveries	780,359			1,488,048			2,150,566
Total Allowance For Loan Losses	$	8,357,496		$	10,241,970		$	11,318,371

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 the least risky in terms of determining the allowance for loan losses. Substandard loans are considered the most risky category. These loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans 60 days or more past due are automatically classified in this category. The other two categories fall in between these two grades.

50

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net, Continued

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

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

	Credit Quality Measures
December 31, 2013	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	74,505,587	$	890,902	$	403,138	$	7,204,855	$	83,004,482
Consumer	50,370,640		843,799		143,649		847,813		52,205,901
Commercial Business	6,807,620		368,019		524,928		74,531		7,775,098
Commercial Real Estate	135,793,150		43,252,464		25,581,235		23,772,706		228,399,555
Total	$	267,476,997	$	45,355,184	$	26,652,950	$	31,899,905	$	371,385,036

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

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	—	$	1,087,299	$	3,061,339	$	4,148,638	$	73,134,179	$	77,282,817
Consumer	1,868,787		91,223		573,644		2,533,654		47,857,570		50,391,224
Commercial    Business	162,481		99,784		246,977		509,242		10,055,225		10,564,467
Commercial    Real Estate	4,544,813		1,094,701		9,859,689		15,499,203		194,031,006		209,530,209
Total	$	6,576,081	$	2,373,007	$	13,741,649	$	22,690,737	$	325,077,980	$	347,768,717

The following table presents an age analysis of past due balances by category at December 31, 2013.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	—	$	1,363,132	$	4,607,613	$	5,970,745	$	77,033,737	$	83,004,482
Consumer	1,494,429		234,878		399,062		2,128,369		50,077,532		52,205,901
Commercial    Business	115,186		—		33,055		148,241		7,626,857		7,775,098
Commercial    Real Estate	5,103,522		2,046,666		4,972,667		12,122,855		216,276,700		228,399,555
Total	$	6,713,137	$	3,644,676	$	10,012,397	$	20,370,210	$	351,014,826	$	371,385,036

51

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net, Continued

At December 31, 2014 and 2013, the Company did not have any loans that were 90 days or more past due and still accruing interest. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, we may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them. The following table shows non-accrual loans by category atDecember 31, 2014 compared to 2013.

	At December 31, 2014				At December 31, 2013				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	3,061,339	0.9	%	$	4,607,613	1.3	%	$	(1,546,274	)	(33.6	)%
Commercial Business	246,977		0.1		33,055		—		213,922			647.2
Commercial Real Estate	9,859,689		2.8		4,972,667		1.4		4,887,022			98.3
Consumer	573,644		0.2		399,062		0.1		174,582			43.7
Total Non- accrual Loans	$	13,741,649	4.0	%	$	10,012,397	2.7	%	$	3,729,252		37.2	%

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

The following tables show the activity in the allowance for loan losses by category for the periods indicated.

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

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

	For the Nine Months Ended December 31, 2012
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,928,625		$	1,498,111		$	644,855		$	10,543,607		$	14,615,198
Provision	183,236			(227,872		)	175,141			1,844,495			1,975,000
Charge-Offs	(647,161		)	(286,612		)	(209,898		)	(6,278,722		)	(7,422,393		)
Recoveries	56,859			17,644			8,821			2,067,242			2,150,566
Ending Balance	$	1,521,559		$	1,001,271		$	618,919		$	8,176,622		$	11,318,371

52

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)      Loans Receivable, Net, Continued

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

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

	Allowance For Loan Losses
December 31, 2013	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	158,791	$	1,547,852	$	1,706,643
Consumer	103,109		744,668		847,777
Commercial Business	—		426,658		426,658
Commercial Real Estate	840,658		6,420,234		7,260,892
Total	$	1,102,558	$	9,139,412	$	10,241,970

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

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

	Loans Receivable
December 31, 2013	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	4,838,236	$	78,166,246	$	83,004,482
Consumer	275,491		51,930,410		52,205,901
Commercial Business	19,775		7,755,323		7,775,098
Commercial Real Estate	26,221,312		202,178,243		228,399,555
Total	$	31,354,814	$	340,030,222	$	371,385,036

53

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       Loans Receivable, Net, Continued

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired management measures impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sale, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and if it is over 24 months old will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to performan internal analysis. The average balance of impaired loans was $22.2 million for year ended December 31, 2014 compared to $33.6 million for the year ended December 31, 2013.

The following tables are a summary of information related to impaired loans as of and for the years ended December 31, 2014 and 2013 and for the nine months ended December 31, 2012.

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

54

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       Loans Receivable, Net, Continued

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

	December 31, 2012
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	4,500,902	$	4,611,873	$	—	$	4,531,543	$	130,896
Consumer	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	31,808,577		35,373,833		—		32,963,079		1,036,344
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	—		—		—		—		—
Commercial Business	—		—		—		—		—
Commercial Real Estate	3,306,618		4,766,031		440,000		3,705,660		—
Total
Residential Real Estate	4,500,902		4,611,873		—		4,531,543		130,896
Consumer	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	35,115,195		40,139,864		440,000		36,668,739		1,036,344
Total	$	39,946,538	$	45,146,178	$	440,000	$	41,555,434	$	1,195,659

55

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (FASB ASC Topic 310-40).  The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.  All TDRs are included in impaired loans at December 31, 2014 and 2013 and amounted to $9.6 million and $12.4 million, respectively.

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

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

	For the Year Ended December 31, 2014
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—
Consumer Loans	—	—		—
Commercial Business	—	—		—
Commercial Real Estate	2	186,188		186,188
Total	2	186,188		186,188

	For the Year Ended December 31, 2013					For the Nine Months Ended December 31, 2012
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—	—	$	—	$	—
Consumer Loans	—	—		—		—	—		—
Commercial Business	1	32,850		32,850		—	—		—
Commercial Real Estate	4	1,409,693		1,409,693		1	257,452		257,452
Total	5	1,442,543		1,442,543		1	257,452		257,452

During the year ended December 31, 2014, the Bank modified two loans that were considered to be TDRs. The Bank lowered the interest rate on both of these loans to enable the borrowers to begin making monthly principal and interest payments.During the year ended December 31, 2013, the Bank modified five loans that were considered to be a TDR. The Bank lowered the interest rate on each of these loans and changed the payment to interest only on for an agreed upon period on three of these loans. During the nine months ended December 31, 2012, the Bank modified one loan that was considered to be a TDR. The Bank lowered the interest rate on the loan and changed the payment to interest only.

56

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(4)       Loans Receivable, Net, Continued

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

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Troubled Debt Restructurings That Subsequently Defaulted During the Period	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential Real Estate	—	$	—	—	$	—	—	$	—
Consumer Loans	—	—		—	—		—	—
Commercial Business	—	—		—	—		—	—
Commercial Real Estate	1	66,138		1	146,267		4	880,745
Total	1	$	66,138	1	$	146,267	4	$	880,745

At December 31, 2014, seven restructured loans were in default, including the one which had been restructured in the last 12 months. At December 31, 2013, 5 loans that had been previously restructured were in default and at December 31, 2012 6 previously restructured loans were in default. The Bank considers any loan 30 days or more past due to be in default.

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

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

57

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(5)Premises and Equipment, Net

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

	December 31,
	2014			2013
Land	$	6,729,097		$	5,471,503
Buildings And Improvements	17,796,209			17,635,363
Furniture And Equipment	11,068,028			10,395,793
Construction In Progress	184,040			206,163
Total Premises And Equipment	35,777,374			33,708,822
Less Accumulated Depreciation	(17,544,148		)	(16,465,432		)
Total Premises And Equipment, Net	$	18,233,226		$	17,243,390

Depreciation expense for the years ended December 31, 2014 and 2013, and for the nine months ended December 31, 2012 was $1.2 million, $1.2 million, and $1.1 million, respectively. The Bank has entered into non-cancelable operating leases related to buildings and land.  At December 31, 2014, future minimum payments under non-cancelable operating leases with initial or remaining terms of one year or more are as follows (by fiscal year):

2015	$	360,106
2016	261,736
2017	231,332
2018	128,361
2019	119,790
Thereafter	908,408
Total Future Minimum Payments	$	2,009,733

Total rental expense amounted to $424,000, $415,000, and $306,000 for the years ended December 31, 2014 and 2013 and for the nine months ended December 31, 2012, respectively.  Four lease agreements with monthly expenses of $6,593, $800, $8,571, and $9,075 have multiple renewal options totaling 30, 10, 45, and 20 years, respectively.

58

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(6)         Intangible Assets and Goodwill

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

	December 31,
	2014		2013
Customer List
Balance At Beginning Of Year	$	11,970	$	61,974
Amortization	11,970		50,004
Balance At End Of Year	—		11,970
Total Intangibles	—		11,970
Goodwill	1,199,754		1,199,754
Total	$	1,199,754	$	1,211,724

In accordance with accounting guidance, the Company evaluates its goodwill on an annual basis. The evaluations were performed as of September 30, 2014 and September 30, 2013 for fiscal years ended December 31, 2014 and 2013, respectively. At the time of the evaluations the Company determined that no impairment existed. Therefore, there was no write-down of goodwill for the years ended December 31, 2014 and 2013 or for the nine months ended December 31, 2012.

(7)         FHLB Stock

The Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to a membership component, which is 0.15% of total assets at September 30, 2014 and 2013 plus a transaction component which equals 4.5% of outstanding advances (borrowings) from the FHLB of Atlanta.  The Bank is in compliance with this requirement with an investment in FHLB of Atlanta stock of $3.1 million and $5.0 million as of December 31, 2014 and 2013, respectively. No readily available market exists for this stock and it has no quoted fair value.  However, because redemption of this stock has historically been at par, it is carried at cost.

(8)         Other Real Estate Owned

The Bank owned $3.2 million and $3.9 million in other real estate owned at December 31, 2014 and 2013, respectively.Transactions in other real estate owned for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 are summarized below.

	Years Ended December 31,						Nine Months Ended December 31,
	2014			2013			2012
Balance, Beginning Of Period	$	3,947,226		$	6,754,425		$	14,160,099
Additions	1,638,135			3,861,182			2,456,478
Sales	(1,850,651		)	(5,274,003		)	(6,929,152		)
Write Downs	(505,000		)	(1,394,378		)	(2,933,000		)
Balance, End Of Period	$	3,229,710		$	3,947,226		$	6,754,425

59

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(9)         Deposits

Deposits outstanding by type of account are summarized as follows:

	At December 31, 2014					At December 31, 2013
	Balance		Weighted Rate		Interest Rate Range	Balance		Weighted Rate		Interest Rate Range
Checking Accounts	$	143,422,150	0.03	%	0.00-0.15%	$	136,695,876	0.04	%	0.00-0.15%
Money Market Accounts	234,819,052		0.19	%	0.10-0.20%	240,631,708		0.28	%	0.10-0.30%
Statement Savings Accounts	28,622,933		0.10	%	0.00-0.10%	24,485,648		0.10	%	0.00-0.10%
Total	$	406,864,135	0.13	%	0.00-0.20%	$	401,813,232	0.19	%	0.00-0.30%
Certificate Accounts:
0.00 – 1.99%	227,473,082					226,750,180
2.00 – 2.99%	25,605,349					28,848,252
3.00 – 3.99%	172,598					1,285,108
Total	253,251,029		0.79	%	0.05-3.01%	256,883,540		0.83	%	0.05-3.25%
Total Deposits	$	660,115,164	0.38	%	0.00-3.01%	$	658,696,772	0.44	%	0.00-3.25%

Included in the certificates above were $38.8 million and $25.6 million in brokered deposits at December 31, 2014 and 2013, respectively, with a weighted average interest rate of 1.14% and 1.23%, respectively. Of the brokered deposits at December 31, 2014, $1.9 million mature within one year.

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $140.0 million and $129.9 million at December 31, 2014 and 2013, respectively.

Certificate of deposits that met or exceeded the FDIC Insurance limit of $250,000 were $69.6 million and $53.1 million at December 31, 2014 and 2013, respectively.

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

	At December 31,
	2014		2013
Within 1 Year	$	142,490,027	$	163,680,585
After 1 Year, Within 2 Years	57,481,254		45,089,513
After 2 Years, Within 3 Years	22,273,310		22,483,793
After 3 Years, Within 4 Years	18,114,738		8,996,498
After 4 Years, Within 5 Years	12,891,700		16,633,151
Thereafter	—		—
	$	253,251,029	$	256,883,540

At December 31, 2014 and 2013, the Bank had $132,000and $133,000, respectively, in overdrafts that were reclassified to loans.

60

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

Advances from the FHLB are summarized by year of maturity and weighted average interest rate below:

	December 31, 2014
Year Ending December 31	Amount		Weighted Rate
2015	$	15,000,000	2.61	%
2016	20,000,000		4.61	%
2017	12,900,000		4.38	%
2018	5,000,000		3.39	%
	$	52,900,000	3.87	%

These advances are secured by a blanket collateral agreement with the FHLB by pledging the Bank’s portfolio of residential first mortgage loans and investment securities with an amortized cost and fair value of $99.9 million and $99.3 million, respectively, at December 31, 2014 and $111.6 million and $102.7 million, respectively, at December 31, 2013. Advances are subject to prepayment penalties.

The following table shows callable FHLB advances as of December 31, 2014. These advances are also included in the above table.  All callable advances are callable at the option of the FHLB.  If an advance is called, the Bank has the option to pay off the advance without penalty, re-borrow funds on different terms, or convert the advance to a three-month floating rate advance tied to LIBOR.

As of December 31, 2014
Borrow Date	Maturity Date	Amount	Int. Rate	Type	Call Dates
11/23/05	11/23/15	$5,000,000	3.933%	Multi-Call	05/23/08 and quarterly thereafter
07/11/06	07/11/16	5,000,000	4.800%	Multi-Call	07/11/08 and quarterly thereafter
11/29/06	11/29/16	5,000,000	4.025%	Multi-Call	05/29/08 and quarterly thereafter
05/24/07	05/24/17	7,900,000	4.375%	Multi-Call	05/27/08 and quarterly thereafter
07/25/07	07/25/17	5,000,000	4.396%	Multi-Call	07/25/08 and quarterly thereafter

During the year ended December 31, 2014, the Bank prepaid one FHLB advance totaling $5.0 million and incurred $178,000 in prepayment penalties related to this prepayment. During the year ended December 31, 2013, the Bank prepaid six FHLB advances totaling $30.0 million and incurred $589,000 in prepayment penalties. The Bank did not prepay any FHLB advances during the nine months ended December 31, 2012.

At December 31, 2014 and December 31, 2013, the Bank had $195.7 million and $167.9 million in additional borrowing capacity, respectively, at the FHLB.

The Bank had $8.5 million and $8.0 million in other borrowings at December 31, 2014 and 2013, respectively.  These borrowings consist of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. The repurchase agreements typically mature within one to three days and the interest rate paid on these borrowings floats monthly with money market type rates. At both December 31, 2014 and December 31, 2013, the interest rate paid on the repurchase agreements was 0.15%. The maximum amount outstanding at any one month end during the year ended December 31, 2014 was $10.8 million compared to $9.9 million during the year ended December 31, 2013. The Bank had pledged as collateral for these repurchase agreements investment and mortgage-backed securities with amortized costs and fair values of $17.3 million and $18.0 million, respectively, at December 31, 2014 and $14.8 million and $15.4 million, respectively, at December 31, 2013.

61

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(11)         Junior Subordinated Debentures

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

The Capital Securities accrue and pay distributions quarterly at a floating rate of three month LIBOR plus 170 basis points which was a rate per annum equal to1.94% at December 31, 2014 and 2013.  The distribution rate payable on the Capital Securities is cumulative and payable quarterly in arrears.

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

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

(12)    Senior Convertible Debentures

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

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

(13)         Income Taxes

Income tax expense is comprised of the following:

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Current:
Federal	$	1,833,069	$	380,143	$	348,588
State	267,904		164,491		91,108
Total Current Tax Expense	2,100,973		544,634		439,696
Deferred:
Federal	192,051		784,814		266,784
State	10,144		10,936		(2,721		)
Total Deferred Tax Expense	202,195		795,750		264,063
Total Income Tax Expense	$	2,303,168	$	1,340,384	$	703,759

62

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(13)         Income Taxes, Continued

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

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Tax At Statutory Income Tax Rate	$	2,758,729		$	1,744,725		$	903,960
State Tax And Other	66,738			45,761			(31,391		)
Tax Exempt Interest	(534,325		)	(425,450		)	(180,917		)
Valuation Allowance	12,026			(24,652		)	12,107
Total Income Tax Expense	$	2,303,168		$	1,340,384		$	703,759

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2014 and 2013 are presented below.

	At December 31,
	2014			2013
Deferred Tax Assets:
Deferred Compensation	$	521,256		$	565,577
Provision For Loan Losses	2,872,552			3,519,305
Other Real Estate Owned	1,194,141			1,125,986
Net Fees Deferred For Financial Reporting	114,924			120,984
Non-accrual Interest	431,696			167,315
Net Operating Losses	220,211			208,185
Other	207,423			47,725
Total Gross Deferred Tax Assets	5,562,203			5,755,077
Less: Valuation Allowance	(220,211		)	(208,185		)
Net Deferred Tax Assets	5,341,992			5,546,892
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,510			114,682
Depreciation	288,157			281,880
Other	63,536			67,881
Intangibles	—			4,465
Unrealized Gain on Securities Available for Sale	3,347,240			289,192
Total Gross Deferred Tax Liability	3,813,443			758,100
Net Deferred Tax Asset	$	1,528,549		$	4,788,792

Deferred tax assets represent the future tax benefit of deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. As of December 31, 2014, management has determined that it is more likely than not that the total deferred tax asset will be realized except for the deferred tax asset associated with State net operating loss carryforwards, and, accordingly, has established a valuation allowance only for this item. The change in the valuation allowance was $12,026. Net deferred tax assets are included in other assets at December 31, 2014 and 2013. The Company had state net operating losses attributable to the non-bank entities of $6.7 million and $6.3 million for the year ended December 31, 2014 and 2013, respectively.

63

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(13)         Income Taxes, Continued

Retained earnings at December 31, 2014 included tax bad debt reserves of $2.2 million, for which no provision for federal income tax has been made. If, in the future, these amounts are used for any purpose other than to absorb bad debt losses, including dividends, stock redemptions, or distributions in liquidation, or the Company ceases to be qualified as a bank, they may be subject to federal income tax at the prevailing corporate tax rate.  

As of December 31, 2014, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company's policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

Tax returns for 2011 and subsequent years are subject to examination by taxing authorities.

(14)         Regulatory Matters

The Federal Reserve and bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the capital adequacy guidelines, regulatory capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common shareholders' equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for loan losses, subject to certain limitations. The Bank is required to maintain capital at a minimum level based on total average assets, which is known as the Tier 1 leverage ratio.

Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that could have a material adverse effect on the Company.  As of December 31, 2014 and 2013, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.  There are no conditions or events that management believes have changed that classification as of the date of this Annual Report.

64

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(14)         Regulatory Matters, Continued

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

	Actual				For Capital Adequacy				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
December 31, 2014
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	77,746	20.6	%	$	15,073	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	89,915		23.9	%	30,147		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	77,746		9.5	%	32,778		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,222	23.2	%	$	15,062	4.0	%	$	22,593	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	91,973		24.4	%	30,123		8.0	%	37,654		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,222		10.6	%	32,792		4.0	%	40,991		5.0	%
December 31, 2013
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	70,598	17.8	%	$	15,894	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	84,529		21.3	%	31,788		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	70,598		8.3	%	34,079		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	81,624	20.6	%	$	15,883	4.0	%	$	23,825	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	86,652		21.8	%	31,767		8.0	%	39,709		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	81,624		9.6	%	34,069		4.0	%	42,586		5.0	%

As of January 1, 2015, FDIC regulations require insured state-chartered banks to maintain (i) a minimum ratio of Tier 1 capital to total assets of 4.00%, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, (iii) a minimum ratio of total-capital to risk-weighted assets of 8.00% and (iv) a minimum ratio of “Common Equity Tier 1 Capital” to risk-weighted assets of 4.50%. The Federal Reserve requires Security Federal Corporation to maintain capital adequacy that generally parallels the FDIC requirements.  At December 31, 2014, Security Federal Corporation and Security Federal Bank each exceeded all applicable capital requirements and there are no conditions or events that management is aware of that would prevent them from meeting the new capital requirements as of the date of this Annual Report.

65

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(15)         Employee Benefit Plans

The Company is participating in a multiple employer defined contribution employee benefit plan covering substantially all employees with six months or more of service.  The Company matches a portion of the employees’ contributions and the plan has a discretionary profit sharing provision.  The total employer contributions were $186,000 for the year ended December 31, 2014, $189,000 for the year ended December 31, 2013 and $145,000 for the nine months ended December 31, 2012.

The Company has an Employee Stock Purchase Plan (“ESPP”).  The ESPP allows employees of the Company to purchase stock quarterly through a payroll deduction at a discount calculated as 15% of the market value with a floor equal to the Company’s book value.  The ESPP, which was approved by stockholders in July 2005, became effective in January 2007. Participation in the ESPP is voluntary.  Employees are limited to investing $25,000 or 5% of their annual salary, whichever is lower, during the year.  During the year ended December 31, 2014, there were no employee stock purchases within the plan.

The Company implemented an Incentive Compensation Plan (the "Plan") during the year ended December 31, 2014. Incentive awards are based on the financial and operating performance of the Company as well as other participant specific objectives. The Plan allows employees of the Company to earn up to 7.5 days of their annual salary for successfully completing specific goals established by the participants and their respective supervisors plus an additional 2.5 days of their annual salary if the Company meets an annual predetermined net operating income amount determined by the Board of Directors. The Company also implemented an Incentive Compensation Plan for executive level officers (the "Executive Plan"). Under this plan incentive awards are based on contributions to performance as measured by critical operating and financial ratios, and other participant specific objectives. The Company has to meet the annual predetermined net operating income amount determined by the Board of Directors for any incentive awards to be paid under the Executive Plan. If the Company does not meet the required net income amount, no incentives are paid regardless of the executive's performance on individual objectives or entity wide objectives. Participation in both plans is voluntary. At December 31, 2014, the Company accrued $335,000 for incentive payments related to both plans, which were paid during 2015.

Certain officers of the Company participate in a supplemental retirement plan.  These benefits are not qualified under the Internal Revenue Code and they are not funded.  During the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, the Company incurred expenses of $103,000, $172,000, and $144,000, respectively, for this plan.

Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Prior to fiscal 2010, the Company had three stock option plans that together authorized the Company to grant 150,000 options. In 2008, the 2008 Equity Incentive Plan was approved by stockholders and implemented by the Company with the intention of replacing the previous three option plans. No additional options are to be granted under the old plans and forfeitures under the old plans are not added to the new plan as available options, however, all existing options outstanding under these plans remain in effect. The 2008 Equity Incentive Plan provides for the grant of non-qualified and incentive stock options, stock appreciation rights (“SARS”), and restricted stock awards. Under the 2008 Equity Incentive Plan, 50,000 shares of common stock are reserved for the issuance of stock options and SARS in addition to 50,000 shares subject to restricted stock awards. The plan is administered by a committee appointed by the Board of Directors. The committee determines the specific employees, amount and type of any awards granted. At December 31, 2014 and 2013, there were 50,000 shares available for issuance under this plan for stock options and SARS. Options under all plans are granted at exercise prices not less than the fair value of the Company’s common stock on the date of the grant.  An additional 50,000 shares is available for restricted stock issuances.

66

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(15)         Employee Benefit Plans, Continued

The following is a summary of the activity under the Company’s incentive and non-qualified stock option plans for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012:

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
	Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price
Balance, Beginning of Period	61,500	$	22.49	68,400	$	22.63	72,900	$	22.62
Options Granted	—	—		—	—		—	—
Options Exercised	—	—		—	—		—	—
Options Forfeited	14,000	22.74		6,900	23.87		4,500	22.58
Balance, End of Period	47,500	$	22.41	61,500	$	22.49	68,400	$	22.63
Options Exercisable	34,300	$	22.00	42,300	$	22.03	43,800	$	22.14
Weighted-Average Remaining Life Of Exercisable Options	1.1 years			1.3 years			1.8 years
Options Available For Grant	50,000			50,000			50,000

During the year ended December 31, 2014, 5,400 options with a weighted average exercise price of $23.50 vested. During the year ended December 31, 2013, 5,400 stock options with a weighted average exercise price of $23.50 vested. During the nine months ended December 31, 2012, 2,200 options with a weighted average exercise price of $23.61 vested. The aggregate intrinsic value of the stock options outstanding and exercisable at December 31, 2014, 2013 and 2012 amounted to $0 for all periods. Total compensation expense related to stock options was $12,700, $(2,600), and $4,500 for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively.  As of December 31, 2014, there was $25,743 of total unrecognized compensation cost related to non-vested stock options.  The cost is expected to be recognized over a weighted average period of three years.

There were no stock-based awards granted by the Company, during the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012. At December 31, 2014, the Company had the following options outstanding:

Grant Date	Outstanding Options	Option Price	Expiration Date
01/01/05	18,000	$20.55	01/01/15
01/01/06	3,500	$23.91	01/01/16
08/24/06	3,500	$23.03	08/24/16
05/24/07	2,000	$24.34	05/24/17
07/09/07	1,000	$24.61	07/09/17
10/01/07	2,000	$24.28	10/01/17
01/01/08	13,000	$23.49	01/01/18
05/19/08	2,500	$22.91	05/19/18
07/01/08	2,000	$22.91	07/01/18

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

67

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(16)         Stock Warrants

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

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

(17)         Bank Owned Life Insurance

The cash value of the life insurance policies are recorded as a separate line item in the accompanying balance sheets at $11.2 million and $11.5 millionat December 31, 2014 and 2013, respectively.  The insurance provides key person life insurance on certain officers of the Company.  The earnings-portion of the insurance policies grows tax deferred and helps offset the cost of the Company’s benefits programs.  The Company recorded earnings of $300,000 and $339,000 and $315,000for the growth in the cash value of life insurance during the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively. The earnings in 2014 also included $254,000 in death benefits in addition to $300,000 in income related to changes in the cash surrender value of the BOLI policies.

(18)         Commitments and Contingencies

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

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

Financial instruments where the contract amount represents the Bank's credit risk include commitments under pre-approved but unused lines of credit of $44.5 million and $30.8 million, undisbursed loans in process of $1.4 million and $3.5 million, and letters of credit of $802,000 and $2.2 million at December 31, 2014 and 2013, respectively.

These loan and letter of credit commitments are subject to the same credit policies and reviews as loans on the balance sheet.  Collateral, both the amount and nature, is obtained based upon management's assessment of the credit risk.  Since many of the extensions of credit are expected to expire without being drawn, the total commitment amounts do not necessarily represent future cash requirements.  In addition to these loan commitments noted above, the Bank had unused credit card loan commitments of $4.4 million and $4.5 million at December 31, 2014 and 2013, respectively.  The Bank also had outstanding commitments on mortgage loans not yet closed of $571,000 at December 31, 2014 compared to none at December 31, 2013.  These commitments, which are funded subject to certain limitations, extend over varying periods of time with the majority being funded within 45 days.  At December 31, 2014 and 2013, the Bank had outstanding commitments to sell approximately $1.9 million and $1.2 million of loans, respectively, which encompassed the Bank’s held for sale loans.  The Bank also has commitments to sell mortgage loans not yet closed, on a best efforts basis.  Best efforts means the Bank suffers no penalty if they are unable to deliver the loans to the potential buyers.  The fair value of the Bank’s commitment to originate mortgage loans at committed interest rates and to sell such loans to permanent investors is insignificant.

68

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(19)         Related Party Transactions

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

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Balance, Beginning of Period	$	230,722	$	273,330	$	315,338
New Loans	1,116		10,956		5,364
Less Loan Payments	29,641		53,564		47,372
Balance, End of Period	$	202,197	$	230,722	$	273,330

Loans to all employees, officers, and directors of the Company, in the aggregate constituted approximately 3.4% and 5.7% of the Company’s total shareholders' equity at December 31, 2014 and 2013, respectively.  At December 31, 2014 and 2013, deposits from executive officers and directors of the Company and the Bank and their related interests in the aggregate approximated $15.1 million and $6.8 million, respectively.

The Company leased office space from a related party during the year ended December 31, 2014. The lease is with a company in which the related party, who is both a director and an officer of the Company, has an ownership interest.  The Company incurred expenses of $81,000, $79,000, and $58,000 for rent for the years ended December 31, 2014 and 2013, and the nine months ended December 31, 2012, respectively, related to this lease.   Management is of the opinion that the transactions with respect to office rent were made on terms that are comparable to those which would be made with unaffiliated persons.

69

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(20)    Stock Issuance and Exchange

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

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

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

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

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

70

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

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

Condensed Balance Sheet Data

	At December 31,
	2014		2013
Assets:
Cash	$	4,542,778	$	3,880,433
Investment Securities, Available For Sale	151,674		101,250
Investment in Security Federal Statutory Trust	155,000		155,000
Investment In Security Federal Bank	93,860,841		85,115,889
Accounts Receivable And Other Assets	8,023		20,167
Total Assets	$	98,718,316	$	89,272,739
Liabilities And Shareholders’ Equity:
Accounts Payable And Other Liabilities	$	45,229	$	44,959
Junior Subordinated Debentures	5,155,000		5,155,000
Senior Convertible Debentures	6,084,000		6,084,000
Shareholders’ Equity	87,434,087		77,988,780
Total Liabilities And Shareholders’ Equity	$	98,718,316	$	89,272,739

Condensed Statements of Income Data

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Income:
Equity In Earnings Of Security Federal Bank	$	3,779,212		$	2,558,986		$	2,229,630
Dividend Income From Security Federal Bank	2,400,000			1,600,000			—
Interest Income	—			—			22,941
Miscellaneous Income	12,937			15,771			—
Total Income	6,192,149			4,174,757			2,252,571
Expenses:
Interest Expense	587,859			589,988			449,049
Other Expenses	19,382			18,223			16,814
Total Expenses	607,241			608,211			465,863
Income Before Income Taxes	5,584,908			3,566,546			1,786,708
Income Tax Benefit	(225,832		)	(224,616		)	(168,241		)
Net Income	5,810,740			3,791,162			1,954,949
Preferred Stock Dividends	440,000			440,000			330,000
Net Income Available to Common Shareholders	$	5,370,740		$	3,351,162		$	1,624,949

71

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

Condensed Statements of Cash Flow Data

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Operating Activities:
Net Income	$	5,810,740		$	3,791,162		$	1,954,949
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Equity In Earnings Of Security Federal Bank	(3,779,212		)	(2,558,986		)	(2,229,630		)
Stock Compensation Expense	12,676			(2,580		)	4,472
(Increase) Decrease In Accounts Receivable	(49		)	(15,248		)	56,203
Increase (Decrease) In Accounts Payable	270			132			(122,707		)
Net Cash Provided By (Used In) In Operating Activities	2,044,425			1,214,480			(336,713		)
Financing Activities:
Repayment Of Warrant Issued In Conjunction With Preferred Stock	—			(50,000		)	—
Dividends Paid To Shareholders-Preferred Stock	(440,000		)	(440,000		)	(330,000		)
Dividends Paid To Shareholders-Common Stock	(942,080		)	(942,082		)	(706,560		)
Net Cash Used In Financing Activities	(1,382,080		)	(1,432,082		)	(1,036,560		)
Net Increase (Decrease) In Cash	662,345			(217,602		)	(1,373,273		)
Cash At Beginning Of Period	3,880,433			4,098,035			5,471,308
Cash At End Of Period	$	4,542,778		$	3,880,433		$	4,098,035

72

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(22)         Carrying Amounts and Fair Value of Financial Instruments

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

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

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

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

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. At December 31, 2014, the Company’s investment portfolio was comprised of government and agency bonds, mortgage-backed securities issued by government agencies or government sponsored enterprises, municipal securities, and equity investments. The portfolio did not contain any private label mortgage-backed securities. Fair value measurement is based upon prices obtained from third party pricing services that use independent pricing models which rely on a variety of factors including reported trades, broker/dealer quotes, benchmark yields, economic and industry events and other relevant market information. As such, these securities are classified as Level 2.

Mortgage Loans Held for Sale

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

73

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

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

Impaired Loans

The Company does not record loans held for investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established as necessary. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment.

Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sell, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and if it is over 24 months old will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis. Specifically as an example, in situations where the collateral on a nonperforming commercial real estate loan is out of the Company’s primary market area, management would typically order an independent appraisal immediately, at the earlier of the date the loan becomes nonperforming or immediately following the determination that the loan is impaired. However, as a second example, on a nonperforming commercial real estate loan where management is familiar with the property and surrounding areas and where the original appraisal value far exceeds the recorded investment in the loan, management may perform an internal analysis whereby the previous appraisal value would be reviewed and adjusted for current conditions including recent sales of similar properties in the area and any other relevant economic trends. These valuations are reviewed at a minimum on a quarterly basis.

Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2014, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The Company records impaired loans as nonrecurring Level 3.

As of December 31, 2014 and 2013,the recorded investment in impaired loans was $20.2 million and $31.4 million, respectively. The average recorded investment in impaired loans was $22.2 million for year ended December 31, 2014 and $33.6 millionfor the year ended December 31, 2013.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral less estimated selling costs. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 3. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the asset as nonrecurring Level 3.

74

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

Assets measured at fair value on a recurring basis are as follows as of December 31, 2014:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	13,246,661	$	—
FFCB Securities	—		5,667,994		—
FNMA Bonds	—		1,004,381		—
SBA Bonds	—		108,126,694		—
Tax Exempt Municipal Bonds	—		62,495,423		—
Mortgage-Backed Securities	—		238,852,713		—
Equity Securities	—		306,674		—
Total	$	—	$	429,700,540	$	—

Assets measured at fair value on a recurring basis are as follows as of December 31, 2013:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	12,670,450	$	—
FFCB Securities	—		5,366,180		—
FNMA Bonds	—		1,974,930		—
SBA Bonds	—		100,823,985		—
Tax Exempt Municipal Bonds	—		61,315,122		—
Mortgage-Backed Securities	—		248,596,535		—
Equity Securities	—		256,250		—
Total	$	—	$	431,003,452	$	—

There were no liabilities measured at fair value on a recurring basis as of December 31, 2014 and 2013.

75

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(22)         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 table below presents assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2014 and 2013, aggregated by the level in the fair value hierarchy within which those measurements fall. 

Assets:	Level 1		Level 2		Level 3		At December 31, 2014
Mortgage Loans Held For Sale	$	—	$	1,864,999	$	—	$	1,864,999
Collateral Dependent Impaired Loans (1)	—		—		19,772,955		19,772,955
Foreclosed Assets	—		—		3,229,710		3,229,710
Total	$	—	$	1,864,999	$	23,002,665	$	24,867,664

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $475,000}

Assets:	Level 1		Level 2		Level 3		At December 31, 2013
Mortgage Loans Held For Sale	$	—	$	1,234,158	$	—	$	1,234,158
Collateral Dependent Impaired Loans (1)	—		—		30,252,256		30,252,256
Foreclosed Assets	—		—		3,947,226		3,947,226
Total	$	—	$	1,234,158	$	34,199,482	$	35,433,640

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $1,103,000}

There were no liabilities measured at fair value on a nonrecurring basis as of December 31, 2014 and 2013.

76

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value			Significant
	December 31,		Valuation	Unobservable
	2014		Technique	Inputs	Range
Collateral Dependent Impaired Loans	$	19,772,955	Appraised Value	Discount Rates/ Discounts to Appraised Values	0% - 70%
Foreclosed Assets	3,229,710		Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	14% - 80%

For assets and liabilities that are not presented on the balance sheet at fair value, the following methods are used to determine the fair value:

Cash and cash equivalents—The carrying amount of these financial instruments approximates fair value. All mature within 90 days and do not present unanticipated credit concerns.

Certificates of deposits with other banks—Fair value is based on market prices for similar assets.

Investment securities held to maturity—Securities held to maturity are valued at quoted market prices or dealer quotes.

Loans Receivable, Net—The fair value of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As discount rates are based on current loan rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

FHLB Stock—The fair value approximates the carrying value.

Deposits—The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities.

FHLB Advances—Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms.

Other Borrowed Money—The carrying value of these short term borrowings approximates fair value.

Senior Convertible Debentures— The fair value is estimated by discounting the future cash flows using the current rates at which similar debenture offerings with similar terms and maturities would be issued by similar institutions. As discount rates are based on current debenture rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

Junior Subordinated Debentures—The carrying value of junior subordinated debentures approximates fair value.

77

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

The following tables are a summary of the carrying value and estimated fair value of the Company’s financial instruments as of December 31, 2014 and 2013 presented in accordance with the applicable accounting guidance.

	December 31, 2014
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	10,193	$	10,193	$	10,193	$	—	$	—
Certificates of Deposits With Other Banks	2,095		2,095		—		2,095		—
Investment And Mortgage-Backed Securities	429,701		429,701		—		429,701		—
Loans Receivable, Net	339,874		340,368		—		—		340,368
FHLB Stock	3,145		3,145		3,145		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	406,864	$	406,864	$	406,864	$	—	$	—
Certificate Accounts	253,251		253,300		—		253,300		—
Advances From FHLB	52,900		55,646		—		55,646		—
Other Borrowed Money	8,523		8,523		8,523		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

	December 31, 2013
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	7,630	$	7,630	$	7,630	$	—	$	—
Certificates of Deposits With Other Banks	2,100		2,100		—		2,100		—
Investment And Mortgage-Backed Securities	431,003		431,003		—		431,003		—
Loans Receivable, Net	358,917		356,623		—		—		356,623
FHLB Stock	5,017		5,017		5,017		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	401,813	$	401,813	$	401,813	$	—	$	—
Certificate Accounts	256,884		257,883		—		257,883		—
Advances From FHLB	87,740		92,608		—		92,608		—
Other Borrowed Money	8,003		8,003		8,003		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

78

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

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

At December 31, 2014, the Bank had $45.3 million of off-balance sheet financial commitments.  These commitments are to originate loans and unused consumer lines of credit and credit card lines.  Because these obligations are based on current market rates, if funded, the original principal is considered to be a reasonable estimate of fair value.

Fair value estimates are made on a specific date, based on relevant market data and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale the Bank’s entire holdings of a particular financial instrument.  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.

79

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(23)         Quarterly Financial Data (Unaudited)

Unaudited condensed financial data by quarter for the years ended December 31, 2014 and 2013 is as follows (dollars, except per share data, in thousands):

	Quarter ended
Year Ended December 31, 2014	March 31, 2014		June 30, 2014		Sept. 30, 2014		Dec. 31, 2014
Interest Income	$	7,193	$	7,637	$	7,389	$	7,263
Interest Expense	1,550		1,507		1,385		1,370
Net Interest Income	5,643		6,130		6,004		5,893
Provision For Loan Losses	100		100		—		250
Net Interest Income After Provision For Loan Losses	5,543		6,030		6,004		5,643
Non-interest Income	1,536		1,332		1,486		1,808
Non-interest Expense	5,326		5,317		5,023		5,602
Income Before Income Tax	1,753		2,045		2,467		1,849
Provision For Income taxes	451		568		756		528
Net Income	1,302		1,477		1,711		1,321
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	1,192	$	1,367	$	1,601	$	1,211
Basic Net Income Per Common Share	$	0.41	$	0.46	$	0.54	$	0.41
Diluted Net Income Per Common Share	$	0.39	$	0.44	$	0.52	$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

	Quarter ended
Year Ended December 31, 2013	March 31, 2013		June 30, 2013		Sept. 30, 2013		Dec. 31, 2013
Interest Income	$	7,704	$	7,680	$	7,706	$	7,357
Interest Expense	2,114		1,959		1,796		1,664
Net Interest Income	5,590		5,721		5,910		5,693
Provision For Loan Losses	1,145		900		600		—
Net Interest Income After Provision For Loan Losses	4,445		4,821		5,310		5,693
Non-interest Income	1,945		1,743		1,738		1,470
Non-interest Expense	5,513		5,392		5,665		5,464
Income Before Income Tax	877		1,172		1,383		1,699
Provision For Income taxes	206		293		361		480
Net Income	671		879		1,022		1,219
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	561	$	769	$	912	$	1,109
Basic Net Income Per Common Share	$	0.19	$	0.26	$	0.31	$	0.38
Diluted Net Income Per Common Share	$	0.20	$	0.26	$	0.30	$	0.36
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

80

SECURITY FEDERAL CORPORATION AND SUBSIDIARIES

Notes To Consolidated Financial Statements

(24)     Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed all events occurring through the date the financial statements were available to be issued and determined that the following subsequent events required disclosure.

During January 2015, the Bank sold $18.6 million of its available for sale securities consisting of fourteen tax exempt municipal bonds which resulted in a $979,000 gain on sale of investments.

Also during January 2015 in a related transaction, the Bank prepaid two FHLB advances totaling $10.0 million and incurred prepayment penalties of $511,000 related to these transactions.

81

SHAREHOLDERS INFORMATION

ANNUAL MEETING

The annual meeting of shareholders will be held at 11:00 a.m., Thursday, April 16, 2015 at Newberry Hall, 117 Newberry Street Southwest, Aiken, South Carolina.

STOCK LISTING

The Company’s stock is traded on the Over-The-Counter-Bulletin Board under the symbol “SFDL.OB.”  The stock began trading on the Bulletin Board in October 2003.

PRICE RANGE OF COMMON STOCK

The table below shows the range of high and low bid prices.  These prices represent actual transactions and do not include retail markups, markdowns or commissions.  

	High	Low
Year Ended December 31, 2013
03/31/2013	$11.00	$8.10
06/30/2013	$12.80	$10.25
09/30/2013	$14.00	$12.10
12/31/2013	$13.30	$11.20
Year Ended December 31, 2014
03/31/2014	$12.95	$11.65
06/30/2014	$15.94	$12.93
09/30/2014	$16.00	$15.25
12/31/2014	$18.00	$15.50

As of December 31, 2014, the Company had approximately 268 shareholders of record, not including shares held in street name, and 2,944,001 outstanding shares of common stock.

DIVIDENDS

The first quarterly dividend on the stock was paid to shareholders on March 15, 1991.  Dividends will be paid upon the determination of the Board of Directors that such payment is consistent with the long-term interest of the Company.  The factors affecting this determination include the Company’s current and projected earnings, operating results, financial condition, regulatory restrictions, future growth plans, and other relevant factors. The Company has paid $0.08 per share cash dividends each quarter since the first quarter of fiscal 2009.

The ability of the Company to pay dividends depends primarily on the ability of the Bank to pay dividends to the Company.  The Bank may not declare or pay a cash dividend on its stock or repurchase shares of its stock if the offset thereof would be to cause its regulatory capital to be reduced below the amount required to meet applicable regulatory capital requirements.  South Carolina banking regulations restrict the amount of dividends that the Bank can pay to the Company, and may require prior approval before declaration and payment of any excess dividend.  Unlike the Bank, there is no regulatory restriction on the payment of dividends by the Company; however, it is subject to the requirements of South Carolina law.  South Carolina law generally prohibits the Company from paying dividends if, after giving effect to a proposed dividend: (1) the Company would be unable to pay its debts as they become due in the normal course of business, or (2) the Company’s total assets would be less than its total liabilities plus the sum that would be needed to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the dividend. In addition, payment of dividends by the Company is subject to certain limitations resulting from participation in the CPP. The Federal Reserve also has the authority to prohibit the Company from paying a dividend on its common and/or preferred stock. See Note 20 of the Notes to the Consolidated Financial Statements included herein for additional information.

CODE OF ETHICS

A copy of the Company’s Code of Ethics may be obtained at the Company’s Internet website at www.securityfederalbank.com.

82

EX-21

Exhibit 21

Subsidiaries of the Registrant

Parent	Subsidiary	State of Incorporation	Percentage of Ownership
Security Federal Corporation	Security Federal Bank	United States	100%
	Security Federal Statutory Trust	South Carolina	100%
Security Federal Bank	Security Federal Insurance, Inc.	South Carolina	100%
	Security Financial Services	South Carolina	100%
	Corporation

EX-23

Exhibit 23

Consent of Elliott Davis, LLC

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Security Federal Corporation and Subsidiaries

We consent to incorporation by reference in Registration Statement No. 333-31500, 333-102337 and 333-136813 on Form S-8 of Security Federal Corporation and Subsidiaries of our report dated March 19, 2015, relating to our audit of the consolidated financial statements, which appear in this Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K of Security Federal Corporation and Subsidiaries for the year ended December 31, 2014.

/s/ Elliott Davis Decosimo, LLC

Columbia, South Carolina

March 19, 2015

EX-31.1

Exhibit 31.1

Certification Required

by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934

I, J. Chris Verenes, certify that:

1. I have reviewed this annual report on Form 10-K of Security Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 20, 2015

/s/J. Chris Verenes

J. Chris Verenes

Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Required

by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934

I, Jessica T. Cummins, certify that:

1. I have reviewed this annual report on Form 10-K of Security Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 20, 2015

/s/Jessica T. Cummins

Jessica T. Cummins

Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

OF SECURITY FEDERAL CORPORATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with this Annual Report on Form 10-K, that:

1. the report fully complies with the requirements of Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, and

2. the information contained in the report fairly presents, in all material respects, the company's financial condition and results of operations.

/s/J. Chris Verenes	/s/Jessica T. Cummins
J. Chris Verenes	Jessica T. Cummins
Chief Executive Officer	Chief Financial Officer

Dated: March 20, 2015

EX-99.1

Exhibit 99.1

Appendix B-IFR Section 30.15-Certification for Years following First Fiscal Year

Security Federal Corporation UST #208

I, J. Chris Verenes, the Chief Executive Officer of Security Federal Corporation certify, based on my knowledge, that:

(i)    The compensation committee of Security Federal Corporation has discussed, reviewed, and evaluated with senior risk officers at least every six months during any part of the most recently completed fiscal year that was a TARP period, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to Security Federal Corporation;

(ii)    The compensation committee of Security Federal Corporation has identified and limited during any part of the most recently completed fiscal year that was a TARP period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation and has identified any features of the employee compensation plans that pose risks to Security Federal Corporation and has limited those features to ensure that Security Federal Corporation is not unnecessarily exposed to risks;

(iii)    The compensation committee has reviewed, at least every six months during any part of the most recently completed fiscal year that was a TARP period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee, and has limited any such features;

(iv)    The compensation committee of Security Federal Corporation will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)    The compensation committee of Security Federal Corporation will provide a narrative description of how it limited during any part of the most recently completed fiscal year that was a TARP period the features in:

(A)    SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation;

(B)    Employee compensation plans that unnecessarily expose Security Federal Corporation to risks; and

(C)    Employee compensation plans that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee;

(vi)    Security Federal Corporation has required that bonus payments to SEOs or any of the next twenty most highly compensated employees, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), be subject to a recovery or "clawback" provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)    Security Federal Corporation has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(viii)    Security Federal Corporation has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during any part of the most recently completed fiscal year that was a TARP period;

(ix)    Security Federal Corporation and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA during any part of the most recently completed fiscal year that was a TARP period; and any expenses that, pursuant to the policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)    Security Federal Corporation will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during any part of the most recently completed fiscal year that was a TARP period;

(xi)    Security Federal Corporation will disclose the amount, nature, and justification for the offering, during any part of the most recently completed fiscal year that was a TARP period, of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)    Security Federal Corporation will disclose whether Security Federal Corporation, the board of directors of Security Federal Corporation, or the compensation committee of Security Federal Corporation has engaged during any part of the most recently completed fiscal year that was a TARP period a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)    Security Federal Corporation has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(xiv)    Security Federal Corporation has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Security Federal Corporation and Treasury, including any amendments;

(xv)    Security Federal Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)    I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both (See, for example, 18 USC 1001).

Date: March 20, 2015	By:	/s/J. Chris Verenes
		J. Chris Verenes
		Principal Executive Officer

EX-99.2

Exhibit 99.2

Appendix B-IFR Section 30.15-Certification for Years following First Fiscal Year

Security Federal Corporation UST #208

I, Jessica T. Cummins, the Chief Financial Officer of Security Federal Corporation certify, based on my knowledge, that:

(i)    The compensation committee of Security Federal Corporation has discussed, reviewed, and evaluated with senior risk officers at least every six months during any part of the most recently completed fiscal year that was a TARP period, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to Security Federal Corporation;

(ii)    The compensation committee of Security Federal Corporation has identified and limited during any part of the most recently completed fiscal year that was a TARP period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation and has identified any features of the employee compensation plans that pose risks to Security Federal Corporation and has limited those features to ensure that Security Federal Corporation is not unnecessarily exposed to risks;

(iii)    The compensation committee has reviewed, at least every six months during any part of the most recently completed fiscal year that was a TARP period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee, and has limited any such features;

(iv)    The compensation committee of Security Federal Corporation will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v)    The compensation committee of Security Federal Corporation will provide a narrative description of how it limited during any part of the most recently completed fiscal year that was a TARP period the features in:

(A)    SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Security Federal Corporation;

(B)    Employee compensation plans that unnecessarily expose Security Federal Corporation to risks; and

(C)    Employee compensation plans that could encourage the manipulation of reported earnings of Security Federal Corporation to enhance the compensation of an employee;

(vi)    Security Federal Corporation has required that bonus payments to SEOs or any of the next twenty most highly compensated employees, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), be subject to a recovery or "clawback" provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii)    Security Federal Corporation has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(viii)    Security Federal Corporation has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during any part of the most recently completed fiscal year that was a TARP period;

(ix)    Security Federal Corporation and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA during any part of the most recently completed fiscal year that was a TARP period; and any expenses that, pursuant to the policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x)    Security Federal Corporation will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during any part of the most recently completed fiscal year that was a TARP period;

(xi)    Security Federal Corporation will disclose the amount, nature, and justification for the offering, during any part of the most recently completed fiscal year that was a TARP period, of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii)    Security Federal Corporation will disclose whether Security Federal Corporation, the board of directors of Security Federal Corporation, or the compensation committee of Security Federal Corporation has engaged during any part of the most recently completed fiscal year that was a TARP period a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii)    Security Federal Corporation has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(xiv)    Security Federal Corporation has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Security Federal Corporation and Treasury, including any amendments;

(xv)    Security Federal Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi)    I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both (See, for example, 18 USC 1001).

Date: March 20, 2015	By:	/s/Jessica T. Cummins
		Jessica T. Cummins
		Principal Financial Officer

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Repossessed Assets Acquired In Settlement Of Loans (Tables)

12 Months Ended

Dec. 31, 2014

Other Real Estate, Foreclosed Assets, and Repossessed Assets [Abstract]

Transactions in repossessed assets

Transactions in other real estate owned for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 are summarized below.

	Years Ended December 31,						Nine Months Ended December 31,
	2014			2013			2012
Balance, Beginning Of Period	$	3,947,226		$	6,754,425		$	14,160,099
Additions	1,638,135			3,861,182			2,456,478
Sales	(1,850,651		)	(5,274,003		)	(6,929,152		)
Write Downs	(505,000		)	(1,394,378		)	(2,933,000		)
Balance, End Of Period	$	3,229,710		$	3,947,226		$	6,754,425

XML

Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Available for Sale Securities) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Mar. 31, 2014	Mar. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		$ 420,876,924	$ 430,241,854
Available-for-sale Securities, Gross Unrealized Gains		10,228,827	8,193,931
Available-for-sale Securities, Gross Unrealized Losses		1,405,211	7,432,333
Available-for-sale Securities, Fair Value Disclosure		429,700,540	431,003,452
Proceeds From Sale of Available For Sale Securities Including Mortgage Backed Securities	40,000,000	69,600,000	62,800,000
Available For Sale Securities Pledged as Collateral, Amortized Cost Basis				120,700,000	118,300,000
Available-for-sale Securities Pledged as Collateral, Fair Value				124,400,000	121,100,000
Available-for-sale Securities, Gross Realized Gains	900,000	1,058,000	1,600,000
Available-for-sale Securities, Gross Realized Losses	0	623,000	279,000
FHLB Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		13,317,462	13,538,723
Available-for-sale Securities, Gross Unrealized Gains		83,691	25,695
Available-for-sale Securities, Gross Unrealized Losses		154,492	893,968
Available-for-sale Securities, Fair Value Disclosure		13,246,661	12,670,450
US Government-sponsored Enterprises Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		5,750,000	5,750,000
Available-for-sale Securities, Gross Unrealized Gains		0	0
Available-for-sale Securities, Gross Unrealized Losses		82,006	383,820
Available-for-sale Securities, Fair Value Disclosure		5,667,994	5,366,180
FNMA and FHLMC Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		996,822	1,993,473
Available-for-sale Securities, Gross Unrealized Gains		7,559	0
Available-for-sale Securities, Gross Unrealized Losses		0	18,543
Available-for-sale Securities, Fair Value Disclosure		1,004,381	1,974,930
SBA Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		106,637,400	99,228,708
Available-for-sale Securities, Gross Unrealized Gains		1,796,943	1,914,720
Available-for-sale Securities, Gross Unrealized Losses		307,649	319,443
Available-for-sale Securities, Fair Value Disclosure		108,126,694	100,823,985
Tax Exempt Municipal Bonds
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		59,960,960	63,590,959
Available-for-sale Securities, Gross Unrealized Gains		2,579,543	410,151
Available-for-sale Securities, Gross Unrealized Losses		45,080	2,685,988
Available-for-sale Securities, Fair Value Disclosure		62,495,423	61,315,122
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		233,963,842	245,882,053
Available-for-sale Securities, Gross Unrealized Gains		5,704,855	5,843,365
Available-for-sale Securities, Gross Unrealized Losses		815,984	3,128,883
Available-for-sale Securities, Fair Value Disclosure		238,852,713	248,596,535
Equity Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		250,438	257,938
Available-for-sale Securities, Gross Unrealized Gains		56,236	0
Available-for-sale Securities, Gross Unrealized Losses		0	1,688
Available-for-sale Securities, Fair Value Disclosure		306,674	256,250
GNMA Mortgage-Backed Securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale		156,800,000	170,400,000
Available-for-sale Securities, Fair Value Disclosure		$ 160,600,000	$ 173,500,000

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Unaudited condensed financial data by quarter

Unaudited condensed financial data by quarter for the years ended December 31, 2014 and 2013 is as follows (dollars, except per share data, in thousands):

	Quarter ended
Year Ended December 31, 2014	March 31, 2014		June 30, 2014		Sept. 30, 2014		Dec. 31, 2014
Interest Income	$	7,193	$	7,637	$	7,389	$	7,263
Interest Expense	1,550		1,507		1,385		1,370
Net Interest Income	5,643		6,130		6,004		5,893
Provision For Loan Losses	100		100		—		250
Net Interest Income After Provision For Loan Losses	5,543		6,030		6,004		5,643
Non-interest Income	1,536		1,332		1,486		1,808
Non-interest Expense	5,326		5,317		5,023		5,602
Income Before Income Tax	1,753		2,045		2,467		1,849
Provision For Income taxes	451		568		756		528
Net Income	1,302		1,477		1,711		1,321
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	1,192	$	1,367	$	1,601	$	1,211
Basic Net Income Per Common Share	$	0.41	$	0.46	$	0.54	$	0.41
Diluted Net Income Per Common Share	$	0.39	$	0.44	$	0.52	$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

	Quarter ended
Year Ended December 31, 2013	March 31, 2013		June 30, 2013		Sept. 30, 2013		Dec. 31, 2013
Interest Income	$	7,704	$	7,680	$	7,706	$	7,357
Interest Expense	2,114		1,959		1,796		1,664
Net Interest Income	5,590		5,721		5,910		5,693
Provision For Loan Losses	1,145		900		600		—
Net Interest Income After Provision For Loan Losses	4,445		4,821		5,310		5,693
Non-interest Income	1,945		1,743		1,738		1,470
Non-interest Expense	5,513		5,392		5,665		5,464
Income Before Income Tax	877		1,172		1,383		1,699
Provision For Income taxes	206		293		361		480
Net Income	671		879		1,022		1,219
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	561	$	769	$	912	$	1,109
Basic Net Income Per Common Share	$	0.19	$	0.26	$	0.31	$	0.38
Diluted Net Income Per Common Share	$	0.20	$	0.26	$	0.30	$	0.36
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

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Intangible Assets and Goodwill (Changes in intangible assets and goodwill) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Finite-lived Intangible Assets [Roll Forward]
Balance At Beginning Of Year		$ 11,970
Amortization Of Intangible Assets	37,503	11,970	50,004
Balance At End Of Year		0	11,970
Intangible Assets, Net (Including Goodwill) [Abstract]
Goodwill		1,199,754	1,199,754
Total		1,199,754	1,211,724
Customer Lists [Member]
Finite-lived Intangible Assets [Roll Forward]
Balance At Beginning Of Year		11,970	61,974
Amortization Of Intangible Assets		11,970	50,004
Balance At End Of Year		$ 0	$ 11,970

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Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Held to Maturity Securities, Contractual Maturities) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Less Than One Year, Amortized Cost	$ 760,264
One – Five Years, Amortized Cost	13,588,753
Five – Ten Years, Amortized Cost	68,880,177
After Ten Years, Amortized Cost	103,683,888
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	420,876,924	430,241,854
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	420,876,924
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Less Than One Year, Fair Value	773,573
One – Five Years, Fair Value	13,819,295
Five – Ten Years, Fair Value	69,887,727
After Ten Years, Fair Value	106,367,232
Available-for-sale Securities, Fair Value Disclosure	429,700,540	431,003,452
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	429,700,540
Equity Securities
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis, Fiscal Year Maturity [Abstract]
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	233,963,842	245,882,053
Available-for-sale Securities, Debt Maturities, Fair Value, Fiscal Year Maturity [Abstract]
Available-for-sale Securities, Fair Value Disclosure	$ 238,852,713	$ 248,596,535

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Other Borrowings) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Short-term Debt [Line Items]
Other Borrowings	$ 8,523,348	$ 8,002,739
Financial Instruments, Owned and Pledged as Collateral, at Amortized Cost	17,300,000	14,800,000
Financial Instruments, Owned and Pledged as Collateral, at Fair Value	18,000,000	15,400,000
Minimum
Short-term Debt [Line Items]
Repurchase agreements, maturity term	1 day
Maximum
Short-term Debt [Line Items]
Repurchase agreements, maturity term	3 days
Securities Sold under Agreements to Repurchase [Member]
Short-term Debt [Line Items]
Short-term Debt, Weighted Average Interest Rate	0.15%
Short-term Debt, Maximum Month-end Outstanding Amount	$ 10,800,000	$ 9,900,000

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Quarterly Financial Data (Unaudited) (Details) (USD $)	3 Months Ended								9 Months Ended			12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
Interest Income	$ 7,263,000	$ 7,389,000		$ 7,193,000	$ 7,357,000	$ 7,706,000	$ 7,680,000	$ 7,704,000	$ 22,288,689	$ 22,743,098	$ 24,791,224	$ 29,482,164	$ 30,447,367	$ 33,742,799
Interest Expense	1,370,000	1,385,000		1,550,000	1,664,000	1,796,000	1,959,000	2,114,000	4,262,965	5,419,314	7,459,816	5,813,056	7,532,936	10,273,737
Net Interest Income	5,893,000	6,004,000	6,130,000	5,643,000	5,693,000	5,910,000	5,721,000	5,590,000	18,025,724	17,323,784	17,331,408	23,669,108	22,914,431	23,469,062
Provision For Loan Losses	250,000	0		100,000	0	600,000	900,000	1,145,000	350,000	1,500,000	1,975,000	450,000	2,645,381	3,925,000
Net Interest Income After Provision For Loan Losses	5,643,000	6,004,000	6,030,000	5,543,000	5,693,000	5,310,000	4,821,000	4,445,000	17,675,724	15,823,784	15,356,408	23,219,108	20,269,050	19,544,062
Non-Interest Income	1,808,000	1,486,000		1,536,000	1,470,000	1,738,000	1,743,000	1,945,000	4,626,384	4,950,822	4,364,854	6,162,783	6,895,804	5,979,341
Non-interest Expense	5,602,000	5,023,000		5,326,000	5,464,000	5,665,000	5,392,000	5,513,000	15,941,304	16,520,424	17,062,554	21,267,983	22,033,308	22,187,423
Income Before Income Taxes	1,849,000	2,467,000	2,045,000	1,753,000	1,699,000	1,383,000	1,172,000	877,000	6,360,804	4,254,182	2,658,708	8,113,908	5,131,546	3,335,980
Provision For Income Taxes	528,000	756,000		451,000	480,000	361,000	293,000	206,000	1,852,584	1,134,389	703,759	2,303,168	1,340,384	951,084
Net Income	1,321,000	1,711,000	1,477,000	1,302,000	1,219,000	1,022,000	879,000	671,000	4,508,220	3,119,793	1,954,949	5,810,740	3,791,162	2,384,896
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000	330,000	330,000	330,000	440,000	440,000	440,000
Net Income Available To Common Shareholders	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000	$ 1,109,000	$ 912,000	$ 769,000	$ 561,000	$ 4,178,220	$ 2,789,793	$ 1,624,949	$ 5,370,740	$ 3,351,162	$ 1,944,896
Net Income Per Common Share (Basic)	$ 0.41	$ 0.54	$ 0.46	$ 0.41	$ 0.38	$ 0.31	$ 0.26	$ 0.19	$ 1.42	$ 0.95	$ 0.55	$ 1.82	$ 1.14	$ 0.66
Net Income Per Common Share (Diluted)	$ 0.40	$ 0.52	$ 0.44	$ 0.39	$ 0.36	$ 0.30	$ 0.26	$ 0.20	$ 1.36	$ 0.93	$ 0.55	$ 1.75	$ 1.12	$ 0.66
Weighted Average Shares Outstanding (Basic)	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001			2,944,001	2,944,001	2,944,001
Weighted Average Shares Outstanding (Diluted)	3,248,201	3,248,201	3,248,201		3,248,201	3,248,201	3,248,201	3,248,201			2,944,001	3,248,201	3,248,201

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

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheet Data

Condensed Balance Sheet Data

	At December 31,
	2014		2013
Assets:
Cash	$	4,542,778	$	3,880,433
Investment Securities, Available For Sale	151,674		101,250
Investment in Security Federal Statutory Trust	155,000		155,000
Investment In Security Federal Bank	93,860,841		85,115,889
Accounts Receivable And Other Assets	8,023		20,167
Total Assets	$	98,718,316	$	89,272,739
Liabilities And Shareholders’ Equity:
Accounts Payable And Other Liabilities	$	45,229	$	44,959
Junior Subordinated Debentures	5,155,000		5,155,000
Senior Convertible Debentures	6,084,000		6,084,000
Shareholders’ Equity	87,434,087		77,988,780
Total Liabilities And Shareholders’ Equity	$	98,718,316	$	89,272,739

Condensed Statements of Income Data

Condensed Statements of Income Data

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Income:
Equity In Earnings Of Security Federal Bank	$	3,779,212		$	2,558,986		$	2,229,630
Dividend Income From Security Federal Bank	2,400,000			1,600,000			—
Interest Income	—			—			22,941
Miscellaneous Income	12,937			15,771			—
Total Income	6,192,149			4,174,757			2,252,571
Expenses:
Interest Expense	587,859			589,988			449,049
Other Expenses	19,382			18,223			16,814
Total Expenses	607,241			608,211			465,863
Income Before Income Taxes	5,584,908			3,566,546			1,786,708
Income Tax Benefit	(225,832		)	(224,616		)	(168,241		)
Net Income	5,810,740			3,791,162			1,954,949
Preferred Stock Dividends	440,000			440,000			330,000
Net Income Available to Common Shareholders	$	5,370,740		$	3,351,162		$	1,624,949

Condensed Statements of Cash Flow Data

Condensed Statements of Cash Flow Data

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Operating Activities:
Net Income	$	5,810,740		$	3,791,162		$	1,954,949
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Equity In Earnings Of Security Federal Bank	(3,779,212		)	(2,558,986		)	(2,229,630		)
Stock Compensation Expense	12,676			(2,580		)	4,472
(Increase) Decrease In Accounts Receivable	(49		)	(15,248		)	56,203
Increase (Decrease) In Accounts Payable	270			132			(122,707		)
Net Cash Provided By (Used In) In Operating Activities	2,044,425			1,214,480			(336,713		)
Financing Activities:
Repayment Of Warrant Issued In Conjunction With Preferred Stock	—			(50,000		)	—
Dividends Paid To Shareholders-Preferred Stock	(440,000		)	(440,000		)	(330,000		)
Dividends Paid To Shareholders-Common Stock	(942,080		)	(942,082		)	(706,560		)
Net Cash Used In Financing Activities	(1,382,080		)	(1,432,082		)	(1,036,560		)
Net Increase (Decrease) In Cash	662,345			(217,602		)	(1,373,273		)
Cash At Beginning Of Period	3,880,433			4,098,035			5,471,308
Cash At End Of Period	$	4,542,778		$	3,880,433		$	4,098,035

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Basis of Consolidation and Nature of Operations

Basis of Consolidation and Nature of Operations

The accompanying consolidated financial statements include the accounts of Security Federal Corporation (the “Company”) and its wholly owned subsidiary, Security Federal Bank (the “Bank”) and the Bank’s wholly owned subsidiaries, Security Federal Insurance, Inc. (“SFINS”) and Security Financial Services Corporation (“SFSC”).  Security Federal Corporation has a wholly owned subsidiary, Security Federal Statutory Trust (the “Trust”), which issued and sold fixed and floating rate capital securities of the Trust.  However, under current accounting guidance, the Trust is not consolidated in the financial statements.  The Bank is primarily engaged in the business of accepting savings and demand deposits and originating mortgage loans and other loans to individuals and small businesses for various personal and commercial purposes.  SFINS was formed during fiscal 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, and home insurance.  SFINS has a wholly owned subsidiary, Collier Jennings Financial Corporation which has as subsidiaries Security Federal Auto Insurance, The Auto Insurance Store Inc., and Security Federal Premium Pay Plans Inc. Security Federal Premium Pay Plans Inc. has one wholly owned premium finance subsidiary and also has an ownership interest in four other premium finance subsidiaries. SFSC was formed in 1975 and is currently inactive.

Change in Fiscal Year

Change in Fiscal Year

The Company's Board of Directors approved a change in the Company's fiscal year end from March 31 to December 31, effective December 31, 2012. As a result of this change, the consolidated financial statements for the period ended December 31, 2012 include the Company's financial results for the nine month transition period from April 1, 2012 to December 31, 2012.

Cash and Cash Equivalents

Cash and Cash Equivalents

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

Investment and Mortgage-Backed Securities

Investment and Mortgage-Backed Securities

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

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

Loans Receivable Held for Investment

Loans Receivable Held for Investment

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

Allowance for Loan Losses

Allowance for Loan Losses

The Company provides for loan losses using the allowance method.  Accordingly, all loan losses are charged to the related allowance and all recoveries are credited to the allowance for loan losses.

Additions to the allowance for loan losses are provided by charges to operations based on various factors, which, in management’s judgment, deserve current recognition in estimating possible losses.  Such factors considered by management include the fair value of the underlying collateral, stated guarantees by the borrower (if applicable), the borrower’s ability to repay from other economic resources, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to the outstanding loans, loss experience, delinquency trends, and general economic conditions.  Management evaluates the carrying value of the loans periodically and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making these evaluations.  The allowance for loan losses is subject to periodic evaluations by bank regulatory agencies that may require adjustments to be made to the allowance based upon the information that is available at the time of their examination.

The Company values impaired loans at the loan’s fair value if it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement at the present value of expected cash flows, the market price of the loan, if available, or the value of the underlying collateral less estimated selling costs.  In accordance with our policy, non-accrual commercial loans with a balance less than $200,000 and non-accrual consumer loans with a balance less than $100,000 are deemed immaterial and therefore excluded from the individual impairment review. Expected cash flows are required to be discounted at the loan’s effective interest rate.  When the ultimate collectibility of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal.  When this doubt does not exist, cash receipts are applied under the contractual terms of the loan agreement first to interest and then to principal.  Once the recorded principal balance has been reduced to zero, future cash receipts are applied to interest income to the extent that any interest has been foregone.  Further cash receipts are recorded as recoveries of any amounts previously charged off.

Loans Receivable Held for Sale

Loans Receivable Held for Sale

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

Repossessed Assets Acquired in Settlement of Loans

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

Premises and Equipment

Premises and Equipment

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

Intangible Assets and Goodwill

Intangible Assets and Goodwill

Intangible Assets consist of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation in July 2006.  The goodwill also is a result of the excess of the cost over the fair value of net assets resulting from the Collier Jennings acquisition.

Intangible assets are amortized over their estimated economic lives using methods that reflect the pattern in which the economic benefits are utilized.  The intangible assets which consisted of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation, were fully amortized during the year ended December 31, 2014. Goodwill is reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Income Taxes

Income Taxes

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

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

There have been no gross amounts of unrecognized tax benefits or interest or penalties related to uncertain tax positions since adoption. There are no unrecognized tax benefits that would, if recognized, affect the effective tax rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. Years prior to March 31, 2011 are closed for federal, state and local income tax matters.

Loan Fees and Costs Associated with Originating Loans

Loan Fees and Costs Associated with Originating Loans

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

Interest Income

Interest Income

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

Advertising Expense

Advertising Expense

Advertising and public relations costs are generally expensed as incurred.  External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent.  Advertising and public relations costs of$484,000, $356,000, and $304,000 were included in the Company’s results of operations for the year ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively.

Stock-Based Compensation

Stock-Based Compensation

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

Earnings Per Share

Earnings Per Share

Accounting guidance specifies computation and presentation requirements for both basic earnings per share ("EPS") and, for entities with complex capital structures, diluted EPS.  Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding.  Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.  The dilutive effect of options and warrants outstanding is reflected in diluted earnings per share by application of the treasury stock method.

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

Use of Estimates

Use of Estimates

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

Recently Issued Accounting Standards

Recently Issued Accounting Standards

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

In January 2014, the FASB amended the Receivables topic of the Accounting Standards Codification. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned (OREO). In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement.

(1) Significant Accounting Policies, Continued

The amendments will be effective for the Company for annual periods, and interim periods within those annual period beginning after December 15, 2014, with early implementation of the guidance permitted. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company will apply the amendments prospectively. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2016. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments will be effective for the Company for the first interim or annual period beginning after December 15, 2014. The Company will apply the guidance by making a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

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

In August 2014, the FASB issued guidance that is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements, management will need to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the organization’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments will be effective for the Company for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In January 2015, the FASB issued guidance that eliminated the concept of extraordinary items from U.S. GAAP. Existing U.S. GAAP required that an entity separately classify, present, and disclose extraordinary events and transactions. The amendments will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, however, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

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

(1) Significant Accounting Policies, Continued

Risks and Uncertainties

Risks and Uncertainties

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

Reclassifications

Reclassifications

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

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings Federal Home Loan Bank Advance Prepayments (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Debt Disclosure [Abstract]
Repayments of Federal Home Loan Bank Borrowings	$ 5,000,000	$ 30,000,000

XML

Repossessed Assets Acquired In Settlement Of Loans (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Other Real Estate and Other Assets Repossessed [Roll Forward]
Balance, Beginning Of Period	$ 14,160,099	$ 3,947,226	$ 6,754,425
Additions	2,456,478	1,638,135	3,861,182
Sales	(6,929,152)	(1,850,651)	(5,274,003)
Write Downs	(2,933,000)	(505,000)	(1,394,378)
Balance, End Of Period	$ 6,754,425	$ 3,229,710	$ 3,947,226

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Employee Benefit Plans (Stock Option Plans) (Details) (USD $)	0 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2006	Dec. 31, 2012	Dec. 31, 2014 stock_option_plan	Dec. 31, 2013	Mar. 31, 2013	Mar. 31, 2011	Mar. 31, 2010	Mar. 31, 2009
Postemployment Benefits [Abstract]
Incentive and non-qualified stock option plans, number of plans			3
Incentive and non-qualified stock option plans, number of shares authorized							150,000
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options vested during period, shares		2,200	5,400	5,400
Options vested during period, shares, weighted average exercise price		$ 23.61	$ 23.50	$ 23.50
Options outstanding and exercisable, instrinsic value			$ 0		$ 0	$ 0
Compensation expense related to stock options		5,000	13,000	(3,000)
Unrecognized compensation cost related to non-vested stock options			$ 26,000
Unrecognized compensation cost related to non-vested stock options, period for recognition			3 years
Award annual vesting percentage	100.00%		20.00%
Award expiration period			10 years
2008 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for the issuance			50,000		50,000
2008 Equity Incentive Plan [Member] | Stock Options and SARS [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for the issuance								50,000
2008 Equity Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for the issuance								50,000

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Investment and Mortgage-Backed Securities, Held to Maturity (Schedule of investment and mortgage-backed securities held to maturity) (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity Securities, Transferred to Available-for-sale Securities, Unrealized Gain (Loss)	$ 1.4
GNMA Mortgage-Backed Securities
Schedule of Held-to-maturity Securities [Line Items]
Held To Maturity, Amortized Cost	$ 72.0

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Advances from the FHLB summarized by year of maturity and weighted average interest rate) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Federal Home Loan Bank, Advances, Fiscal Year Maturity [Abstract]
Due in Next Twelve Months	$ 15,000,000
Due in Year Two	20,000,000
Due in Year Three	12,900,000
Due in Year Four	5,000,000
Federal Home Loan Bank, Advances	52,900,000	87,740,058
Federal Home Loan Bank, Advances, Maturities Summary, Average Interest Rate of Amounts Due [Abstract]
Weighted Rate of Amounts Due within One Year of Balance Sheet Date	2.61%
Weighted Rate, One to Two Years from Balance Sheet Date	4.61%
Weighted Rate, Two to Three Years from Balance Sheet Date	4.38%
Weighted Rate, Three to Four Years from Balance Sheet Date	3.39%
Federal Home Loan Bank, Advances, Weighted Rate	3.87%
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures [Abstract]
Federal Home Loan Bank, Advances, Collateral Pledged, Amortized Cost	99,900,000	111,600,000
Federal Home Loan Bank, Advances, Collateral Pledged, Fair Value	$ 99,300,000	$ 102,700,000

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Regulatory Matters (Regulatory capital amounts and ratios) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)
Actual, Amount	$ 77,746,000	$ 70,598,000
Actual, Ratio	20.60%	17.80%
For Capital Adequacy, Amount	15,073,400	15,893,920
For Capital Adequacy, Ratio	4.00%	4.00%
Total Risk-Based Capital (To Risk Weighted Assets)
Actual, Amount	89,915,000	84,529,000
Actual, Ratio	23.90%	21.30%
For Capital Adequacy, Amount	30,146,800	31,788,040
For Capital Adequacy, Ratio	8.00%	8.00%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)
Actual, Amount	77,746,000	70,598,000
Actual, Ratio	9.50%	8.30%
For Capital Adequacy, Amount	32,778,400	34,078,920
For Capital Adequacy, Ratio	4.00%	4.00%
Security Federal Bank [Member]
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)
Actual, Amount	87,222,000	81,624,000
Actual, Ratio	23.20%	20.60%
For Capital Adequacy, Amount	15,061,720	15,883,000
For Capital Adequacy, Ratio	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	22,592,580	23,825,220
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	6.00%	6.00%
Total Risk-Based Capital (To Risk Weighted Assets)
Actual, Amount	91,973,000	86,652,000
Actual, Ratio	24.40%	21.80%
For Capital Adequacy, Amount	30,123,440	31,766,960
For Capital Adequacy, Ratio	8.00%	8.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	37,654,300	39,708,700
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	10.00%	10.00%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)
Actual, Amount	87,222,000	81,624,000
Actual, Ratio	10.60%	9.60%
For Capital Adequacy, Amount	32,792,480	34,068,520
For Capital Adequacy, Ratio	4.00%	4.00%
To Be Well Capitalized Under Prompt Corrective Action Provisions, Amount	$ 40,990,600	$ 42,585,650
To Be Well Capitalized Under Prompt Corrective Action Provisions, Ratio	5.00%	5.00%

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Senior Convertible Debentures (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 01, 2009
Debt Instrument [Line Items]
Senior Convertible Debentures	6,084,000	$ 6,084,000
Senior Convertible Debt [Member] | Senior Convertible Debentures issued December 1, 2009 [Member]
Debt Instrument [Line Items]
Senior Convertible Debentures			$ 6,100,000
Interest rate per year			8.00%
Debt Instrument, Convertible, Conversion Price			$ 20
Debt Instrument, Redemption Price, Percentage	100.00%

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Employee Benefit Plans (Retirement Benefits) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Postemployment Benefits [Abstract]
Defined contribution plan, requisite service period		6 months
Defined contribution plan, employer contributions	$ 145,000	$ 186,000	$ 189,000
Supplemental retirement plan, expense	144,000	103,000	172,000
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum Days Earned For Bonus		7 days 12 hours
Minimum Days Earned for Bonus		2 days 12 hours
Accrued Bonuses		335,000
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Stock Purchase Plan, purchase discount of the market value		15.00%
Employee Stock Purchase Plan, maximum annual employee purchase amount		$ 25,000
Employee Stock Purchase Plan, maximum annual employee purchase amount as a percent of annual salary		5.00%

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Callable FHLB advances) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	$ 52,900,000	$ 87,740,058
Amount of Additional Borrowing Capacity	195,700,000	167,900,000
Federal Home Loan Bank Advances November 23, 2005 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	5,000,000
Advances from FHLB, Interest Rate at Period End	3.933%
Federal Home Loan Bank Advances July 11, 2006 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	5,000,000
Advances from FHLB, Interest Rate at Period End	4.80%
Federal Home Loan Bank Advances November 29, 2006 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	5,000,000
Advances from FHLB, Interest Rate at Period End	4.025%
Federal Home Loan Bank Advances May 24, 2007 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	7,900,000
Advances from FHLB, Interest Rate at Period End	4.375%
Federal Home Loan Bank Advances July 25, 2007 [Member]
Schedule of Federal Home Loan Bank Advances [Line Items]
Advances From FHLB	$ 5,000,000
Advances from FHLB, Interest Rate at Period End	4.396%

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Intangible Assets and Goodwill (Amortization of the intangibles) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Finite-Lived Intangible Assets, Net	$ 0	$ 11,970

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Bank Owned Life Insurance

12 Months Ended

Dec. 31, 2014

Investments, All Other Investments [Abstract]

Bank Owned Life Insurance

Bank Owned Life Insurance

The cash value of the life insurance policies are recorded as a separate line item in the accompanying balance sheets at $11.2 million and $11.5 millionat December 31, 2014 and 2013, respectively.  The insurance provides key person life insurance on certain officers of the Company.  The earnings-portion of the insurance policies grows tax deferred and helps offset the cost of the Company’s benefits programs.  The Company recorded earnings of $300,000 and $339,000 and $315,000for the growth in the cash value of life insurance during the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively. The earnings in 2014 also included $254,000 in death benefits in addition to $300,000 in income related to changes in the cash surrender value of the BOLI policies.

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Significant Accounting Policies (Premises and Equipment) (Details)	12 Months Ended
	Dec. 31, 2014
Building and Improvements [Member] | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	40 years
Building and Improvements [Member] | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	7 years
Furniture and Equipment [Member] | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Furniture and Equipment [Member] | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income tax expense

Income tax expense is comprised of the following:

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Current:
Federal	$	1,833,069	$	380,143	$	348,588
State	267,904		164,491		91,108
Total Current Tax Expense	2,100,973		544,634		439,696
Deferred:
Federal	192,051		784,814		266,784
State	10,144		10,936		(2,721		)
Total Deferred Tax Expense	202,195		795,750		264,063
Total Income Tax Expense	$	2,303,168	$	1,340,384	$	703,759

Income tax reconciliation

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

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Tax At Statutory Income Tax Rate	$	2,758,729		$	1,744,725		$	903,960
State Tax And Other	66,738			45,761			(31,391		)
Tax Exempt Interest	(534,325		)	(425,450		)	(180,917		)
Valuation Allowance	12,026			(24,652		)	12,107
Total Income Tax Expense	$	2,303,168		$	1,340,384		$	703,759

Deferred tax assets and deferred tax liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2014 and 2013 are presented below.

	At December 31,
	2014			2013
Deferred Tax Assets:
Deferred Compensation	$	521,256		$	565,577
Provision For Loan Losses	2,872,552			3,519,305
Other Real Estate Owned	1,194,141			1,125,986
Net Fees Deferred For Financial Reporting	114,924			120,984
Non-accrual Interest	431,696			167,315
Net Operating Losses	220,211			208,185
Other	207,423			47,725
Total Gross Deferred Tax Assets	5,562,203			5,755,077
Less: Valuation Allowance	(220,211		)	(208,185		)
Net Deferred Tax Assets	5,341,992			5,546,892
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,510			114,682
Depreciation	288,157			281,880
Other	63,536			67,881
Intangibles	—			4,465
Unrealized Gain on Securities Available for Sale	3,347,240			289,192
Total Gross Deferred Tax Liability	3,813,443			758,100
Net Deferred Tax Asset	$	1,528,549		$	4,788,792

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Deposits (Amounts and scheduled maturities of all certificates of deposit) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Banking and Thrift [Abstract]
Time deposits, $250,000 or more	$ 69,600,000	$ 53,100,000
Time Deposits, Fiscal Year Maturity [Abstract]
Within 1 Year	142,490,027	163,680,585
After 1 Year, Within 2 Years	57,481,254	45,089,513
After 2 Years, Within 3 Years	22,273,310	22,483,793
After 3 Years, Within 4 Years	18,114,738	8,996,498
After 4 Years, Within 5 Years	12,891,700	16,633,151
Thereafter	0	0
Time Deposits	$ 253,251,029	$ 256,883,540

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Security Federal Corporation Condensed Financial Statements (Parent Company Only) (Condensed Statements of Income Data) (Details) (USD $)	3 Months Ended								9 Months Ended			12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income:
Cash Dividends Paid to Parent Company											$ 0	$ 2,400,000	$ 1,600,000
Interest Income	7,263,000	7,389,000		7,193,000	7,357,000	7,706,000	7,680,000	7,704,000	22,288,689	22,743,098	24,791,224	29,482,164	30,447,367	33,742,799
Miscellaneous Income	1,808,000	1,486,000		1,536,000	1,470,000	1,738,000	1,743,000	1,945,000	4,626,384	4,950,822	4,364,854	6,162,783	6,895,804	5,979,341
Expenses:
Interest Expense	1,370,000	1,385,000		1,550,000	1,664,000	1,796,000	1,959,000	2,114,000	4,262,965	5,419,314	7,459,816	5,813,056	7,532,936	10,273,737
Other Expenses											2,713,044	4,390,766	4,177,210
Income Before Income Taxes	1,849,000	2,467,000	2,045,000	1,753,000	1,699,000	1,383,000	1,172,000	877,000	6,360,804	4,254,182	2,658,708	8,113,908	5,131,546	3,335,980
Income Tax Benefit	528,000	756,000		451,000	480,000	361,000	293,000	206,000	1,852,584	1,134,389	703,759	2,303,168	1,340,384	951,084
Net Income	1,321,000	1,711,000	1,477,000	1,302,000	1,219,000	1,022,000	879,000	671,000	4,508,220	3,119,793	1,954,949	5,810,740	3,791,162	2,384,896
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000	330,000	330,000	330,000	440,000	440,000	440,000
Net Income Available To Common Shareholders	1,211,000	1,601,000	1,367,000	1,192,000	1,109,000	912,000	769,000	561,000	4,178,220	2,789,793	1,624,949	5,370,740	3,351,162	1,944,896
Parent Company [Member]
Income:
Equity In Earnings Of Security Federal Bank											2,229,630	3,779,212	2,558,986
Interest Income											22,941	0	0
Miscellaneous Income											0	12,937	15,771
Total Income											2,252,571	6,192,149	4,174,757
Expenses:
Interest Expense											449,049	587,859	589,988
Other Expenses											16,814	19,382	18,223
Total Expenses											465,863	607,241	608,211
Income Before Income Taxes											1,786,708	5,584,908	3,566,546
Income Tax Benefit											(168,241)	(225,832)	(224,616)
Net Income											1,954,949	5,810,740	3,791,162
Preferred Stock Dividends											330,000	440,000	440,000
Net Income Available To Common Shareholders											$ 1,624,949	$ 5,370,740	$ 3,351,162

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Premises and Equipment, Net (Tables)

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Premises and equipment, net

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

	December 31,
	2014			2013
Land	$	6,729,097		$	5,471,503
Buildings And Improvements	17,796,209			17,635,363
Furniture And Equipment	11,068,028			10,395,793
Construction In Progress	184,040			206,163
Total Premises And Equipment	35,777,374			33,708,822
Less Accumulated Depreciation	(17,544,148		)	(16,465,432		)
Total Premises And Equipment, Net	$	18,233,226		$	17,243,390

Future minimum payments under non-cancelable operating leases

The Bank has entered into non-cancelable operating leases related to buildings and land.  At December 31, 2014, future minimum payments under non-cancelable operating leases with initial or remaining terms of one year or more are as follows (by fiscal year):

2015	$	360,106
2016	261,736
2017	231,332
2018	128,361
2019	119,790
Thereafter	908,408
Total Future Minimum Payments	$	2,009,733

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Significant Accounting Policies (Earnings Per Share - Effects of dilutive options and warrants) (Details) (USD $)	3 Months Ended								9 Months Ended			12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Basic EPS
Income	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000	$ 1,109,000	$ 912,000	$ 769,000	$ 561,000	$ 4,178,220	$ 2,789,793	$ 1,624,949	$ 5,370,740	$ 3,351,162	$ 1,944,896
Shares	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001	2,944,001			2,944,001	2,944,001	2,944,001
Per Share Amounts	$ 0.41	$ 0.54	$ 0.46	$ 0.41	$ 0.38	$ 0.31	$ 0.26	$ 0.19	$ 1.42	$ 0.95	$ 0.55	$ 1.82	$ 1.14	$ 0.66
Senior Convertible Debentures Income													301,766
Effect of Diluted Securities:
Senior Convertible Debentures													304,200
Senior Convertible Debentures (per Share)													$ (0.02)
Diluted EPS
Income													$ 3,652,928
Shares	3,248,201	3,248,201	3,248,201		3,248,201	3,248,201	3,248,201	3,248,201			2,944,001	3,248,201	3,248,201
Per Share Amounts	$ 0.40	$ 0.52	$ 0.44	$ 0.39	$ 0.36	$ 0.30	$ 0.26	$ 0.20	$ 1.36	$ 0.93	$ 0.55	$ 1.75	$ 1.12	$ 0.66
Weighted Average [Member]
Diluted EPS
Share Price	$ 14.56				$ 11.37			$ 8.63	$ 14.56	$ 11.37		$ 14.56	$ 11.37

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Loans Receivable, Net (Narrative) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012 loan	Dec. 31, 2014 payments loan	Dec. 31, 2013 loan
Receivables [Abstract]
Review period to request a new third party appraisal		24 months
Impaired financing receivable, average recorded investment	$ 41,555,434	$ 22,211,689	$ 33,574,855
TDRs included in impaired loans		$ 9,600,000.0	$ 12,400,000.0
Number of Contracts - Troubled Debt Restructurings	1	2	5
Number of Contracts - loans that had been previously restructured that were in default	6	7	5,000
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period	4	1	1
Nonperforming Loans, Minimum Consecutive Payments		6

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Loans Receivable, Net (Past Due Financing Receivables) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	$ 6,576,081	$ 6,713,137
60-89 Days Past Due	2,373,007	3,644,676
90 Days or More Past Due	13,741,649	10,012,397
Total Past Due	22,690,737	20,370,210
Current	325,077,980	351,014,826
Total	347,768,717	371,385,036
Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	0	0
60-89 Days Past Due	1,087,299	1,363,132
90 Days or More Past Due	3,061,339	4,607,613
Total Past Due	4,148,638	5,970,745
Current	73,134,179	77,033,737
Total	77,282,817	83,004,482
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	1,868,787	1,494,429
60-89 Days Past Due	91,223	234,878
90 Days or More Past Due	573,644	399,062
Total Past Due	2,533,654	2,128,369
Current	47,857,570	50,077,532
Total	50,391,224	52,205,901
Commercial Business
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	162,481	115,186
60-89 Days Past Due	99,784	0
90 Days or More Past Due	246,977	33,055
Total Past Due	509,242	148,241
Current	10,055,225	7,626,857
Total	10,564,467	7,775,098
Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
30-59 Days Past Due	4,544,813	5,103,522
60-89 Days Past Due	1,094,701	2,046,666
90 Days or More Past Due	9,859,689	4,972,667
Total Past Due	15,499,203	12,122,855
Current	194,031,006	216,276,700
Total	$ 209,530,209	$ 228,399,555

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Carrying Amounts and Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Fair value measurements, recurring basis

Assets measured at fair value on a recurring basis are as follows as of December 31, 2014:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	13,246,661	$	—
FFCB Securities	—		5,667,994		—
FNMA Bonds	—		1,004,381		—
SBA Bonds	—		108,126,694		—
Tax Exempt Municipal Bonds	—		62,495,423		—
Mortgage-Backed Securities	—		238,852,713		—
Equity Securities	—		306,674		—
Total	$	—	$	429,700,540	$	—

Assets measured at fair value on a recurring basis are as follows as of December 31, 2013:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	12,670,450	$	—
FFCB Securities	—		5,366,180		—
FNMA Bonds	—		1,974,930		—
SBA Bonds	—		100,823,985		—
Tax Exempt Municipal Bonds	—		61,315,122		—
Mortgage-Backed Securities	—		248,596,535		—
Equity Securities	—		256,250		—
Total	$	—	$	431,003,452	$	—

Fair value measurements, nonrecurring basis

The table below presents assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2014 and 2013, aggregated by the level in the fair value hierarchy within which those measurements fall. 

Assets:	Level 1		Level 2		Level 3		At December 31, 2014
Mortgage Loans Held For Sale	$	—	$	1,864,999	$	—	$	1,864,999
Collateral Dependent Impaired Loans (1)	—		—		19,772,955		19,772,955
Foreclosed Assets	—		—		3,229,710		3,229,710
Total	$	—	$	1,864,999	$	23,002,665	$	24,867,664

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $475,000}

Assets:	Level 1		Level 2		Level 3		At December 31, 2013
Mortgage Loans Held For Sale	$	—	$	1,234,158	$	—	$	1,234,158
Collateral Dependent Impaired Loans (1)	—		—		30,252,256		30,252,256
Foreclosed Assets	—		—		3,947,226		3,947,226
Total	$	—	$	1,234,158	$	34,199,482	$	35,433,640

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF}

Significant unobservable inputs used in the fair value measurements

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value			Significant
	December 31,		Valuation	Unobservable
	2014		Technique	Inputs	Range
Collateral Dependent Impaired Loans	$	19,772,955	Appraised Value	Discount Rates/ Discounts to Appraised Values	0% - 70%
Foreclosed Assets	3,229,710		Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	14% - 80%

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

The following tables are a summary of the carrying value and estimated fair value of the Company’s financial instruments as of December 31, 2014 and 2013 presented in accordance with the applicable accounting guidance.

	December 31, 2014
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	10,193	$	10,193	$	10,193	$	—	$	—
Certificates of Deposits With Other Banks	2,095		2,095		—		2,095		—
Investment And Mortgage-Backed Securities	429,701		429,701		—		429,701		—
Loans Receivable, Net	339,874		340,368		—		—		340,368
FHLB Stock	3,145		3,145		3,145		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	406,864	$	406,864	$	406,864	$	—	$	—
Certificate Accounts	253,251		253,300		—		253,300		—
Advances From FHLB	52,900		55,646		—		55,646		—
Other Borrowed Money	8,523		8,523		8,523		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

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Significant Accounting Policies

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

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

(a) Basis of Consolidation and Nature of Operations

The accompanying consolidated financial statements include the accounts of Security Federal Corporation (the “Company”) and its wholly owned subsidiary, Security Federal Bank (the “Bank”) and the Bank’s wholly owned subsidiaries, Security Federal Insurance, Inc. (“SFINS”) and Security Financial Services Corporation (“SFSC”).  Security Federal Corporation has a wholly owned subsidiary, Security Federal Statutory Trust (the “Trust”), which issued and sold fixed and floating rate capital securities of the Trust.  However, under current accounting guidance, the Trust is not consolidated in the financial statements.  The Bank is primarily engaged in the business of accepting savings and demand deposits and originating mortgage loans and other loans to individuals and small businesses for various personal and commercial purposes.  SFINS was formed during fiscal 2002 and began operating during the December 2001 quarter.  SFINS is an insurance agency offering auto, business, and home insurance.  SFINS has a wholly owned subsidiary, Collier Jennings Financial Corporation which has as subsidiaries Security Federal Auto Insurance, The Auto Insurance Store Inc., and Security Federal Premium Pay Plans Inc. Security Federal Premium Pay Plans Inc. has one wholly owned premium finance subsidiary and also has an ownership interest in four other premium finance subsidiaries. SFSC was formed in 1975 and is currently inactive.

(b) Change in Fiscal Year

The Company's Board of Directors approved a change in the Company's fiscal year end from March 31 to December 31, effective December 31, 2012. As a result of this change, the consolidated financial statements for the period ended December 31, 2012 include the Company's financial results for the nine month transition period from April 1, 2012 to December 31, 2012. The following table presents certain comparative transition period condensed financial information for the periods ended December 31, 2014, 2013 and 2012.

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014		2013		2012		2014		2013		2012
					(Unaudited)		(Unaudited)		(Unaudited)
Interest Income	$	29,482,164	$	30,447,367	$	33,742,799	$	22,288,689	$	22,743,098	$	24,791,224
Interest Expense	5,813,056		7,532,936		10,273,737		4,262,965		5,419,314		7,459,816
Net Interest Income	23,669,108		22,914,431		23,469,062		18,025,724		17,323,784		17,331,408
Provision For Loan Losses	450,000		2,645,381		3,925,000		350,000		1,500,000		1,975,000
Net Interest Income After Provision For Loan Losses	23,219,108		20,269,050		19,544,062		17,675,724		15,823,784		15,356,408
Non-Interest Income	6,162,783		6,895,804		5,979,341		4,626,384		4,950,822		4,364,854
General And Administrative Expenses	21,267,983		22,033,308		22,187,423		15,941,304		16,520,424		17,062,554
Income Before Income Taxes	8,113,908		5,131,546		3,335,980		6,360,804		4,254,182		2,658,708
Provision For Income Taxes	2,303,168		1,340,384		951,084		1,852,584		1,134,389		703,759
Net Income	5,810,740		3,791,162		2,384,896		4,508,220		3,119,793		1,954,949
Preferred Stock Dividends	440,000		440,000		440,000		330,000		330,000		330,000
Net Income Available To Common Shareholders	$	5,370,740	$	3,351,162	$	1,944,896	$	4,178,220	$	2,789,793	$	1,624,949
Net Income Per Common Share (Basic)	$1.82		$1.14		$0.66		$1.42		$0.95		$0.55
Net Income Per Common Share (Diluted)	$1.75		$1.12		$0.66		$1.36		$0.93		$0.55
Cash Dividend Per Share On Common Stock	$0.32		$0.32		$0.32		$0.24		$0.24		$0.24

(1) Significant Accounting Policies, Continued

(c) Cash and Cash Equivalents

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

(d) Investment and Mortgage-Backed Securities

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

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

(e) Loans Receivable Held for Investment

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

(f) Allowance for Loan Losses

The Company provides for loan losses using the allowance method.  Accordingly, all loan losses are charged to the related allowance and all recoveries are credited to the allowance for loan losses.

Additions to the allowance for loan losses are provided by charges to operations based on various factors, which, in management’s judgment, deserve current recognition in estimating possible losses.  Such factors considered by management include the fair value of the underlying collateral, stated guarantees by the borrower (if applicable), the borrower’s ability to repay from other economic resources, growth and composition of the loan portfolio, the relationship of the allowance for loan losses to the outstanding loans, loss experience, delinquency trends, and general economic conditions.  Management evaluates the carrying value of the loans periodically and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments may be necessary if economic conditions differ substantially from the assumptions used in making these evaluations.  The allowance for loan losses is subject to periodic evaluations by bank regulatory agencies that may require adjustments to be made to the allowance based upon the information that is available at the time of their examination.

The Company values impaired loans at the loan’s fair value if it is probable that the Company will be unable to collect all amounts due according to the terms of the loan agreement at the present value of expected cash flows, the market price of the loan, if available, or the value of the underlying collateral less estimated selling costs.  In accordance with our policy, non-accrual commercial loans with a balance less than $200,000 and non-accrual consumer loans with a balance less than $100,000 are deemed immaterial and therefore excluded from the individual impairment review. Expected cash flows are required to be discounted at the loan’s effective interest rate.  When the ultimate collectibility of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal.  When this doubt does not exist, cash receipts are applied under the contractual terms of the loan agreement first to interest and then to principal.  Once the recorded principal balance has been reduced to zero, future cash receipts are applied to interest income to the extent that any interest has been foregone.  Further cash receipts are recorded as recoveries of any amounts previously charged off.

(1) Significant Accounting Policies, Continued

(g) Loans Receivable Held for Sale

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

(h) Other Real Estate Owned

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

(i) Premises and Equipment

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

(j) Intangible Assets and Goodwill

Intangible Assets consist of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation in July 2006.  The goodwill also is a result of the excess of the cost over the fair value of net assets resulting from the Collier Jennings acquisition.

Intangible assets are amortized over their estimated economic lives using methods that reflect the pattern in which the economic benefits are utilized.  The intangible assets which consisted of the customer list and employment contracts resulting from the Company’s acquisition of Collier Jennings Financial Corporation, were fully amortized during the year ended December 31, 2014. Goodwill is reviewed for impairment annually or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

(k) Income Taxes

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

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

There have been no gross amounts of unrecognized tax benefits or interest or penalties related to uncertain tax positions since adoption. There are no unrecognized tax benefits that would, if recognized, affect the effective tax rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months. Years prior to March 31, 2011 are closed for federal, state and local income tax matters.

(1) Significant Accounting Policies, Continued

(l) Loan Fees and Costs Associated with Originating Loans

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

(m) Interest Income

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

(n) Advertising Expense

Advertising and public relations costs are generally expensed as incurred.  External costs relating to direct mailing costs are expensed in the period in which the direct mailings are sent.  Advertising and public relations costs of$484,000, $356,000, and $304,000 were included in the Company’s results of operations for the year ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively.

(o) Stock-Based Compensation

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

(p) Earnings Per Share

Accounting guidance specifies computation and presentation requirements for both basic earnings per share ("EPS") and, for entities with complex capital structures, diluted EPS.  Basic EPS is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding.  Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued.  The dilutive effect of options and warrants outstanding is reflected in diluted earnings per share by application of the treasury stock method.

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

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

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Earnings Available To Common Shareholders
Net Income	$	5,810,740	$	3,791,162	$	1,954,949
Preferred Stock Dividends	440,000		440,000		330,000
Net Income Available To Common Shareholders	$	5,370,740	$	3,351,162	$	1,624,949

(1) Significant Accounting Policies, Continued

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

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

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

There were no dilutive securities or options for the nine months ended December 31, 2012 therefore no reconciliation is provided.

The average market price used in calculating the assumed number of dilutive shares issued for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 was $14.56, $11.37, and $8.63 respectively. As a result of the average stock price being less than the exercise price of all options and warrants in years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, the options are not dilutive in calculating diluted earnings per share for those periods.

(q) Use of Estimates

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

(r) Recently Issued Accounting Standards

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

In January 2014, the FASB amended the Receivables topic of the Accounting Standards Codification. The amendments are intended to resolve diversity in practice with respect to when a creditor should reclassify a collateralized consumer mortgage loan to other real estate owned (OREO). In addition, the amendments require a creditor reclassify a collateralized consumer mortgage loan to OREO upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement.

(1) Significant Accounting Policies, Continued

The amendments will be effective for the Company for annual periods, and interim periods within those annual period beginning after December 15, 2014, with early implementation of the guidance permitted. In implementing this guidance, assets that are reclassified from real estate to loans are measured at the carrying value of the real estate at the date of adoption. Assets reclassified from loans to real estate are measured at the lower of the net amount of the loan receivable or the fair value of the real estate less costs to sell at the date of adoption. The Company will apply the amendments prospectively. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In May 2014, the FASB issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2016. The Company will apply the guidance using a modified retrospective approach. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In June 2014, the FASB issued guidance which makes limited amendments to the guidance on accounting for certain repurchase agreements. The new guidance (1) requires entities to account for repurchase-to-maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements), (2) eliminates accounting guidance on linked repurchase financing transactions, and (3) expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers (specifically, repos, securities lending transactions, and repurchase-to-maturity transactions) accounted for as secured borrowings. The amendments will be effective for the Company for the first interim or annual period beginning after December 15, 2014. The Company will apply the guidance by making a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

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

In August 2014, the FASB issued guidance that is intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements, management will need to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the organization’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments will be effective for the Company for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

In January 2015, the FASB issued guidance that eliminated the concept of extraordinary items from U.S. GAAP. Existing U.S. GAAP required that an entity separately classify, present, and disclose extraordinary events and transactions. The amendments will eliminate the requirements for reporting entities to consider whether an underlying event or transaction is extraordinary, however, the presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company does not expect these amendments to have a material effect on its consolidated financial statements.

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

(1) Significant Accounting Policies, Continued

(s)       Risks and Uncertainties

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

(t) Reclassifications

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

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Loans Receivable, Net (Schedule of non-accrual loans by category) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount	$ 13,741,649		$ 10,012,397
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	4.00%	[1]	2.70%	[1]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)	3,729,252
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)	37.20%
Residential Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			4,607,613
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	0.90%	[1]	1.30%	[1]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)	(1,546,274)
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)	(33.60%)
Commercial Business
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			33,055
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	0.10%	[1]	0.00%	[1]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)	213,922
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)	647.20%
Commercial Real Estate
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			4,972,667
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	2.80%	[1]	1.40%	[1]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)	4,887,022
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)	98.30%
Consumer
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount			399,062
Financing Receivable, Recorded Investment, Nonaccrual Status, Percentage (1)	0.20%	[1]	0.10%	[1]
Financing Receivable, Recorded Investment, Nonaccrual Status, Amount, Increase (Decrease)	$ 174,582
Financing Receivable, Recorded Investment, Nonaccrual Status, Percent, Increase (Decrease)	43.70%

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

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Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Regulatory capital amounts and ratios

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

	Actual				For Capital Adequacy				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
December 31, 2014
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	77,746	20.6	%	$	15,073	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	89,915		23.9	%	30,147		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	77,746		9.5	%	32,778		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,222	23.2	%	$	15,062	4.0	%	$	22,593	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	91,973		24.4	%	30,123		8.0	%	37,654		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,222		10.6	%	32,792		4.0	%	40,991		5.0	%
December 31, 2013
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	70,598	17.8	%	$	15,894	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	84,529		21.3	%	31,788		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	70,598		8.3	%	34,079		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	81,624	20.6	%	$	15,883	4.0	%	$	23,825	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	86,652		21.8	%	31,767		8.0	%	39,709		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	81,624		9.6	%	34,069		4.0	%	42,586		5.0	%

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Security Federal Corporation Condensed Financial Statements (Parent Company Only)

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Security Federal Corporation Condensed Financial Statements (Parent Company Only)

Security Federal Corporation Condensed Financial Statements (Parent Company Only)

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

Condensed Balance Sheet Data

	At December 31,
	2014		2013
Assets:
Cash	$	4,542,778	$	3,880,433
Investment Securities, Available For Sale	151,674		101,250
Investment in Security Federal Statutory Trust	155,000		155,000
Investment In Security Federal Bank	93,860,841		85,115,889
Accounts Receivable And Other Assets	8,023		20,167
Total Assets	$	98,718,316	$	89,272,739
Liabilities And Shareholders’ Equity:
Accounts Payable And Other Liabilities	$	45,229	$	44,959
Junior Subordinated Debentures	5,155,000		5,155,000
Senior Convertible Debentures	6,084,000		6,084,000
Shareholders’ Equity	87,434,087		77,988,780
Total Liabilities And Shareholders’ Equity	$	98,718,316	$	89,272,739

Condensed Statements of Income Data

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Income:
Equity In Earnings Of Security Federal Bank	$	3,779,212		$	2,558,986		$	2,229,630
Dividend Income From Security Federal Bank	2,400,000			1,600,000			—
Interest Income	—			—			22,941
Miscellaneous Income	12,937			15,771			—
Total Income	6,192,149			4,174,757			2,252,571
Expenses:
Interest Expense	587,859			589,988			449,049
Other Expenses	19,382			18,223			16,814
Total Expenses	607,241			608,211			465,863
Income Before Income Taxes	5,584,908			3,566,546			1,786,708
Income Tax Benefit	(225,832		)	(224,616		)	(168,241		)
Net Income	5,810,740			3,791,162			1,954,949
Preferred Stock Dividends	440,000			440,000			330,000
Net Income Available to Common Shareholders	$	5,370,740		$	3,351,162		$	1,624,949

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

Condensed Statements of Cash Flow Data

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Operating Activities:
Net Income	$	5,810,740		$	3,791,162		$	1,954,949
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Equity In Earnings Of Security Federal Bank	(3,779,212		)	(2,558,986		)	(2,229,630		)
Stock Compensation Expense	12,676			(2,580		)	4,472
(Increase) Decrease In Accounts Receivable	(49		)	(15,248		)	56,203
Increase (Decrease) In Accounts Payable	270			132			(122,707		)
Net Cash Provided By (Used In) In Operating Activities	2,044,425			1,214,480			(336,713		)
Financing Activities:
Repayment Of Warrant Issued In Conjunction With Preferred Stock	—			(50,000		)	—
Dividends Paid To Shareholders-Preferred Stock	(440,000		)	(440,000		)	(330,000		)
Dividends Paid To Shareholders-Common Stock	(942,080		)	(942,082		)	(706,560		)
Net Cash Used In Financing Activities	(1,382,080		)	(1,432,082		)	(1,036,560		)
Net Increase (Decrease) In Cash	662,345			(217,602		)	(1,373,273		)
Cash At Beginning Of Period	3,880,433			4,098,035			5,471,308
Cash At End Of Period	$	4,542,778		$	3,880,433		$	4,098,035

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Stock Issuance and Exchange

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Stock Issuance and Exchange

Stock Issuance and Exchange

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

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

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

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

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

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Carrying Amounts and Fair Value of Financial Instruments (Fair value measurements, nonrecurring basis) (Details) (USD $)	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired financing receivable, related allowance	$ 475,000		$ 1,102,558		$ 440,000
Liabilities, Fair Value Disclosure, Nonrecurring	0
Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	24,867,664		35,433,640
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	1,864,999		1,234,158
Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	23,002,665		34,199,482
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	1,864,999		1,234,158
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	1,864,999		1,234,158
Mortgage Loans Held For Sale | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired financing receivable, related allowance	475,000		1,103,000
Assets, Fair Value Disclosure, Nonrecurring	19,772,955	[1]	30,252,256	[1]
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	[1]	0	[1]
Collateral Dependent Impaired Loans (1) | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0	[1]	0	[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]
Assets, Fair Value Disclosure, Nonrecurring	19,772,955	[1]	30,252,256	[1]
Foreclosed Assets | Fair Value, Measurements, Nonrecurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	3,229,710		3,947,226
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	0		0
Foreclosed Assets | Fair Value, Measurements, Nonrecurring | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 3,229,710		$ 3,947,226

[1] (1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF

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Investment and Mortgage-Backed Securities, Available for Sale (Schedule of Temporarily Impaired Securities, Fair Value and Unrealized losses) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014 security	Dec. 31, 2013 security
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 67,300,430	$ 157,246,307
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	47,048,976	14,776,094
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	114,349,406	172,022,401
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	452,533	6,585,989
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	952,678	846,344
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	1,405,211	7,432,333
Number of individual securities available for sale that are in unrealized continuous loss positions for twelve months or more	24	11
Percent of unrealized losses for securities in a continuous loss position for 12 months or more	67.80%	11.40%
FHLB Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	994,818	10,288,110
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	3,850,690	1,757,640
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	4,845,508	12,045,750
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	5,182	651,608
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	149,310	242,360
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	154,492	893,968
Federal Farm Credit Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	4,435,070
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	5,667,994	931,110
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	5,667,994	5,366,180
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	0	314,930
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	82,006	68,890
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	82,006	383,820
FNMA and FHLMC Bonds
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	0	1,974,930
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	0	1,974,930
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	0	18,543
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	0	18,543
SBA Bonds
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	27,859,461	12,183,961
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	4,920,631	3,541,453
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	32,780,092	15,725,414
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	223,070	288,678
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	84,579	30,765
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	307,649	319,443
Tax Exempt Municipal Bonds
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	3,605,319	39,848,206
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	1,710,586	2,008,272
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	5,315,905	41,856,478
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	16,039	2,556,014
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	29,041	129,974
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	45,080	2,685,988
Equity Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	34,840,832	88,516,030
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	30,899,075	6,436,369
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value	65,739,907	94,952,399
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses	208,242	2,756,216
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses	607,742	372,667
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses	815,984	3,128,883
Equity Securities
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value		0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value		101,250
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value		101,250
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses [Abstract]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Unrealized Losses		0
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Unrealized Losses		1,688
Available-for-sale Securities, Continuous Unrealized Loss Position, Unrealized Losses		$ 1,688

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2014

Postemployment Benefits [Abstract]

Activity under the incentive and non-qualified stock option plans

The following is a summary of the activity under the Company’s incentive and non-qualified stock option plans for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012:

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
	Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price
Balance, Beginning of Period	61,500	$	22.49	68,400	$	22.63	72,900	$	22.62
Options Granted	—	—		—	—		—	—
Options Exercised	—	—		—	—		—	—
Options Forfeited	14,000	22.74		6,900	23.87		4,500	22.58
Balance, End of Period	47,500	$	22.41	61,500	$	22.49	68,400	$	22.63
Options Exercisable	34,300	$	22.00	42,300	$	22.03	43,800	$	22.14
Weighted-Average Remaining Life Of Exercisable Options	1.1 years			1.3 years			1.8 years
Options Available For Grant	50,000			50,000			50,000

Options outstanding

At December 31, 2014, the Company had the following options outstanding:

Grant Date	Outstanding Options	Option Price	Expiration Date
01/01/05	18,000	$20.55	01/01/15
01/01/06	3,500	$23.91	01/01/16
08/24/06	3,500	$23.03	08/24/16
05/24/07	2,000	$24.34	05/24/17
07/09/07	1,000	$24.61	07/09/17
10/01/07	2,000	$24.28	10/01/17
01/01/08	13,000	$23.49	01/01/18
05/19/08	2,500	$22.91	05/19/18
07/01/08	2,000	$22.91	07/01/18

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Carrying Amounts and Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Carrying Amounts and Fair Value of Financial Instruments

Carrying Amounts and Fair Value of Financial Instruments

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

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

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

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

Investment Securities Available for Sale

Investment securities available for sale are recorded at fair value on a recurring basis. At December 31, 2014, the Company’s investment portfolio was comprised of government and agency bonds, mortgage-backed securities issued by government agencies or government sponsored enterprises, municipal securities, and equity investments. The portfolio did not contain any private label mortgage-backed securities. Fair value measurement is based upon prices obtained from third party pricing services that use independent pricing models which rely on a variety of factors including reported trades, broker/dealer quotes, benchmark yields, economic and industry events and other relevant market information. As such, these securities are classified as Level 2.

Mortgage Loans Held for Sale

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

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

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

Impaired Loans

The Company does not record loans held for investment at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established as necessary. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment.

Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sell, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and if it is over 24 months old will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis. Specifically as an example, in situations where the collateral on a nonperforming commercial real estate loan is out of the Company’s primary market area, management would typically order an independent appraisal immediately, at the earlier of the date the loan becomes nonperforming or immediately following the determination that the loan is impaired. However, as a second example, on a nonperforming commercial real estate loan where management is familiar with the property and surrounding areas and where the original appraisal value far exceeds the recorded investment in the loan, management may perform an internal analysis whereby the previous appraisal value would be reviewed and adjusted for current conditions including recent sales of similar properties in the area and any other relevant economic trends. These valuations are reviewed at a minimum on a quarterly basis.

Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2014, substantially all of the total impaired loans were evaluated based on the fair value of the collateral. Impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. The Company records impaired loans as nonrecurring Level 3.

As of December 31, 2014 and 2013,the recorded investment in impaired loans was $20.2 million and $31.4 million, respectively. The average recorded investment in impaired loans was $22.2 million for year ended December 31, 2014 and $33.6 millionfor the year ended December 31, 2013.

Foreclosed Assets

Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral less estimated selling costs. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 3. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the asset as nonrecurring Level 3.

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

Assets measured at fair value on a recurring basis are as follows as of December 31, 2014:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	13,246,661	$	—
FFCB Securities	—		5,667,994		—
FNMA Bonds	—		1,004,381		—
SBA Bonds	—		108,126,694		—
Tax Exempt Municipal Bonds	—		62,495,423		—
Mortgage-Backed Securities	—		238,852,713		—
Equity Securities	—		306,674		—
Total	$	—	$	429,700,540	$	—

Assets measured at fair value on a recurring basis are as follows as of December 31, 2013:

Assets:	Quoted Market Price In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
FHLB Securities	$	—	$	12,670,450	$	—
FFCB Securities	—		5,366,180		—
FNMA Bonds	—		1,974,930		—
SBA Bonds	—		100,823,985		—
Tax Exempt Municipal Bonds	—		61,315,122		—
Mortgage-Backed Securities	—		248,596,535		—
Equity Securities	—		256,250		—
Total	$	—	$	431,003,452	$	—

There were no liabilities measured at fair value on a recurring basis as of December 31, 2014 and 2013.

(22)         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 table below presents assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2014 and 2013, aggregated by the level in the fair value hierarchy within which those measurements fall. 

Assets:	Level 1		Level 2		Level 3		At December 31, 2014
Mortgage Loans Held For Sale	$	—	$	1,864,999	$	—	$	1,864,999
Collateral Dependent Impaired Loans (1)	—		—		19,772,955		19,772,955
Foreclosed Assets	—		—		3,229,710		3,229,710
Total	$	—	$	1,864,999	$	23,002,665	$	24,867,664

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $475,000}

Assets:	Level 1		Level 2		Level 3		At December 31, 2013
Mortgage Loans Held For Sale	$	—	$	1,234,158	$	—	$	1,234,158
Collateral Dependent Impaired Loans (1)	—		—		30,252,256		30,252,256
Foreclosed Assets	—		—		3,947,226		3,947,226
Total	$	—	$	1,234,158	$	34,199,482	$	35,433,640

^{(1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF $1,103,000}

There were no liabilities measured at fair value on a nonrecurring basis as of December 31, 2014 and 2013.

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

For Level 3 assets and liabilities measured at fair value on a recurring or non-recurring basis as of December 31, 2014, the significant unobservable inputs used in the fair value measurements were as follows:

	Fair Value			Significant
	December 31,		Valuation	Unobservable
	2014		Technique	Inputs	Range
Collateral Dependent Impaired Loans	$	19,772,955	Appraised Value	Discount Rates/ Discounts to Appraised Values	0% - 70%
Foreclosed Assets	3,229,710		Appraised Value/Comparable Sales	Discount Rates/ Discounts to Appraised Values	14% - 80%

For assets and liabilities that are not presented on the balance sheet at fair value, the following methods are used to determine the fair value:

Cash and cash equivalents—The carrying amount of these financial instruments approximates fair value. All mature within 90 days and do not present unanticipated credit concerns.

Certificates of deposits with other banks—Fair value is based on market prices for similar assets.

Investment securities held to maturity—Securities held to maturity are valued at quoted market prices or dealer quotes.

Loans Receivable, Net—The fair value of loans are estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. As discount rates are based on current loan rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

FHLB Stock—The fair value approximates the carrying value.

Deposits—The fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities.

FHLB Advances—Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms.

Other Borrowed Money—The carrying value of these short term borrowings approximates fair value.

Senior Convertible Debentures— The fair value is estimated by discounting the future cash flows using the current rates at which similar debenture offerings with similar terms and maturities would be issued by similar institutions. As discount rates are based on current debenture rates as well as management estimates, the fair values presented may not be indicative of the value negotiated in an actual sale.

Junior Subordinated Debentures—The carrying value of junior subordinated debentures approximates fair value.

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

The following tables are a summary of the carrying value and estimated fair value of the Company’s financial instruments as of December 31, 2014 and 2013 presented in accordance with the applicable accounting guidance.

	December 31, 2014
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	10,193	$	10,193	$	10,193	$	—	$	—
Certificates of Deposits With Other Banks	2,095		2,095		—		2,095		—
Investment And Mortgage-Backed Securities	429,701		429,701		—		429,701		—
Loans Receivable, Net	339,874		340,368		—		—		340,368
FHLB Stock	3,145		3,145		3,145		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	406,864	$	406,864	$	406,864	$	—	$	—
Certificate Accounts	253,251		253,300		—		253,300		—
Advances From FHLB	52,900		55,646		—		55,646		—
Other Borrowed Money	8,523		8,523		8,523		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

	December 31, 2013
	Carrying		Fair Value
(In Thousands)	Amount		Total		Level 1		Level 2		Level 3
Financial Assets:
Cash And Cash Equivalents	$	7,630	$	7,630	$	7,630	$	—	$	—
Certificates of Deposits With Other Banks	2,100		2,100		—		2,100		—
Investment And Mortgage-Backed Securities	431,003		431,003		—		431,003		—
Loans Receivable, Net	358,917		356,623		—		—		356,623
FHLB Stock	5,017		5,017		5,017		—		—
Financial Liabilities:
Deposits:
Checking, Savings, And Money Market     Accounts	$	401,813	$	401,813	$	401,813	$	—	$	—
Certificate Accounts	256,884		257,883		—		257,883		—
Advances From FHLB	87,740		92,608		—		92,608		—
Other Borrowed Money	8,003		8,003		8,003		—		—
Junior Subordinated Debentures	5,155		5,155		—		5,155		—
Senior Convertible Debentures	6,084		6,084		—		6,084		—

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

At December 31, 2014, the Bank had $45.3 million of off-balance sheet financial commitments.  These commitments are to originate loans and unused consumer lines of credit and credit card lines.  Because these obligations are based on current market rates, if funded, the original principal is considered to be a reasonable estimate of fair value.

Fair value estimates are made on a specific date, based on relevant market data and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale the Bank’s entire holdings of a particular financial instrument.  Because no active market exists for a significant portion of the Bank’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, current interest rates and prepayment trends, risk characteristics of various financial instruments, and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in any of these assumptions used in calculating fair value would also significantly affect the estimates. Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  For example, the Bank has significant assets and liabilities that are not considered financial assets or liabilities including deposit franchise values, loan servicing portfolios, deferred tax liabilities, and premises and equipment.

In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of these estimates. The Company has used management’s best estimate of fair value on the above assumptions.  Thus, the fair values presented may not be the amounts, which could be realized, in an immediate sale or settlement of the instrument.  In addition, any income taxes or other expenses that would be incurred in an actual sale or settlement are not taken into consideration in the fair value presented.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

23)         Quarterly Financial Data (Unaudited)

Unaudited condensed financial data by quarter for the years ended December 31, 2014 and 2013 is as follows (dollars, except per share data, in thousands):

	Quarter ended
Year Ended December 31, 2014	March 31, 2014		June 30, 2014		Sept. 30, 2014		Dec. 31, 2014
Interest Income	$	7,193	$	7,637	$	7,389	$	7,263
Interest Expense	1,550		1,507		1,385		1,370
Net Interest Income	5,643		6,130		6,004		5,893
Provision For Loan Losses	100		100		—		250
Net Interest Income After Provision For Loan Losses	5,543		6,030		6,004		5,643
Non-interest Income	1,536		1,332		1,486		1,808
Non-interest Expense	5,326		5,317		5,023		5,602
Income Before Income Tax	1,753		2,045		2,467		1,849
Provision For Income taxes	451		568		756		528
Net Income	1,302		1,477		1,711		1,321
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	1,192	$	1,367	$	1,601	$	1,211
Basic Net Income Per Common Share	$	0.41	$	0.46	$	0.54	$	0.41
Diluted Net Income Per Common Share	$	0.39	$	0.44	$	0.52	$	0.40
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

	Quarter ended
Year Ended December 31, 2013	March 31, 2013		June 30, 2013		Sept. 30, 2013		Dec. 31, 2013
Interest Income	$	7,704	$	7,680	$	7,706	$	7,357
Interest Expense	2,114		1,959		1,796		1,664
Net Interest Income	5,590		5,721		5,910		5,693
Provision For Loan Losses	1,145		900		600		—
Net Interest Income After Provision For Loan Losses	4,445		4,821		5,310		5,693
Non-interest Income	1,945		1,743		1,738		1,470
Non-interest Expense	5,513		5,392		5,665		5,464
Income Before Income Tax	877		1,172		1,383		1,699
Provision For Income taxes	206		293		361		480
Net Income	671		879		1,022		1,219
Preferred Stock Dividends	110		110		110		110
Net Income Available To Common Shareholders	$	561	$	769	$	912	$	1,109
Basic Net Income Per Common Share	$	0.19	$	0.26	$	0.31	$	0.38
Diluted Net Income Per Common Share	$	0.20	$	0.26	$	0.30	$	0.36
Basic Weighted Average Shares Outstanding	2,944,001		2,944,001		2,944,001		2,944,001
Diluted Weighted Average Shares Outstanding	3,248,201		3,248,201		3,248,201		3,248,201

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Consolidated Statements of Cash Flows (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 1,954,949	$ 5,810,740	$ 3,791,162
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Depreciation Expense	1,055,662	1,214,912	1,243,839
Amortization Of Intangible Assets	37,503	11,970	50,004
Stock Option Compensation Expense	4,472	12,676	(2,580)
Discount Accretion And Premium Amortization	5,712,398	5,180,338	7,162,479
Provisions For Losses On Loans	1,975,000	450,000	2,645,381
Income From Bank Owned Life Insurance	(315,000)	(300,000)	(339,000)
Gain On Sales Of Loans	(498,879)	(620,994)	(779,554)
Gain On Sales Of Mortgage-Backed Securities	(804,959)	(503,288)	(1,104,491)
(Gain) Loss On Sales Of Investment Securities	(140,517)	66,417	(221,332)
Gain On Sale Of Real Estate Owned	(694,650)	(303,440)	(101,645)
Write Down On Other Real Estate Owned	2,933,000	505,000	1,394,378
Amortization Of Deferred Costs (Fees) On Loans	(8,994)	6,154	6,589
Proceeds From Sale Of Loans Held For Sale	22,536,178	23,607,017	33,207,780
Origination Of Loans Held For Sale	(24,136,288)	(23,616,864)	(28,891,624)
(Increase) Decrease In Accrued Interest Receivable:
Loans	476,180	60,178	210,325
Mortgage-Backed Securities	86,488	49,515	169,323
Investment Securities	(337,607)	(15,768)	(261,894)
Increase (Decrease) In Advance Payments By Borrowers	(161,040)	10,988	65,940
Decrease In Prepaid FDIC Assessment	359,681	0	1,781,476
Other, Net	1,261,763	575,230	335,386
Net Cash Provided By Operating Activities	11,295,340	12,200,781	20,361,942
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase Of Mortgage-Backed Securities Available For Sale	(57,808,416)	(54,673,351)	(88,844,145)
Principal Repayments On Mortgage-Backed Securities Available For Sale	43,332,870	32,752,039	56,166,594
Purchase Of Mortgage-Backed Securities Held To Maturity	(9,130,181)	0	0
Principal Repayments On Mortgage-Backed Securities Held To Maturity	1,144,542	0	942,806
Purchase Of Investment Securities Available For Sale	(44,272,326)	(64,593,473)	(72,626,491)
Maturities Of Investment Securities Available For Sale	14,662,340	21,531,825	22,028,941
Purchase of Investment Securities Held To Maturity	(14,513,829)	0	(1,000,000)
Maturities Of Investment Securities Held To Maturity	13,592,535	0	3,501,978
Proceeds From Sale of Investment Securities Available For Sale	5,441,135	37,842,271	21,957,851
Proceeds From Sale of Mortgage-Backed Securities Available For Sale	34,874,060	31,762,151	40,802,371
Investment In Certificates Of Deposits With Other Banks	0	0	(370,000)
Purchase Of FHLB Stock	(657,887)	(5,905,180)	(4,950,606)
Redemption Of FHLB Stock	2,950,287	7,777,180	6,112,706
Proceeds from Life Insurance Policies	0	624,260	0
Decrease In Loans Receivable	28,481,291	17,578,222	28,739,400
Proceeds From Sale Of Other Real Estate Owned	7,623,802	2,154,091	5,375,648
Purchase And Improvement Of Premises And Equipment	(247,260)	(2,204,748)	(567,582)
Net Cash Provided By Investing Activities	25,472,963	24,645,287	17,269,471
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Decrease) In Deposit Accounts	(19,862,403)	1,418,392	(17,641,881)
Proceeds From FHLB Advances	60,400,000	253,630,000	150,800,000
Repayment Of FHLB Advances	(77,212,620)	(288,470,058)	(168,317,124)
Proceeds From (Repayments Of) Other Borrowings, Net	(484,142)	520,609	(1,314,505)
Repayment Of Warrant Issued In Conjunction With Preferred Stock	0	0	(50,000)
Dividends To Preferred Stock Shareholders	(330,000)	(440,000)	(440,000)
Dividends To Common Stock Shareholders	(706,560)	(942,080)	(942,082)
Net Cash Used By Financing Activities	(38,195,725)	(34,283,137)	(37,905,592)
Net Increase (Decrease) In Cash And Cash Equivalents	(1,427,422)	2,562,931	(274,179)
Cash And Cash Equivalents At Beginning Of Year	9,331,372	7,629,771	7,903,950
Cash And Cash Equivalents At End Of Year	7,903,950	10,192,702	7,629,771
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest	7,692,965	5,969,581	7,728,772
Income Taxes	274,656	1,464,350	448,419
Supplemental Schedule Of Non Cash Transactions:
Transfers From Loans Receivable	2,456,478	1,638,135	3,861,182
Increase (Decrease) in Unrealized Gains On Securities Available For Sale, Net Of Taxes	$ 897,737	$ 5,003,969	$ (6,958,904)

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Subsequent Events

12 Months Ended

Dec. 31, 2014

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed all events occurring through the date the financial statements were available to be issued and determined that the following subsequent events required disclosure.

During January 2015, the Bank sold $18.6 million of its available for sale securities consisting of fourteen tax exempt municipal bonds which resulted in a $979,000 gain on sale of investments.

Also during January 2015 in a related transaction, the Bank prepaid two FHLB advances totaling $10.0 million and incurred prepayment penalties of $511,000 related to these transactions.

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Income Taxes (Income tax reconciliation) (Details) (USD $)	3 Months Ended							9 Months Ended			12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Tax At Statutory Income Tax Rate										$ 903,960	$ 2,758,729	$ 1,744,725
State Tax And Other										(31,391)	66,738	45,761
Tax Exempt Interest										(180,917)	(534,325)	(425,450)
Valuation Allowance										12,107	12,026	(24,652)
Total Income Tax Expense	$ 528,000	$ 756,000	$ 451,000	$ 480,000	$ 361,000	$ 293,000	$ 206,000	$ 1,852,584	$ 1,134,389	$ 703,759	$ 2,303,168	$ 1,340,384	$ 951,084

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Deposits (Tables)

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Deposits outstanding by type

Deposits outstanding by type of account are summarized as follows:

	At December 31, 2014					At December 31, 2013
	Balance		Weighted Rate		Interest Rate Range	Balance		Weighted Rate		Interest Rate Range
Checking Accounts	$	143,422,150	0.03	%	0.00-0.15%	$	136,695,876	0.04	%	0.00-0.15%
Money Market Accounts	234,819,052		0.19	%	0.10-0.20%	240,631,708		0.28	%	0.10-0.30%
Statement Savings Accounts	28,622,933		0.10	%	0.00-0.10%	24,485,648		0.10	%	0.00-0.10%
Total	$	406,864,135	0.13	%	0.00-0.20%	$	401,813,232	0.19	%	0.00-0.30%
Certificate Accounts:
0.00 – 1.99%	227,473,082					226,750,180
2.00 – 2.99%	25,605,349					28,848,252
3.00 – 3.99%	172,598					1,285,108
Total	253,251,029		0.79	%	0.05-3.01%	256,883,540		0.83	%	0.05-3.25%
Total Deposits	$	660,115,164	0.38	%	0.00-3.01%	$	658,696,772	0.44	%	0.00-3.25%

Amounts and scheduled maturities of all certificates of deposit

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

	At December 31,
	2014		2013
Within 1 Year	$	142,490,027	$	163,680,585
After 1 Year, Within 2 Years	57,481,254		45,089,513
After 2 Years, Within 3 Years	22,273,310		22,483,793
After 3 Years, Within 4 Years	18,114,738		8,996,498
After 4 Years, Within 5 Years	12,891,700		16,633,151
Thereafter	—		—
	$	253,251,029	$	256,883,540

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Significant Accounting Policies (Narrative) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Accounting Policies [Abstract]
Cash Equivalents, Original Maturity Period, Maximum		3 months
Loans and Leases Receivable, Placed on Nonaccrual Status, Period Delinquent		90 days
Advertising	$ 303,754	$ 484,056	$ 355,678

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FHLB Stock (Details) (USD $)	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2013
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal Home Loan Bank (FHLB) Stock, At Cost	$ 3,144,600		$ 5,016,600
Federal Home Loan Bank of Atlanta [Member]
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Federal Home Loan Bank Stock, Membership Component, Percent of Total Assets	0.15%	0.15%	0.15%
Federal Home Loan Bank Stock, Transaction Component, % of Outstanding Advances	4.50%
Federal Home Loan Bank (FHLB) Stock, At Cost	$ 3,100,000		$ 5,000,000

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Consolidated Balance Sheets (USD $)	Dec. 31, 2014	Dec. 31, 2013
ASSETS:
Cash And Cash Equivalents	$ 10,192,702	$ 7,629,771
Certificates Of Deposit With Other Banks	2,095,000	2,100,395
Investment And Mortgage-Backed Securities:
Available For Sale: (Amortized Cost of $420,876,924 and $430,241,854 at December 31, 2014 and 2013, Respectively)	429,700,540	431,003,452
Loans Receivable, Net:
Held For Sale	1,864,999	1,234,158
Held For Investment: (Net of Allowance of $14,615,198 and $12,501,800 at March 31, 2012 and 2011, Respectively)	338,009,496	357,682,507
Total Loans Receivable, Net	339,874,495	358,916,665
Accrued Interest Receivable:
Loans	971,569	1,031,747
Mortgage-Backed Securities	682,585	732,100
Investment Securities	1,408,924	1,393,156
Total Accrued Interest Receivable	3,063,078	3,157,003
Premises And Equipment, Net	18,233,226	17,243,390
Federal Home Loan Bank (FHLB) Stock, At Cost	3,144,600	5,016,600
Other Real Estate Owned	3,229,710	3,947,226
Bank Owned Life Insurance	11,150,045	11,474,305
Intangible Assets, Net	0	11,970
Goodwill	1,199,754	1,199,754
Other Assets	3,480,676	7,547,528
Total Assets	825,363,826	849,248,059
Liabilities:
Deposit Accounts	660,115,164	658,696,772
Advances From FHLB	52,900,000	87,740,058
Other Borrowings	8,523,348	8,002,739
Junior Subordinated Debentures	5,155,000	5,155,000
Advance Payments By Borrowers For Taxes And Insurance	266,352	255,364
Senior Convertible Debentures	6,084,000	6,084,000
Other Liabilities	4,884,577	5,324,046
Total Liabilities	737,928,441	771,257,979
Commitments (Notes 5 and 18)
Shareholders' Equity:
Serial Preferred Stock, $.01 Par Value; Authorized 200,000 Shares; Issued And Outstanding, 22,000 At March 31, 2012 And 2011, Respectively	22,000,000	22,000,000
Common Stock, $.01 Par Value; Authorized 5,000,000 Shares; Issued And Outstanding Shares, 3,144,934 And 2,944,001, Respectively, At March 31, 2012 And 2011	31,449	31,449
Additional Paid-In Capital	11,990,813	11,978,137
Treasury Stock, At Cost (200,933 Shares At March 31, 2012 And 2011, Respectively)	(4,330,712)	(4,330,712)
Accumulated Other Comprehensive Income	5,476,375	472,406
Retained Earnings	52,267,460	47,838,800
Total Shareholders' Equity	87,435,385	77,990,080
Total Liabilities And Shareholders' Equity	$ 825,363,826	$ 849,248,059

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Loan transactions with directors, including their affiliates, and executive officers

A summary of loan transactions with directors, including their affiliates, and executive officers follows:

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Balance, Beginning of Period	$	230,722	$	273,330	$	315,338
New Loans	1,116		10,956		5,364
Less Loan Payments	29,641		53,564		47,372
Balance, End of Period	$	202,197	$	230,722	$	273,330

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Security Federal Corporation Condensed Financial Statements (Parent Company Only) (Condensed Balance Sheet Data) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Mar. 31, 2012
ASSETS:
Cash	$ 10,192,702	$ 7,629,771	$ 7,903,950	$ 9,331,372
Investment Securities, Available For Sale	429,700,540	431,003,452
Total Assets	825,363,826	849,248,059
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Junior Subordinated Debentures	5,155,000	5,155,000
Senior Convertible Debentures	6,084,000	6,084,000
Stockholders' Equity Attributable to Parent	87,435,385	77,990,080	82,592,484	80,771,886
Total Liabilities And Shareholders' Equity	825,363,826	849,248,059
Parent Company [Member]
ASSETS:
Cash	4,542,778	3,880,433	4,098,035	5,471,308
Investment Securities, Available For Sale	151,674	101,250
Investment in Security Federal Statutory Trust	155,000	155,000
Investment In Security Federal Bank	93,860,841	85,115,889
Accounts Receivable And Other Assets	8,023	20,167
Total Assets	98,718,316	89,272,739
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Accounts Payable And Other Liabilities	45,229	44,959
Junior Subordinated Debentures	5,155,000	5,155,000
Senior Convertible Debentures	6,084,000	6,084,000
Stockholders' Equity Attributable to Parent	87,434,087	77,988,780
Total Liabilities And Shareholders' Equity	$ 98,718,316	$ 89,272,739

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Taxes on Unrealized Holding Gains On Securities Available For Sale	$ 909,507	$ 4,286,481	$ 3,224,059
Taxes on Reclassification Adjustment For Gains Included In Net Income	$ 359,281	$ 503,813	$ 166,011

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Related Party Transactions (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Management [Member]
Loans and Leases Receivable, Related Parties [Roll Forward]
Balance, Beginning of Period	$ 315,338	$ 230,722	$ 273,330
New Loans	5,364	1,116	10,956
Less Loan Payments	47,372	29,641	53,564
Balance, End of Period	273,330	202,197	230,722
Related Party Deposit Liabilities		15,100,000	6,800,000
All Employees, Officers and Directors [Member]
Loans and Leases Receivable, Related Parties [Roll Forward]
Loans and Leases Receivable, Related Party, Aggregate as Percent of Equity		3.40%	5.70%
Director and Officer [Member]
Loans and Leases Receivable, Related Parties [Roll Forward]
Related Party Transaction, Expenses from Transactions with Related Party	$ 58,000	$ 81,000	$ 79,000

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Loans Receivable, Net (Financing Receivable Credit Quality Indicators) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Total	$ 347,768,717	$ 371,385,036
Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	77,282,817	83,004,482
Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	50,391,224	52,205,901
Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	10,564,467	7,775,098
Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	209,530,209	228,399,555
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	252,478,429	267,476,997
Pass [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	69,163,911	74,505,587
Pass [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	48,283,560	50,370,640
Pass [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	9,691,685	6,807,620
Pass [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	125,339,273	135,793,150
Caution [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	34,893,641	45,355,184
Caution [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	956,976	890,902
Caution [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	1,046,624	843,799
Caution [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	340,706	368,019
Caution [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	32,549,335	43,252,464
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	36,139,924	26,652,950
Special Mention [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	639,638	403,138
Special Mention [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	128,033	143,649
Special Mention [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	202,895	524,928
Special Mention [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	35,169,358	25,581,235
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total	24,256,723	31,899,905
Substandard [Member] | Residential Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	6,522,292	7,204,855
Substandard [Member] | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total	933,007	847,813
Substandard [Member] | Commercial Business
Financing Receivable, Recorded Investment [Line Items]
Total	329,181	74,531
Substandard [Member] | Commercial Real Estate
Financing Receivable, Recorded Investment [Line Items]
Total	$ 16,472,243	$ 23,772,706

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Carrying Amounts and Fair Value of Financial Instruments (Fair value measurements, recurring basis) (Details) (Fair Value, Measurements, Recurring, USD $)	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	$ 0
Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	429,700,540	431,003,452
Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0
FHLB Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
FHLB Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	13,246,661	12,670,450
FHLB Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Federal Farm Credit Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Federal Farm Credit Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	5,667,994	5,366,180
Federal Farm Credit Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
FNMA and FHLMC Bonds | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
FNMA and FHLMC Bonds | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	1,004,381	1,974,930
FNMA and FHLMC Bonds | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
SBA Bonds | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
SBA Bonds | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	108,126,694	100,823,985
SBA Bonds | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Tax Exempt Municipal Bonds | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Tax Exempt Municipal Bonds | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	62,495,423	61,315,122
Tax Exempt Municipal Bonds | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	238,852,713	248,596,535
Equity Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	0	0
Equity Securities | Fair Value, Inputs, Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	306,674	256,250
Equity Securities | Fair Value, Inputs, Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, Fair Value Disclosure, Recurring	$ 0	$ 0

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

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Schedule of Available for Sale Securities

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

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,317,462	$	83,691	$	154,492	$	13,246,661
Federal Farm Credit Bank ("FFCB") Securities	5,750,000		—		82,006		5,667,994
Federal National Mortgage Association ("FNMA") Bonds	996,822		7,559		—		1,004,381
Small Business Administration (“SBA”) Bonds	106,637,400		1,796,943		307,649		108,126,694
Tax Exempt Municipal Bonds	59,960,960		2,579,543		45,080		62,495,423
Mortgage-Backed Securities	233,963,842		5,704,855		815,984		238,852,713
Equity Securities	250,438		56,236		—		306,674
	$	420,876,924	$	10,228,827	$	1,405,211	$	429,700,540
	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,538,723	$	25,695	$	893,968	$	12,670,450
FFCB Securities	5,750,000		—		383,820		5,366,180
FNMA Bonds	1,993,473		—		18,543		1,974,930
SBA Bonds	99,228,708		1,914,720		319,443		100,823,985
Tax Exempt Municipal Bonds	63,590,959		410,151		2,685,988		61,315,122
Mortgage-Backed Securities	245,882,053		5,843,365		3,128,883		248,596,535
Equity Securities	257,938		—		1,688		256,250
	$	430,241,854	$	8,193,931	$	7,432,333	$	431,003,452

Schedule of Available For Sale Securities, Contractual Maturities

	Amortized Cost		Fair Value
Less Than One Year	$	760,264	$	773,573
One – Five Years	13,588,753		13,819,295
Five – Ten Years	68,880,177		69,887,727
After Ten Years	103,683,888		106,367,232
Mortgage-Backed Securities	233,963,842		238,852,713
	$	420,876,924	$	429,700,540

Schedule of Temporarily Impaired Securities, Fair Value and Unrealized Losses

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

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

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

	December 31, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	10,288,110	$	651,608	$	1,757,640	$	242,360	$	12,045,750	$	893,968
FFCB Securities	4,435,070		314,930		931,110		68,890		5,366,180		383,820
FNMA Bonds	1,974,930		18,543		—		—		1,974,930		18,543
SBA Bonds	12,183,961		288,678		3,541,453		30,765		15,725,414		319,443
Tax Exempt Municipal Bond	39,848,206		2,556,014		2,008,272		129,974		41,856,478		2,685,988
Mortgage-Backed Securities	88,516,030		2,756,216		6,436,369		372,667		94,952,399		3,128,883
Equity Securities	—		—		101,250		1,688		101,250		1,688
	$	157,246,307	$	6,585,989	$	14,776,094	$	846,344	$	172,022,401	$	7,432,333

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Loans Receivable, Net (Impaired Financing Receivables) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, related allowance	$ 440,000	$ 475,000	$ 1,102,558
Impaired financing receivable, recorded investment	39,946,538	20,247,955	31,354,814
Impaired financing receivable, unpaid principal balance	45,146,178	24,950,379	37,515,743
Impaired financing receivable, average recorded investment	41,555,434	22,211,689	33,574,855
Impaired financing receivable, interest income, accrual method	1,195,659	364,423	1,176,461
Residential Real Estate
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	4,500,902	2,519,814	3,936,316
Impaired financing receivable, with no related allowance, unpaid principal balance	4,611,873	2,618,003	4,588,645
Impaired financing receivable, with no related allowance, average recorded investment	4,531,543	2,642,156	4,044,142
Impaired financing receivable, with no related allowance, interest income, accrual method	130,896	0	31,704
Impaired financing receivable, with related allowance, recorded investment	0	0	901,920
Impaired financing receivable, with related allowance, unpaid principal balance	0	0	901,920
Impaired financing receivable, related allowance	0	0	158,791
Impaired financing receivable, with related allowance, average recorded investment	0	0	909,473
Impaired financing receivable, with related allowance, interest income, accrual method	0	0	0
Impaired financing receivable, recorded investment	4,500,902	2,519,814	4,838,236
Impaired financing receivable, unpaid principal balance	4,611,873	2,618,003	5,490,565
Impaired financing receivable, average recorded investment	4,531,543	2,642,156	4,953,615
Impaired financing receivable, interest income, accrual method	130,896	0	31,704
Consumer Loans
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	322,588	152,029	106,197
Impaired financing receivable, with no related allowance, unpaid principal balance	386,588	159,529	106,198
Impaired financing receivable, with no related allowance, average recorded investment	342,916	155,602	104,539
Impaired financing receivable, with no related allowance, interest income, accrual method	28,419	1,510	953
Impaired financing receivable, with related allowance, recorded investment	0	66,203	169,294
Impaired financing receivable, with related allowance, unpaid principal balance	0	66,203	169,294
Impaired financing receivable, related allowance	0	2,600	103,109
Impaired financing receivable, with related allowance, average recorded investment	0	67,522	170,499
Impaired financing receivable, with related allowance, interest income, accrual method	0	4,867	5,173
Impaired financing receivable, recorded investment	322,588	218,232	275,491
Impaired financing receivable, unpaid principal balance	386,588	225,732	275,492
Impaired financing receivable, average recorded investment	342,916	223,124	275,038
Impaired financing receivable, interest income, accrual method	28,419	6,377	6,126
Commercial Business
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	7,853	236,030	19,775
Impaired financing receivable, with no related allowance, unpaid principal balance	7,853	436,030	19,775
Impaired financing receivable, with no related allowance, average recorded investment	12,236	413,653	19,896
Impaired financing receivable, with no related allowance, interest income, accrual method	0	0	389
Impaired financing receivable, with related allowance, recorded investment	0	0	0
Impaired financing receivable, with related allowance, unpaid principal balance	0	0	0
Impaired financing receivable, related allowance	0	0	0
Impaired financing receivable, with related allowance, average recorded investment	0	0	0
Impaired financing receivable, with related allowance, interest income, accrual method	0	0	0
Impaired financing receivable, recorded investment	7,853	236,030	19,775
Impaired financing receivable, unpaid principal balance	7,853	436,030	19,775
Impaired financing receivable, average recorded investment	12,236	413,653	19,896
Impaired financing receivable, interest income, accrual method	0	0	389
Commercial Real Estate
Financing Receivable, Impaired [Line Items]
Impaired financing receivable, with no related allowance, recorded investment	31,808,577	13,721,964	21,810,347
Impaired financing receivable, with no related allowance, unpaid principal balance	35,373,833	18,088,149	26,775,853
Impaired financing receivable, with no related allowance, average recorded investment	32,963,079	14,980,690	23,618,648
Impaired financing receivable, with no related allowance, interest income, accrual method	1,036,344	297,839	886,737
Impaired financing receivable, with related allowance, recorded investment	3,306,618	3,551,915	4,410,965
Impaired financing receivable, with related allowance, unpaid principal balance	4,766,031	3,582,465	4,954,058
Impaired financing receivable, related allowance	440,000	472,400	840,658
Impaired financing receivable, with related allowance, average recorded investment	3,705,660	3,952,066	4,707,658
Impaired financing receivable, with related allowance, interest income, accrual method	0	60,207	251,505
Impaired financing receivable, recorded investment	35,115,195	17,273,879	26,221,312
Impaired financing receivable, unpaid principal balance	40,139,864	21,670,614	31,729,911
Impaired financing receivable, average recorded investment	36,668,739	18,932,756	28,326,306
Impaired financing receivable, interest income, accrual method	$ 1,036,344	$ 358,046	$ 1,138,242

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Regulatory Matters

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Regulatory Matters

Regulatory Matters

The Federal Reserve and bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the capital adequacy guidelines, regulatory capital is classified into two tiers. These guidelines require an institution to maintain a certain level of Tier 1 and Tier 2 capital to risk-weighted assets. Tier 1 capital consists of common shareholders' equity, excluding the unrealized gain or loss on securities available for sale, minus certain intangible assets. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 100% based on the risks believed to be inherent in the type of asset. Tier 2 capital consists of Tier 1 capital plus the general reserve for loan losses, subject to certain limitations. The Bank is required to maintain capital at a minimum level based on total average assets, which is known as the Tier 1 leverage ratio.

Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that could have a material adverse effect on the Company.  As of December 31, 2014 and 2013, the Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action.  There are no conditions or events that management believes have changed that classification as of the date of this Annual Report.

(14)         Regulatory Matters, Continued

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

	Actual				For Capital Adequacy				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
December 31, 2014
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	77,746	20.6	%	$	15,073	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	89,915		23.9	%	30,147		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	77,746		9.5	%	32,778		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	87,222	23.2	%	$	15,062	4.0	%	$	22,593	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	91,973		24.4	%	30,123		8.0	%	37,654		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	87,222		10.6	%	32,792		4.0	%	40,991		5.0	%
December 31, 2013
SECURITY FEDERAL CORP.
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	70,598	17.8	%	$	15,894	4.0	%	N/A		N/A
Total Risk-Based Capital (To Risk Weighted Assets)	84,529		21.3	%	31,788		8.0	%	N/A		N/A
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	70,598		8.3	%	34,079		4.0	%	N/A		N/A
SECURITY FEDERAL BANK
Tier 1 Risk-Based Core Capital (To Risk Weighted Assets)	$	81,624	20.6	%	$	15,883	4.0	%	$	23,825	6.0	%
Total Risk-Based Capital (To Risk Weighted Assets)	86,652		21.8	%	31,767		8.0	%	39,709		10.0	%
Tier 1 Leverage (Core) Capital (To Adjusted Tangible Assets)	81,624		9.6	%	34,069		4.0	%	42,586		5.0	%

As of January 1, 2015, FDIC regulations require insured state-chartered banks to maintain (i) a minimum ratio of Tier 1 capital to total assets of 4.00%, (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.00%, (iii) a minimum ratio of total-capital to risk-weighted assets of 8.00% and (iv) a minimum ratio of “Common Equity Tier 1 Capital” to risk-weighted assets of 4.50%. The Federal Reserve requires Security Federal Corporation to maintain capital adequacy that generally parallels the FDIC requirements.  At December 31, 2014, Security Federal Corporation and Security Federal Bank each exceeded all applicable capital requirements and there are no conditions or events that management is aware of that would prevent them from meeting the new capital requirements as of the date of this Annual Report.

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Loans Receivable, Net (Tables)

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

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

	December 31, 2014		December 31, 2013
Residential Real Estate Loans	$	77,282,817	$	83,004,482
Consumer Loans	50,391,224		52,205,901
Commercial Business	10,564,467		7,775,098
Commercial Real Estate	209,530,209		228,399,555
Total Loans Held For Investment	347,768,717		371,385,036
Loans Held For Sale	1,864,999		1,234,158
Total Loans Receivable, Gross	349,633,716		372,619,194
Less:
Allowance For Loan Losses	8,357,496		10,241,970
Loans In Process	1,379,114		3,465,072
Deferred Loan Fees (Costs)	22,611		(4,513		)
	9,759,221		13,702,529
Total Loans Receivable, Net	$	339,874,495	$	358,916,665

Schedule of Allowance for Loan Losses

Changes in the allowance for loan losses for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 are summarized as follows:

	Year Ended December 31,						Nine Months Ended December 31,
	2014			2013			2012
Balance At Beginning Of Period	$	10,241,970		$	11,318,371		$	14,615,198
Provision For Loan Losses	450,000			2,645,381			1,975,000
Charge Offs	(3,114,833		)	(5,209,830		)	(7,422,393		)
Recoveries	780,359			1,488,048			2,150,566
Total Allowance For Loan Losses	$	8,357,496		$	10,241,970		$	11,318,371

Financing Receivable Credit Quality Indicators

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

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

	Credit Quality Measures
December 31, 2013	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	74,505,587	$	890,902	$	403,138	$	7,204,855	$	83,004,482
Consumer	50,370,640		843,799		143,649		847,813		52,205,901
Commercial Business	6,807,620		368,019		524,928		74,531		7,775,098
Commercial Real Estate	135,793,150		43,252,464		25,581,235		23,772,706		228,399,555
Total	$	267,476,997	$	45,355,184	$	26,652,950	$	31,899,905	$	371,385,036

Past Due Financing Receivables

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

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	—	$	1,087,299	$	3,061,339	$	4,148,638	$	73,134,179	$	77,282,817
Consumer	1,868,787		91,223		573,644		2,533,654		47,857,570		50,391,224
Commercial    Business	162,481		99,784		246,977		509,242		10,055,225		10,564,467
Commercial    Real Estate	4,544,813		1,094,701		9,859,689		15,499,203		194,031,006		209,530,209
Total	$	6,576,081	$	2,373,007	$	13,741,649	$	22,690,737	$	325,077,980	$	347,768,717

The following table presents an age analysis of past due balances by category at December 31, 2013.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	—	$	1,363,132	$	4,607,613	$	5,970,745	$	77,033,737	$	83,004,482
Consumer	1,494,429		234,878		399,062		2,128,369		50,077,532		52,205,901
Commercial    Business	115,186		—		33,055		148,241		7,626,857		7,775,098
Commercial    Real Estate	5,103,522		2,046,666		4,972,667		12,122,855		216,276,700		228,399,555
Total	$	6,713,137	$	3,644,676	$	10,012,397	$	20,370,210	$	351,014,826	$	371,385,036

Schedule of Financing Receivables, Non Accrual Status

The following table shows non-accrual loans by category atDecember 31, 2014 compared to 2013.

	At December 31, 2014				At December 31, 2013				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	3,061,339	0.9	%	$	4,607,613	1.3	%	$	(1,546,274	)	(33.6	)%
Commercial Business	246,977		0.1		33,055		—		213,922			647.2
Commercial Real Estate	9,859,689		2.8		4,972,667		1.4		4,887,022			98.3
Consumer	573,644		0.2		399,062		0.1		174,582			43.7
Total Non- accrual Loans	$	13,741,649	4.0	%	$	10,012,397	2.7	%	$	3,729,252		37.2	%

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

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent

The following tables show the activity in the allowance for loan losses by category for the periods indicated.

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

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

	For the Nine Months Ended December 31, 2012
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,928,625		$	1,498,111		$	644,855		$	10,543,607		$	14,615,198
Provision	183,236			(227,872		)	175,141			1,844,495			1,975,000
Charge-Offs	(647,161		)	(286,612		)	(209,898		)	(6,278,722		)	(7,422,393		)
Recoveries	56,859			17,644			8,821			2,067,242			2,150,566
Ending Balance	$	1,521,559		$	1,001,271		$	618,919		$	8,176,622		$	11,318,371

Allowance for Credit Losses on Financing Receivables

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

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

	Allowance For Loan Losses
December 31, 2013	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	158,791	$	1,547,852	$	1,706,643
Consumer	103,109		744,668		847,777
Commercial Business	—		426,658		426,658
Commercial Real Estate	840,658		6,420,234		7,260,892
Total	$	1,102,558	$	9,139,412	$	10,241,970

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

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

	Loans Receivable
December 31, 2013	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	4,838,236	$	78,166,246	$	83,004,482
Consumer	275,491		51,930,410		52,205,901
Commercial Business	19,775		7,755,323		7,775,098
Commercial Real Estate	26,221,312		202,178,243		228,399,555
Total	$	31,354,814	$	340,030,222	$	371,385,036

Impaired Financing Receivables

The following tables are a summary of information related to impaired loans as of and for the years ended December 31, 2014 and 2013 and for the nine months ended December 31, 2012.

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

(4)       Loans Receivable, Net, Continued

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

	December 31, 2012
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	4,500,902	$	4,611,873	$	—	$	4,531,543	$	130,896
Consumer	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	31,808,577		35,373,833		—		32,963,079		1,036,344
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	—		—		—		—		—
Commercial Business	—		—		—		—		—
Commercial Real Estate	3,306,618		4,766,031		440,000		3,705,660		—
Total
Residential Real Estate	4,500,902		4,611,873		—		4,531,543		130,896
Consumer	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	35,115,195		40,139,864		440,000		36,668,739		1,036,344
Total	$	39,946,538	$	45,146,178	$	440,000	$	41,555,434	$	1,195,659

Troubled Debt Restructurings on Financing Receivables

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

	For the Year Ended December 31, 2014
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—
Consumer Loans	—	—		—
Commercial Business	—	—		—
Commercial Real Estate	2	186,188		186,188
Total	2	186,188		186,188

	For the Year Ended December 31, 2013					For the Nine Months Ended December 31, 2012
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—	—	$	—	$	—
Consumer Loans	—	—		—		—	—		—
Commercial Business	1	32,850		32,850		—	—		—
Commercial Real Estate	4	1,409,693		1,409,693		1	257,452		257,452
Total	5	1,442,543		1,442,543		1	257,452		257,452

(4)       Loans Receivable, Net, Continued

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

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Troubled Debt Restructurings That Subsequently Defaulted During the Period	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential Real Estate	—	$	—	—	$	—	—	$	—
Consumer Loans	—	—		—	—		—	—
Commercial Business	—	—		—	—		—	—
Commercial Real Estate	1	66,138		1	146,267		4	880,745
Total	1	$	66,138	1	$	146,267	4	$	880,745

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Security Federal Corporation Condensed Financial Statements (Parent Company Only) (Condensed Statements of Cash Flow Data) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Operating Activities:
Net Income	$ 1,954,949	$ 5,810,740	$ 3,791,162	$ 2,384,896
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Stock Compensation Expense	4,472	12,676	(2,580)
Net Cash Provided By Operating Activities	11,295,340	12,200,781	20,361,942
Investing Activities:
Decrease In Loans Receivable	28,481,291	17,578,222	28,739,400
Net Cash Provided By Investing Activities	25,472,963	24,645,287	17,269,471
Financing Activities:
Repayment Of Warrant Issued In Conjunction With Preferred Stock	0	0	(50,000)
Dividends Paid To Shareholders-Preferred Stock	(330,000)	(440,000)	(440,000)
Dividends Paid To Shareholders-Common Stock	(706,560)	(942,080)	(942,082)
Net Cash Used By Financing Activities	(38,195,725)	(34,283,137)	(37,905,592)
Net Increase (Decrease) In Cash	(1,427,422)	2,562,931	(274,179)
Cash And Cash Equivalents At Beginning Of Year	9,331,372	7,629,771	7,903,950
Cash And Cash Equivalents At End Of Year	7,903,950	10,192,702	7,629,771	7,903,950
Parent Company [Member]
Operating Activities:
Net Income	1,954,949	5,810,740	3,791,162
Adjustments To Reconcile Net Income To Net Cash Provided By Operating Activities:
Equity In Earnings Of Security Federal Bank	(2,229,630)	(3,779,212)	(2,558,986)
Stock Compensation Expense	4,472	12,676	(2,580)
(Increase) Decrease In Accounts Receivable And Other Assets	56,203	(49)	(15,248)
Increase (Decrease) In Accounts Payable	(122,707)	270	132
Net Cash Provided By Operating Activities	(336,713)	2,044,425	1,214,480
Financing Activities:
Dividends Paid To Shareholders-Preferred Stock	(330,000)	(440,000)	(440,000)
Dividends Paid To Shareholders-Common Stock	(706,560)	(942,080)	(942,082)
Net Cash Used By Financing Activities	(1,036,560)	(1,382,080)	(1,432,082)
Net Increase (Decrease) In Cash	(1,373,273)	662,345	(217,602)
Cash And Cash Equivalents At Beginning Of Year	5,471,308	3,880,433	4,098,035
Cash And Cash Equivalents At End Of Year	$ 4,098,035	$ 4,542,778	$ 3,880,433	$ 4,098,035

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Stock Warrants

12 Months Ended

Dec. 31, 2014

Other Liabilities Disclosure [Abstract]

Stock Warrants

Stock Warrants

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

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

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Premises and Equipment, Net (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross		$ 35,777,374	$ 33,708,822
Less Accumulated Depreciation		(17,544,148)	(16,465,432)
Total Premises And Equipment, Net		18,233,226	17,243,390
Depreciation Expense	1,055,662	1,214,912	1,243,839
Land [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross		6,729,097	5,471,503
Building and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross		17,796,209	17,635,363
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross		11,068,028	10,395,793
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross		$ 184,040	$ 206,163

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Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income (USD $)	Total	Preferred Stock	Warrants	Common Stock	Additional Paid-In Capital	Treasury Stock	Accumulated Other Comprehensive Income	Retained Earnings
Balance at at Mar. 31, 2012	$ 80,771,886	$ 22,000,000	$ 400,000	$ 31,449	$ 11,626,245	$ (4,330,712)	$ 6,533,573	$ 44,511,331
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	1,954,949							1,954,949
Other Comprehensive Income, Net Of Tax:	897,737						897,737
Stock Compensation Expense	4,472							0
Cash Dividends On Preferred Stock	(330,000)							(330,000)
Cash Dividends On Common Stock	(706,560)							(706,560)
Balance at at Dec. 31, 2012	82,592,484	22,000,000	400,000	31,449	11,630,717	(4,330,712)	7,431,310	45,429,720
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	3,791,162							3,791,162
Other Comprehensive Income, Net Of Tax:	(6,958,904)						(6,958,904)
Stock Compensation Expense	(2,580)				(2,580)
Cash Dividends On Preferred Stock	(440,000)							(440,000)
Cash Dividends On Common Stock	(942,082)							(942,082)
Balance at at Dec. 31, 2013	77,990,080	22,000,000	0	31,449	11,978,137	(4,330,712)	472,406	47,838,800
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net Income	5,810,740							5,810,740
Other Comprehensive Income, Net Of Tax:	5,003,969						5,003,969
Stock Compensation Expense	12,676				12,676
Cash Dividends On Preferred Stock	(440,000)							(440,000)
Cash Dividends On Common Stock	(942,080)							(942,080)
Balance at at Dec. 31, 2014	$ 87,435,385	$ 22,000,000		$ 31,449	$ 11,990,813	$ (4,330,712)	$ 5,476,375	$ 52,267,460

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2014	Dec. 31, 2013
ASSETS:
Amortized Cost of Investment And Mortgage-Backed Securities Available For Sale	$ 420,876,924	$ 430,241,854
Fair Value of Investment And Mortgage-Backed Securities Held To Maturity	0	0
Allowance For Loan Losses	$ 8,357,496	$ 10,241,970
Shareholders' Equity:
Serial Preferred Stock Par Value Per Share	$ 0.01	$ 0.01
Serial Preferred Stock Shares Authorized	200,000	200,000
Serial Preferred Stock Shares Issued	22,000	22,000
Serial Preferred Stock Shares Outstanding	22,000	22,000
Common Stock Par Value Per Share	$ 0.01	$ 0.01
Common Stock Shares Authorized	5,000,000	5,000,000
Common Stock Shares Issued	3,144,934	3,144,934
Common Stock Shares Outstanding	2,944,001	2,944,001
Treasury Stock Shares Held	200,933	200,933

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Deposits

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Deposits

Deposits

Deposits outstanding by type of account are summarized as follows:

	At December 31, 2014					At December 31, 2013
	Balance		Weighted Rate		Interest Rate Range	Balance		Weighted Rate		Interest Rate Range
Checking Accounts	$	143,422,150	0.03	%	0.00-0.15%	$	136,695,876	0.04	%	0.00-0.15%
Money Market Accounts	234,819,052		0.19	%	0.10-0.20%	240,631,708		0.28	%	0.10-0.30%
Statement Savings Accounts	28,622,933		0.10	%	0.00-0.10%	24,485,648		0.10	%	0.00-0.10%
Total	$	406,864,135	0.13	%	0.00-0.20%	$	401,813,232	0.19	%	0.00-0.30%
Certificate Accounts:
0.00 – 1.99%	227,473,082					226,750,180
2.00 – 2.99%	25,605,349					28,848,252
3.00 – 3.99%	172,598					1,285,108
Total	253,251,029		0.79	%	0.05-3.01%	256,883,540		0.83	%	0.05-3.25%
Total Deposits	$	660,115,164	0.38	%	0.00-3.01%	$	658,696,772	0.44	%	0.00-3.25%

Included in the certificates above were $38.8 million and $25.6 million in brokered deposits at December 31, 2014 and 2013, respectively, with a weighted average interest rate of 1.14% and 1.23%, respectively. Of the brokered deposits at December 31, 2014, $1.9 million mature within one year.

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 was $140.0 million and $129.9 million at December 31, 2014 and 2013, respectively.

Certificate of deposits that met or exceeded the FDIC Insurance limit of $250,000 were $69.6 million and $53.1 million at December 31, 2014 and 2013, respectively.

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

	At December 31,
	2014		2013
Within 1 Year	$	142,490,027	$	163,680,585
After 1 Year, Within 2 Years	57,481,254		45,089,513
After 2 Years, Within 3 Years	22,273,310		22,483,793
After 3 Years, Within 4 Years	18,114,738		8,996,498
After 4 Years, Within 5 Years	12,891,700		16,633,151
Thereafter	—		—
	$	253,251,029	$	256,883,540

At December 31, 2014 and 2013, the Bank had $132,000and $133,000, respectively, in overdrafts that were reclassified to loans.

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Carrying Amounts and Fair Value of Financial Instruments (Narrative) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Fair Value Disclosures [Abstract]
Investor funding period		30 days
Review period to request a new third party appraisal		24 months
Impaired financing receivable, recorded investment	$ 39,946,538	$ 20,247,955	$ 31,354,814
Impaired financing receivable, average recorded investment	41,555,434	22,211,689	33,574,855
Liabilities, fair value disclosure, recurring		0
Fair value disclosure, off-balance sheet risks, amount, liability		$ 45,300,000

XML

Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Commitments, Period of Time to Provide Funding	45 days
Loans and Leases Receivable, Commitments to Purchase or Sell	$ 1.9	$ 1.2
Unused lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	44.5	30.8
Undispursed Loans in Process [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	1.4	3.5
Commitments for Letters of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	0.8	2.2
Unused Credit Card Loan Commitments [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	4.4	4.5
Commitments to Extend Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Unused Commitments to Extend Credit	$ 0.6

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Stock Warrants (Details) (USD $)	0 Months Ended	12 Months Ended
	Jul. 31, 2013	Dec. 31, 2008
Class of Warrant or Right [Line Items]
Payments for Repurchase of Warrants	$ 50,000
Warrant Issued In Conjunction With Serial Preferred Stock	400,000
Adjustments to Additional Paid in Capital, Warrant Repurchased	$ 350,000
US Department of Treasury Capital Purchase Program [Member]
Class of Warrant or Right [Line Items]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right		137,966
Class of Warrant or Right, Termination Period		10 years

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Document and Entity Information (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2014	Mar. 20, 2015	Jun. 30, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	Security Federal Corporation
Document Type	10-K
Document Period End Date	Dec. 31, 2014
Amendment Flag	false
Entity Central Index Key	0000818677
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		2,945,474
Entity Public Float			$ 30.2
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY

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

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

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

Advances From Federal Home Loan Bank And Other Borrowings

Advances from the FHLB are summarized by year of maturity and weighted average interest rate below:

	December 31, 2014
Year Ending December 31	Amount		Weighted Rate
2015	$	15,000,000	2.61	%
2016	20,000,000		4.61	%
2017	12,900,000		4.38	%
2018	5,000,000		3.39	%
	$	52,900,000	3.87	%

These advances are secured by a blanket collateral agreement with the FHLB by pledging the Bank’s portfolio of residential first mortgage loans and investment securities with an amortized cost and fair value of $99.9 million and $99.3 million, respectively, at December 31, 2014 and $111.6 million and $102.7 million, respectively, at December 31, 2013. Advances are subject to prepayment penalties.

The following table shows callable FHLB advances as of December 31, 2014. These advances are also included in the above table.  All callable advances are callable at the option of the FHLB.  If an advance is called, the Bank has the option to pay off the advance without penalty, re-borrow funds on different terms, or convert the advance to a three-month floating rate advance tied to LIBOR.

As of December 31, 2014
Borrow Date	Maturity Date	Amount	Int. Rate	Type	Call Dates
11/23/05	11/23/15	$5,000,000	3.933%	Multi-Call	05/23/08 and quarterly thereafter
07/11/06	07/11/16	5,000,000	4.800%	Multi-Call	07/11/08 and quarterly thereafter
11/29/06	11/29/16	5,000,000	4.025%	Multi-Call	05/29/08 and quarterly thereafter
05/24/07	05/24/17	7,900,000	4.375%	Multi-Call	05/27/08 and quarterly thereafter
07/25/07	07/25/17	5,000,000	4.396%	Multi-Call	07/25/08 and quarterly thereafter

During the year ended December 31, 2014, the Bank prepaid one FHLB advance totaling $5.0 million and incurred $178,000 in prepayment penalties related to this prepayment. During the year ended December 31, 2013, the Bank prepaid six FHLB advances totaling $30.0 million and incurred $589,000 in prepayment penalties. The Bank did not prepay any FHLB advances during the nine months ended December 31, 2012.

At December 31, 2014 and December 31, 2013, the Bank had $195.7 million and $167.9 million in additional borrowing capacity, respectively, at the FHLB.

The Bank had $8.5 million and $8.0 million in other borrowings at December 31, 2014 and 2013, respectively.  These borrowings consist of short-term repurchase agreements with certain commercial demand deposit customers for sweep accounts. The repurchase agreements typically mature within one to three days and the interest rate paid on these borrowings floats monthly with money market type rates. At both December 31, 2014 and December 31, 2013, the interest rate paid on the repurchase agreements was 0.15%. The maximum amount outstanding at any one month end during the year ended December 31, 2014 was $10.8 million compared to $9.9 million during the year ended December 31, 2013. The Bank had pledged as collateral for these repurchase agreements investment and mortgage-backed securities with amortized costs and fair values of $17.3 million and $18.0 million, respectively, at December 31, 2014 and $14.8 million and $15.4 million, respectively, at December 31, 2013.

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Junior Subordinated Debentures (Details) (Junior Subordinated Debt [Member], Capital Securities [Member], USD $) In Millions, unless otherwise specified	0 Months Ended	9 Months Ended	12 Months Ended
	Sep. 21, 2006	Dec. 31, 2012	Dec. 31, 2014 QuarterlyPeriods
Junior Subordinated Debt [Member] | Capital Securities [Member]
Debt Instrument [Line Items]
Proceeds from Issuance of Subordinated Long-term Debt	$ 5.2
Annual Distribution Rate			1.94%
Floating basis spread on variable rate		1.70%	1.70%
Debt Instrument, Rights to Defer Interest Payments, Consecutive Quarterly Periods			20

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Employee Benefit Plans (Options outstanding) (Details) (USD $)	Dec. 31, 2014
$20.55
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	18,000
Option Price	$ 20.55
$23.91
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	3,500
Option Price	$ 23.91
$23.03
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	3,500
Option Price	$ 23.03
$24.34
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	2,000
Option Price	$ 24.34
$24.61
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	1,000
Option Price	$ 24.61
$24.28
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	2,000
Option Price	$ 24.28
$23.49
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	13,000
Option Price	$ 23.49
$22.91
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	2,500
Option Price	$ 22.91
$22.91
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding Options	2,000
Option Price	$ 22.91

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Consolidated Statements of Income (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Interest Income:
Loans	$ 17,907,415	$ 19,416,904	$ 21,583,028
Mortgage-Backed Securities	4,882,993	6,036,955	5,267,280
Investment Securities	1,994,411	4,017,705	3,588,794
Other	6,405	10,600	8,265
Total Interest Income	24,791,224	29,482,164	30,447,367
Interest Expense:
NOW And Money Market Accounts	832,856	568,397	813,278
Statement Savings Accounts	32,720	26,600	33,897
Certificate Accounts	2,838,292	1,990,003	2,566,220
FHLB Advances And Other Borrowed Money	3,306,898	2,640,197	3,529,553
Senior Convertible Debentures	365,040	486,720	486,720
Junior Subordinated Debentures	84,010	101,139	103,268
Total Interest Expense	7,459,816	5,813,056	7,532,936
Net Interest Income	17,331,408	23,669,108	22,914,431
Provision For Loan Losses	(1,975,000)	(450,000)	(2,645,381)
Net Interest Income After Provision For Loan Losses	15,356,408	23,219,108	20,269,050
Non-Interest Income:
Gain On Sale Of Investment Securities	945,476	436,871	1,325,823
Gain On Sale Of Loans	498,879	620,994	779,554
Service Fees On Deposit Accounts	880,209	1,176,849	1,152,875
Commissions From Insurance Agency	346,015	424,969	453,446
Trust Income	380,000	542,000	520,000
Bank Owned Life Insurance Income	315,000	554,364	339,000
Check Card Fee Income	615,815	901,998	853,027
Revenue from Grants	0	851,999	929,346
Other	383,460	652,739	542,733
Total Non-Interest Income	4,364,854	6,162,783	6,895,804
General And Administrative Expenses:
Compensation And Employee Benefits	7,978,054	11,308,610	10,964,366
Occupancy	1,498,858	1,995,283	1,970,403
Advertising	303,754	484,056	355,678
Depreciation And Maintenance Of Equipment	1,271,609	1,665,454	1,598,067
FDIC Insurance Premiums	514,065	691,937	746,389
Amortization Of Intangibles	37,503	11,970	50,004
Net Cost Of Operation Of Other Real Estate Owned	2,745,667	541,840	1,582,168
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Repayment and Penalties	0	178,067	589,023
Other	2,713,044	4,390,766	4,177,210
Total General And Administrative Expenses	17,062,554	21,267,983	22,033,308
Income Before Income Taxes	2,658,708	8,113,908	5,131,546
Provision For Income Taxes	703,759	2,303,168	1,340,384
Net Income	1,954,949	5,810,740	3,791,162
Preferred Stock Dividends	330,000	440,000	440,000
Net Income Available To Common Shareholders	$ 1,624,949	$ 5,370,740	$ 3,351,162
Net Income Per Common Share (Basic)	$ 0.55	$ 1.82	$ 1.14
Net Income Per Common Share (Diluted)	$ 0.55	$ 1.75	$ 1.12
Cash Dividend Per Share On Common Stock	$ 0.24	$ 0.32	$ 0.32
Weighted Average Shares Outstanding (Basic)	2,944,001	2,944,001	2,944,001
Weighted Average Shares Outstanding (Diluted)	2,944,001	3,248,201	3,248,201

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Loans Receivable, Net

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Loans Receivable, Net

Loans Receivable, Net

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

	December 31, 2014		December 31, 2013
Residential Real Estate Loans	$	77,282,817	$	83,004,482
Consumer Loans	50,391,224		52,205,901
Commercial Business	10,564,467		7,775,098
Commercial Real Estate	209,530,209		228,399,555
Total Loans Held For Investment	347,768,717		371,385,036
Loans Held For Sale	1,864,999		1,234,158
Total Loans Receivable, Gross	349,633,716		372,619,194
Less:
Allowance For Loan Losses	8,357,496		10,241,970
Loans In Process	1,379,114		3,465,072
Deferred Loan Fees (Costs)	22,611		(4,513		)
	9,759,221		13,702,529
Total Loans Receivable, Net	$	339,874,495	$	358,916,665

Changes in the allowance for loan losses for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 are summarized as follows:

	Year Ended December 31,						Nine Months Ended December 31,
	2014			2013			2012
Balance At Beginning Of Period	$	10,241,970		$	11,318,371		$	14,615,198
Provision For Loan Losses	450,000			2,645,381			1,975,000
Charge Offs	(3,114,833		)	(5,209,830		)	(7,422,393		)
Recoveries	780,359			1,488,048			2,150,566
Total Allowance For Loan Losses	$	8,357,496		$	10,241,970		$	11,318,371

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 the least risky in terms of determining the allowance for loan losses. Substandard loans are considered the most risky category. These loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans 60 days or more past due are automatically classified in this category. The other two categories fall in between these two grades.

(4)      Loans Receivable, Net, Continued

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

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

	Credit Quality Measures
December 31, 2013	Pass		Caution		Special Mention		Substandard		Total Loans
Residential Real Estate	$	74,505,587	$	890,902	$	403,138	$	7,204,855	$	83,004,482
Consumer	50,370,640		843,799		143,649		847,813		52,205,901
Commercial Business	6,807,620		368,019		524,928		74,531		7,775,098
Commercial Real Estate	135,793,150		43,252,464		25,581,235		23,772,706		228,399,555
Total	$	267,476,997	$	45,355,184	$	26,652,950	$	31,899,905	$	371,385,036

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

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	—	$	1,087,299	$	3,061,339	$	4,148,638	$	73,134,179	$	77,282,817
Consumer	1,868,787		91,223		573,644		2,533,654		47,857,570		50,391,224
Commercial    Business	162,481		99,784		246,977		509,242		10,055,225		10,564,467
Commercial    Real Estate	4,544,813		1,094,701		9,859,689		15,499,203		194,031,006		209,530,209
Total	$	6,576,081	$	2,373,007	$	13,741,649	$	22,690,737	$	325,077,980	$	347,768,717

The following table presents an age analysis of past due balances by category at December 31, 2013.

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable
Residential    Real Estate	$	—	$	1,363,132	$	4,607,613	$	5,970,745	$	77,033,737	$	83,004,482
Consumer	1,494,429		234,878		399,062		2,128,369		50,077,532		52,205,901
Commercial    Business	115,186		—		33,055		148,241		7,626,857		7,775,098
Commercial    Real Estate	5,103,522		2,046,666		4,972,667		12,122,855		216,276,700		228,399,555
Total	$	6,713,137	$	3,644,676	$	10,012,397	$	20,370,210	$	351,014,826	$	371,385,036

(4)      Loans Receivable, Net, Continued

At December 31, 2014 and 2013, the Company did not have any loans that were 90 days or more past due and still accruing interest. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, we may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them. The following table shows non-accrual loans by category atDecember 31, 2014 compared to 2013.

	At December 31, 2014				At December 31, 2013				$			%
	Amount		Percent (1)		Amount		Percent (1)		Increase (Decrease)			Increase (Decrease)
Non-accrual Loans:
Residential Real Estate	$	3,061,339	0.9	%	$	4,607,613	1.3	%	$	(1,546,274	)	(33.6	)%
Commercial Business	246,977		0.1		33,055		—		213,922			647.2
Commercial Real Estate	9,859,689		2.8		4,972,667		1.4		4,887,022			98.3
Consumer	573,644		0.2		399,062		0.1		174,582			43.7
Total Non- accrual Loans	$	13,741,649	4.0	%	$	10,012,397	2.7	%	$	3,729,252		37.2	%

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

The following tables show the activity in the allowance for loan losses by category for the periods indicated.

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

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

	For the Nine Months Ended December 31, 2012
	Residential Real Estate			Consumer			Commercial Business			Commercial Real Estate			Total
Beginning Balance	$	1,928,625		$	1,498,111		$	644,855		$	10,543,607		$	14,615,198
Provision	183,236			(227,872		)	175,141			1,844,495			1,975,000
Charge-Offs	(647,161		)	(286,612		)	(209,898		)	(6,278,722		)	(7,422,393		)
Recoveries	56,859			17,644			8,821			2,067,242			2,150,566
Ending Balance	$	1,521,559		$	1,001,271		$	618,919		$	8,176,622		$	11,318,371

(4)      Loans Receivable, Net, Continued

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

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

	Allowance For Loan Losses
December 31, 2013	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	158,791	$	1,547,852	$	1,706,643
Consumer	103,109		744,668		847,777
Commercial Business	—		426,658		426,658
Commercial Real Estate	840,658		6,420,234		7,260,892
Total	$	1,102,558	$	9,139,412	$	10,241,970

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

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

	Loans Receivable
December 31, 2013	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
Residential Real Estate	$	4,838,236	$	78,166,246	$	83,004,482
Consumer	275,491		51,930,410		52,205,901
Commercial Business	19,775		7,755,323		7,775,098
Commercial Real Estate	26,221,312		202,178,243		228,399,555
Total	$	31,354,814	$	340,030,222	$	371,385,036

(4)       Loans Receivable, Net, Continued

Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired management measures impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sale, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and if it is over 24 months old will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to performan internal analysis. The average balance of impaired loans was $22.2 million for year ended December 31, 2014 compared to $33.6 million for the year ended December 31, 2013.

The following tables are a summary of information related to impaired loans as of and for the years ended December 31, 2014 and 2013 and for the nine months ended December 31, 2012.

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

(4)       Loans Receivable, Net, Continued

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

	December 31, 2012
Impaired Loans	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance    Recorded:
Residential Real Estate	$	4,500,902	$	4,611,873	$	—	$	4,531,543	$	130,896
Consumer	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	31,808,577		35,373,833		—		32,963,079		1,036,344
With An Allowance Recorded:
Residential Real Estate	—		—		—		—		—
Consumer	—		—		—		—		—
Commercial Business	—		—		—		—		—
Commercial Real Estate	3,306,618		4,766,031		440,000		3,705,660		—
Total
Residential Real Estate	4,500,902		4,611,873		—		4,531,543		130,896
Consumer	322,588		386,588		—		342,916		28,419
Commercial Business	7,853		7,853		—		12,236		—
Commercial Real Estate	35,115,195		40,139,864		440,000		36,668,739		1,036,344
Total	$	39,946,538	$	45,146,178	$	440,000	$	41,555,434	$	1,195,659

(4)       Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (FASB ASC Topic 310-40).  The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.  All TDRs are included in impaired loans at December 31, 2014 and 2013 and amounted to $9.6 million and $12.4 million, respectively.

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

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

	For the Year Ended December 31, 2014
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—
Consumer Loans	—	—		—
Commercial Business	—	—		—
Commercial Real Estate	2	186,188		186,188
Total	2	186,188		186,188

	For the Year Ended December 31, 2013					For the Nine Months Ended December 31, 2012
Troubled Debt Restructurings	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Residential Real Estate	—	$	—	$	—	—	$	—	$	—
Consumer Loans	—	—		—		—	—		—
Commercial Business	1	32,850		32,850		—	—		—
Commercial Real Estate	4	1,409,693		1,409,693		1	257,452		257,452
Total	5	1,442,543		1,442,543		1	257,452		257,452

During the year ended December 31, 2014, the Bank modified two loans that were considered to be TDRs. The Bank lowered the interest rate on both of these loans to enable the borrowers to begin making monthly principal and interest payments.During the year ended December 31, 2013, the Bank modified five loans that were considered to be a TDR. The Bank lowered the interest rate on each of these loans and changed the payment to interest only on for an agreed upon period on three of these loans. During the nine months ended December 31, 2012, the Bank modified one loan that was considered to be a TDR. The Bank lowered the interest rate on the loan and changed the payment to interest only.

(4)       Loans Receivable, Net, Continued

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

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Troubled Debt Restructurings That Subsequently Defaulted During the Period	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Residential Real Estate	—	$	—	—	$	—	—	$	—
Consumer Loans	—	—		—	—		—	—
Commercial Business	—	—		—	—		—	—
Commercial Real Estate	1	66,138		1	146,267		4	880,745
Total	1	$	66,138	1	$	146,267	4	$	880,745

At December 31, 2014, seven restructured loans were in default, including the one which had been restructured in the last 12 months. At December 31, 2013, 5 loans that had been previously restructured were in default and at December 31, 2012 6 previously restructured loans were in default. The Bank considers any loan 30 days or more past due to be in default.

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

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

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Investment and Mortgage-Backed Securities, Held to Maturity

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Investment and Mortgage-Backed Securities, Held to Maturity

Investment and Mortgage-Backed Securities, Held to Maturity

On June 30, 2013, the Company transferred all of its investment and mortgage-backed securities classified as held to maturity to available for sale. Based on changes in the current rate environment, management elected this change in an effort to more effectively manage the investment portfolio, including subsequently selling some securities that were formerly classified as held to maturity. The amortized cost of the securities that were transferred totaled $72.0 million and the net unrealized gain related to these securities totaled $1.4 million on the date of the transfer. As a result of the transfer and subsequent sales, the Company believes its held to maturity classification process has been compromised and careful evaluation and analysis will be required going forward in determining when circumstances are suitable for management to assert with a great degree of credibility that it has the intent and ability to hold investment and mortgage-backed securities to maturity.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2014

Postemployment Benefits [Abstract]

Employee Benefit Plans

Employee Benefit Plans

The Company is participating in a multiple employer defined contribution employee benefit plan covering substantially all employees with six months or more of service.  The Company matches a portion of the employees’ contributions and the plan has a discretionary profit sharing provision.  The total employer contributions were $186,000 for the year ended December 31, 2014, $189,000 for the year ended December 31, 2013 and $145,000 for the nine months ended December 31, 2012.

The Company has an Employee Stock Purchase Plan (“ESPP”).  The ESPP allows employees of the Company to purchase stock quarterly through a payroll deduction at a discount calculated as 15% of the market value with a floor equal to the Company’s book value.  The ESPP, which was approved by stockholders in July 2005, became effective in January 2007. Participation in the ESPP is voluntary.  Employees are limited to investing $25,000 or 5% of their annual salary, whichever is lower, during the year.  During the year ended December 31, 2014, there were no employee stock purchases within the plan.

The Company implemented an Incentive Compensation Plan (the "Plan") during the year ended December 31, 2014. Incentive awards are based on the financial and operating performance of the Company as well as other participant specific objectives. The Plan allows employees of the Company to earn up to 7.5 days of their annual salary for successfully completing specific goals established by the participants and their respective supervisors plus an additional 2.5 days of their annual salary if the Company meets an annual predetermined net operating income amount determined by the Board of Directors. The Company also implemented an Incentive Compensation Plan for executive level officers (the "Executive Plan"). Under this plan incentive awards are based on contributions to performance as measured by critical operating and financial ratios, and other participant specific objectives. The Company has to meet the annual predetermined net operating income amount determined by the Board of Directors for any incentive awards to be paid under the Executive Plan. If the Company does not meet the required net income amount, no incentives are paid regardless of the executive's performance on individual objectives or entity wide objectives. Participation in both plans is voluntary. At December 31, 2014, the Company accrued $335,000 for incentive payments related to both plans, which were paid during 2015.

Certain officers of the Company participate in a supplemental retirement plan.  These benefits are not qualified under the Internal Revenue Code and they are not funded.  During the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, the Company incurred expenses of $103,000, $172,000, and $144,000, respectively, for this plan.

Certain officers and directors of the Company participate in incentive and non-qualified stock option plans. Prior to fiscal 2010, the Company had three stock option plans that together authorized the Company to grant 150,000 options. In 2008, the 2008 Equity Incentive Plan was approved by stockholders and implemented by the Company with the intention of replacing the previous three option plans. No additional options are to be granted under the old plans and forfeitures under the old plans are not added to the new plan as available options, however, all existing options outstanding under these plans remain in effect. The 2008 Equity Incentive Plan provides for the grant of non-qualified and incentive stock options, stock appreciation rights (“SARS”), and restricted stock awards. Under the 2008 Equity Incentive Plan, 50,000 shares of common stock are reserved for the issuance of stock options and SARS in addition to 50,000 shares subject to restricted stock awards. The plan is administered by a committee appointed by the Board of Directors. The committee determines the specific employees, amount and type of any awards granted. At December 31, 2014 and 2013, there were 50,000 shares available for issuance under this plan for stock options and SARS. Options under all plans are granted at exercise prices not less than the fair value of the Company’s common stock on the date of the grant.  An additional 50,000 shares is available for restricted stock issuances.

(15)         Employee Benefit Plans, Continued

The following is a summary of the activity under the Company’s incentive and non-qualified stock option plans for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012:

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
	Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price		Shares	Weighted Avg. Exercise Price
Balance, Beginning of Period	61,500	$	22.49	68,400	$	22.63	72,900	$	22.62
Options Granted	—	—		—	—		—	—
Options Exercised	—	—		—	—		—	—
Options Forfeited	14,000	22.74		6,900	23.87		4,500	22.58
Balance, End of Period	47,500	$	22.41	61,500	$	22.49	68,400	$	22.63
Options Exercisable	34,300	$	22.00	42,300	$	22.03	43,800	$	22.14
Weighted-Average Remaining Life Of Exercisable Options	1.1 years			1.3 years			1.8 years
Options Available For Grant	50,000			50,000			50,000

During the year ended December 31, 2014, 5,400 options with a weighted average exercise price of $23.50 vested. During the year ended December 31, 2013, 5,400 stock options with a weighted average exercise price of $23.50 vested. During the nine months ended December 31, 2012, 2,200 options with a weighted average exercise price of $23.61 vested. The aggregate intrinsic value of the stock options outstanding and exercisable at December 31, 2014, 2013 and 2012 amounted to $0 for all periods. Total compensation expense related to stock options was $12,700, $(2,600), and $4,500 for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively.  As of December 31, 2014, there was $25,743 of total unrecognized compensation cost related to non-vested stock options.  The cost is expected to be recognized over a weighted average period of three years.

There were no stock-based awards granted by the Company, during the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012. At December 31, 2014, the Company had the following options outstanding:

Grant Date	Outstanding Options	Option Price	Expiration Date
01/01/05	18,000	$20.55	01/01/15
01/01/06	3,500	$23.91	01/01/16
08/24/06	3,500	$23.03	08/24/16
05/24/07	2,000	$24.34	05/24/17
07/09/07	1,000	$24.61	07/09/17
10/01/07	2,000	$24.28	10/01/17
01/01/08	13,000	$23.49	01/01/18
05/19/08	2,500	$22.91	05/19/18
07/01/08	2,000	$22.91	07/01/18

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

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Junior Subordinated Debentures

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Junior Subordinated Debentures

Junior Subordinated Debentures

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

The Capital Securities accrue and pay distributions quarterly at a floating rate of three month LIBOR plus 170 basis points which was a rate per annum equal to1.94% at December 31, 2014 and 2013.  The distribution rate payable on the Capital Securities is cumulative and payable quarterly in arrears.

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

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

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Income Taxes (Deferred tax assets and deferred tax liabilities) (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Deferred Tax Assets:
Deferred Compensation	$ 521,256	$ 565,577
Provision For Loan Losses	2,872,552	3,519,305
Other Real Estate Owned	1,194,141	1,125,986
Net Fees Deferred For Financial Reporting	114,924	120,984
Non-accrual Interest	431,696	167,315
Net Operating Losses	220,211	208,185
Other	207,423	47,725
Total Gross Deferred Tax Assets	5,562,203	5,755,077
Less: Valuation Allowance	(220,211)	(208,185)
Net Deferred Tax Assets	5,341,992	5,546,892
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,510	114,682
Depreciation	288,157	281,880
Other	63,536	67,881
Intangibles	0	4,465
Unrealized Gain on Securities Available for Sale	3,347,240	289,192
Total Gross Deferred Tax Liability	3,813,443	758,100
Net Deferred Tax Asset	1,528,549	4,788,792
Valuation Allowance, Deferred Tax Asset, Change in Amount	12,026
Bad Debt Reserve for Tax Purposes of Qualified Lender	$ 2,200,000

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FHLB Stock

12 Months Ended

Dec. 31, 2014

Federal Home Loan Banks [Abstract]

FHLB Stock

FHLB Stock

The Bank, as a member of the FHLB of Atlanta, is required to acquire and hold shares of capital stock in the FHLB of Atlanta in an amount equal to a membership component, which is 0.15% of total assets at September 30, 2014 and 2013 plus a transaction component which equals 4.5% of outstanding advances (borrowings) from the FHLB of Atlanta.  The Bank is in compliance with this requirement with an investment in FHLB of Atlanta stock of $3.1 million and $5.0 million as of December 31, 2014 and 2013, respectively. No readily available market exists for this stock and it has no quoted fair value.  However, because redemption of this stock has historically been at par, it is carried at cost.

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Loans Receivable, Net (Schedule of Allowance for Loan Losses) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	$ 14,615,198	$ 10,241,970	$ 11,318,371
Provision For Loan Losses	1,975,000	450,000	2,645,381
Charge-Offs	(7,422,393)	(3,114,833)	(5,209,830)
Recoveries	2,150,566	780,359	1,488,048
Ending Balance	11,318,371	8,357,496	10,241,970
Residential Real Estate
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	1,928,625	1,706,643	1,521,559
Provision For Loan Losses	183,236	(91,991)	1,030,237
Charge-Offs	(647,161)	(359,021)	(1,118,168)
Recoveries	56,859	136,434	273,015
Ending Balance	1,521,559	1,392,065	1,706,643
Consumer
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	1,498,111	847,777	1,001,271
Provision For Loan Losses	(227,872)	352,305	(5,306)
Charge-Offs	(286,612)	(372,460)	(207,230)
Recoveries	17,644	59,094	59,042
Ending Balance	1,001,271	886,716	847,777
Commercial Business
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	644,855	426,658	618,919
Provision For Loan Losses	175,141	(53,435)	(187,377)
Charge-Offs	(209,898)	(328,094)	(31,831)
Recoveries	8,821	114,224	26,947
Ending Balance	618,919	159,353	426,658
Commercial Real Estate
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	10,543,607	7,260,892	8,176,622
Provision For Loan Losses	1,844,495	243,121	1,807,827
Charge-Offs	(6,278,722)	(2,055,258)	(3,852,601)
Recoveries	2,067,242	470,607	1,129,044
Ending Balance	$ 8,176,622	$ 5,919,362	$ 7,260,892

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Premises and Equipment, Net

12 Months Ended

Dec. 31, 2014

Property, Plant and Equipment [Abstract]

Premises and Equipment, Net

Premises and Equipment, Net

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

	December 31,
	2014			2013
Land	$	6,729,097		$	5,471,503
Buildings And Improvements	17,796,209			17,635,363
Furniture And Equipment	11,068,028			10,395,793
Construction In Progress	184,040			206,163
Total Premises And Equipment	35,777,374			33,708,822
Less Accumulated Depreciation	(17,544,148		)	(16,465,432		)
Total Premises And Equipment, Net	$	18,233,226		$	17,243,390

Depreciation expense for the years ended December 31, 2014 and 2013, and for the nine months ended December 31, 2012 was $1.2 million, $1.2 million, and $1.1 million, respectively. The Bank has entered into non-cancelable operating leases related to buildings and land.  At December 31, 2014, future minimum payments under non-cancelable operating leases with initial or remaining terms of one year or more are as follows (by fiscal year):

2015	$	360,106
2016	261,736
2017	231,332
2018	128,361
2019	119,790
Thereafter	908,408
Total Future Minimum Payments	$	2,009,733

Total rental expense amounted to $424,000, $415,000, and $306,000 for the years ended December 31, 2014 and 2013 and for the nine months ended December 31, 2012, respectively.  Four lease agreements with monthly expenses of $6,593, $800, $8,571, and $9,075 have multiple renewal options totaling 30, 10, 45, and 20 years, respectively.

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Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Intangible Assets and Goodwill

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

	December 31,
	2014		2013
Customer List
Balance At Beginning Of Year	$	11,970	$	61,974
Amortization	11,970		50,004
Balance At End Of Year	—		11,970
Total Intangibles	—		11,970
Goodwill	1,199,754		1,199,754
Total	$	1,199,754	$	1,211,724

In accordance with accounting guidance, the Company evaluates its goodwill on an annual basis. The evaluations were performed as of September 30, 2014 and September 30, 2013 for fiscal years ended December 31, 2014 and 2013, respectively. At the time of the evaluations the Company determined that no impairment existed. Therefore, there was no write-down of goodwill for the years ended December 31, 2014 and 2013 or for the nine months ended December 31, 2012.

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Repossessed Assets Acquired In Settlement Of Loans

12 Months Ended

Dec. 31, 2014

Other Real Estate, Foreclosed Assets, and Repossessed Assets [Abstract]

Repossessed Assets Acquired in Settlement of Loans

Other Real Estate Owned

The Bank owned $3.2 million and $3.9 million in other real estate owned at December 31, 2014 and 2013, respectively.Transactions in other real estate owned for the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012 are summarized below.

	Years Ended December 31,						Nine Months Ended December 31,
	2014			2013			2012
Balance, Beginning Of Period	$	3,947,226		$	6,754,425		$	14,160,099
Additions	1,638,135			3,861,182			2,456,478
Sales	(1,850,651		)	(5,274,003		)	(6,929,152		)
Write Downs	(505,000		)	(1,394,378		)	(2,933,000		)
Balance, End Of Period	$	3,229,710		$	3,947,226		$	6,754,425

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Loans Receivable, Net (Schedule of loans evaluated individually for impairment and collectively evaluated for impairment in loans receivable) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	$ 20,247,955	$ 31,354,814
Collectively Evaluated For Impairment	327,520,762	340,030,222
Total	347,768,717	371,385,036
Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	2,519,814	4,838,236
Collectively Evaluated For Impairment	74,763,003	78,166,246
Total	77,282,817	83,004,482
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	218,232	275,491
Collectively Evaluated For Impairment	50,172,992	51,930,410
Total	50,391,224	52,205,901
Commercial Business
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	236,030	19,775
Collectively Evaluated For Impairment	10,328,437	7,755,323
Total	10,564,467	7,775,098
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	17,273,879	26,221,312
Collectively Evaluated For Impairment	192,256,330	202,178,243
Total	$ 209,530,209	$ 228,399,555

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Income Taxes (Operating Loss Carryforwards) (Details) (State and Local Jurisdiction [Member], USD $) In Millions, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
State and Local Jurisdiction [Member]
Operating Loss Carryforwards [Line Items]
Operating Loss Carryforwards	$ 6.7	$ 6.3

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Loans Receivable, Net (Summary of loans restructured as Troubled Debt Restructurings) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012 loan	Dec. 31, 2014 loan	Dec. 31, 2013 loan
Financing Receivable, Modifications [Line Items]
Number of Contracts - Troubled Debt Restructurings	1	2	5
Pre- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	$ 257,452	$ 186,188	$ 1,442,543
Post- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	257,452	186,188	1,442,543
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period	4	1	1
Recorded Investment - Troubled Debt Restructurings That Subsequently Defaulted During the Period	880,745	66,138	146,267
Residential Real Estate
Financing Receivable, Modifications [Line Items]
Number of Contracts - Troubled Debt Restructurings	0	0	0
Pre- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	0	0	0
Post- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	0	0	0
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period	0	0	0
Recorded Investment - Troubled Debt Restructurings That Subsequently Defaulted During the Period	0	0	0
Consumer Loans
Financing Receivable, Modifications [Line Items]
Number of Contracts - Troubled Debt Restructurings	0	0	0
Pre- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	0	0	0
Post- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	0	0	0
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period	0	0	0
Recorded Investment - Troubled Debt Restructurings That Subsequently Defaulted During the Period	0	0	0
Commercial Business
Financing Receivable, Modifications [Line Items]
Number of Contracts - Troubled Debt Restructurings	0	0	1
Pre- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	0	0	32,850
Post- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	0	0	32,850
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period	0	0	0
Recorded Investment - Troubled Debt Restructurings That Subsequently Defaulted During the Period	0	0	0
Commercial Real Estate
Financing Receivable, Modifications [Line Items]
Number of Contracts - Troubled Debt Restructurings	1	2	4
Pre- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	257,452	186,188	1,409,693
Post- Modification Outstanding Recorded Investment - Troubled Debt Restructurings	257,452	186,188	1,409,693
Number of Contracts - Troubled Debt Restructurings That Subsequently Defaulted During the Period	4	1	1
Recorded Investment - Troubled Debt Restructurings That Subsequently Defaulted During the Period	$ 880,745	$ 66,138	$ 146,267

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Carrying Amounts and Fair Value of Financial Instruments (Summary of the carrying value and estimated fair value of financial instruments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Dec. 31, 2013
Financial Assets:
Cash And Cash Equivalents	$ 10,193	$ 7,630
Certificates of Deposits With Other Banks	2,095	2,100
Investment And Mortgage-Backed Securities	429,701	431,003
Loans Receivable, Net	339,874	358,917
FHLB Stock	3,145	5,017
Financial Liabilities:
Checking, Savings, And Money Market Accounts	406,864	401,813
Certificate Accounts	253,251	256,884
Advances From FHLB	52,900	87,740
Other Borrowed Money	8,523	8,003
Subordinated Debt Obligations, Fair Value Disclosure	5,155	5,155
Senior Convertible Debentures	6,084	6,084
Netting
Financial Assets:
Cash And Cash Equivalents	10,193	7,630
Certificates of Deposits With Other Banks	2,095	2,100
Investment And Mortgage-Backed Securities	429,701	431,003
Loans Receivable, Net	340,368	356,623
FHLB Stock	3,145	5,017
Financial Liabilities:
Checking, Savings, And Money Market Accounts	406,864	401,813
Certificate Accounts	253,300	257,883
Advances From FHLB	55,646	92,608
Other Borrowed Money	8,523	8,003
Subordinated Debt Obligations, Fair Value Disclosure	5,155	5,155
Senior Convertible Debentures	6,084	6,084
Fair Value, Inputs, Level 1
Financial Assets:
Cash And Cash Equivalents	10,193	7,630
Certificates of Deposits With Other Banks	0	0
Investment And Mortgage-Backed Securities	0	0
Loans Receivable, Net	0	0
FHLB Stock	3,145	5,017
Financial Liabilities:
Checking, Savings, And Money Market Accounts	406,864	401,813
Certificate Accounts	0	0
Advances From FHLB	0	0
Other Borrowed Money	8,523	8,003
Subordinated Debt Obligations, Fair Value Disclosure	0	0
Senior Convertible Debentures	0	0
Fair Value, Inputs, Level 2
Financial Assets:
Cash And Cash Equivalents	0	0
Certificates of Deposits With Other Banks	2,095	2,100
Investment And Mortgage-Backed Securities	429,701	431,003
Loans Receivable, Net	0	0
FHLB Stock	0	0
Financial Liabilities:
Checking, Savings, And Money Market Accounts	0	0
Certificate Accounts	253,300	257,883
Advances From FHLB	55,646	92,608
Other Borrowed Money	0	0
Subordinated Debt Obligations, Fair Value Disclosure	5,155	5,155
Senior Convertible Debentures	6,084	6,084
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	340,368	356,623
FHLB Stock	0	0
Financial Liabilities:
Checking, Savings, And Money Market Accounts	0	0
Certificate Accounts	0	0
Advances From FHLB	0	0
Other Borrowed Money	0	0
Subordinated Debt Obligations, Fair Value Disclosure	0	0
Senior Convertible Debentures	$ 0	$ 0

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Loans Receivable, Net (Schedule of loans evaluated individually for impairment and collectively evaluated for impairment in the allowance for loan losses) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	$ 475,000	$ 1,102,558
Collectively Evaluated For Impairment	7,882,496	9,139,412
Total	8,357,496	10,241,970
Residential Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	0	158,791
Collectively Evaluated For Impairment	1,392,065	1,547,852
Total	1,392,065	1,706,643
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	2,600	103,109
Collectively Evaluated For Impairment	884,116	744,668
Total	886,716	847,777
Commercial Business
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	0	0
Collectively Evaluated For Impairment	159,353	426,658
Total	159,353	426,658
Commercial Real Estate
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually Evaluated For Impairment	472,400	840,658
Collectively Evaluated For Impairment	5,446,962	6,420,234
Total	$ 5,919,362	$ 7,260,892

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Bank Owned Life Insurance (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Investments, All Other Investments [Abstract]
Bank Owned Life Insurance		$ 11,150,045	$ 11,474,305
Life Insurance, Corporate or Bank Owned, Change in Value	315,000	300,000	339,000
Bank Owned Life Insurance Income	315,000	554,364	339,000
BOLI death benefits		$ 254,000

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Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Comparative transition period condensed financial information

The following table presents certain comparative transition period condensed financial information for the periods ended December 31, 2014, 2013 and 2012.

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014		2013		2012		2014		2013		2012
					(Unaudited)		(Unaudited)		(Unaudited)
Interest Income	$	29,482,164	$	30,447,367	$	33,742,799	$	22,288,689	$	22,743,098	$	24,791,224
Interest Expense	5,813,056		7,532,936		10,273,737		4,262,965		5,419,314		7,459,816
Net Interest Income	23,669,108		22,914,431		23,469,062		18,025,724		17,323,784		17,331,408
Provision For Loan Losses	450,000		2,645,381		3,925,000		350,000		1,500,000		1,975,000
Net Interest Income After Provision For Loan Losses	23,219,108		20,269,050		19,544,062		17,675,724		15,823,784		15,356,408
Non-Interest Income	6,162,783		6,895,804		5,979,341		4,626,384		4,950,822		4,364,854
General And Administrative Expenses	21,267,983		22,033,308		22,187,423		15,941,304		16,520,424		17,062,554
Income Before Income Taxes	8,113,908		5,131,546		3,335,980		6,360,804		4,254,182		2,658,708
Provision For Income Taxes	2,303,168		1,340,384		951,084		1,852,584		1,134,389		703,759
Net Income	5,810,740		3,791,162		2,384,896		4,508,220		3,119,793		1,954,949
Preferred Stock Dividends	440,000		440,000		440,000		330,000		330,000		330,000
Net Income Available To Common Shareholders	$	5,370,740	$	3,351,162	$	1,944,896	$	4,178,220	$	2,789,793	$	1,624,949
Net Income Per Common Share (Basic)	$1.82		$1.14		$0.66		$1.42		$0.95		$0.55
Net Income Per Common Share (Diluted)	$1.75		$1.12		$0.66		$1.36		$0.93		$0.55
Cash Dividend Per Share On Common Stock	$0.32		$0.32		$0.32		$0.24		$0.24		$0.24

Reconciliation of net income to net income available to common shareholders

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

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Earnings Available To Common Shareholders
Net Income	$	5,810,740	$	3,791,162	$	1,954,949
Preferred Stock Dividends	440,000		440,000		330,000
Net Income Available To Common Shareholders	$	5,370,740	$	3,351,162	$	1,624,949

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

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

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

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Significant Accounting Policies (Earnings Per Share - Reconciliation of net income to net income available to common shareholders) (Details) (USD $)	3 Months Ended								9 Months Ended			12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Earnings Available To Common Shareholders
Net Income	$ 1,321,000	$ 1,711,000	$ 1,477,000	$ 1,302,000	$ 1,219,000	$ 1,022,000	$ 879,000	$ 671,000	$ 4,508,220	$ 3,119,793	$ 1,954,949	$ 5,810,740	$ 3,791,162	$ 2,384,896
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000	330,000	330,000	330,000	440,000	440,000	440,000
Income	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000	$ 1,109,000	$ 912,000	$ 769,000	$ 561,000	$ 4,178,220	$ 2,789,793	$ 1,624,949	$ 5,370,740	$ 3,351,162	$ 1,944,896

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Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense is comprised of the following:

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Current:
Federal	$	1,833,069	$	380,143	$	348,588
State	267,904		164,491		91,108
Total Current Tax Expense	2,100,973		544,634		439,696
Deferred:
Federal	192,051		784,814		266,784
State	10,144		10,936		(2,721		)
Total Deferred Tax Expense	202,195		795,750		264,063
Total Income Tax Expense	$	2,303,168	$	1,340,384	$	703,759

(13)         Income Taxes, Continued

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

	For the Years Ended December 31,						For the Nine Months Ended December 31,
	2014			2013			2012
Tax At Statutory Income Tax Rate	$	2,758,729		$	1,744,725		$	903,960
State Tax And Other	66,738			45,761			(31,391		)
Tax Exempt Interest	(534,325		)	(425,450		)	(180,917		)
Valuation Allowance	12,026			(24,652		)	12,107
Total Income Tax Expense	$	2,303,168		$	1,340,384		$	703,759

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2014 and 2013 are presented below.

	At December 31,
	2014			2013
Deferred Tax Assets:
Deferred Compensation	$	521,256		$	565,577
Provision For Loan Losses	2,872,552			3,519,305
Other Real Estate Owned	1,194,141			1,125,986
Net Fees Deferred For Financial Reporting	114,924			120,984
Non-accrual Interest	431,696			167,315
Net Operating Losses	220,211			208,185
Other	207,423			47,725
Total Gross Deferred Tax Assets	5,562,203			5,755,077
Less: Valuation Allowance	(220,211		)	(208,185		)
Net Deferred Tax Assets	5,341,992			5,546,892
Deferred Tax Liabilities:
FHLB Stock Basis Over Tax Basis	114,510			114,682
Depreciation	288,157			281,880
Other	63,536			67,881
Intangibles	—			4,465
Unrealized Gain on Securities Available for Sale	3,347,240			289,192
Total Gross Deferred Tax Liability	3,813,443			758,100
Net Deferred Tax Asset	$	1,528,549		$	4,788,792

Deferred tax assets represent the future tax benefit of deductible differences and, if it is more likely than not that a tax asset will not be realized, a valuation allowance is required to reduce the recorded deferred tax assets to net realizable value. As of December 31, 2014, management has determined that it is more likely than not that the total deferred tax asset will be realized except for the deferred tax asset associated with State net operating loss carryforwards, and, accordingly, has established a valuation allowance only for this item. The change in the valuation allowance was $12,026. Net deferred tax assets are included in other assets at December 31, 2014 and 2013. The Company had state net operating losses attributable to the non-bank entities of $6.7 million and $6.3 million for the year ended December 31, 2014 and 2013, respectively.

(13)         Income Taxes, Continued

Retained earnings at December 31, 2014 included tax bad debt reserves of $2.2 million, for which no provision for federal income tax has been made. If, in the future, these amounts are used for any purpose other than to absorb bad debt losses, including dividends, stock redemptions, or distributions in liquidation, or the Company ceases to be qualified as a bank, they may be subject to federal income tax at the prevailing corporate tax rate.  

As of December 31, 2014, the Company had no material unrecognized tax benefits or accrued interest and penalties. It is the Company's policy to account for interest and penalties accrued relative to unrecognized tax benefits as a component of income tax expense.

Tax returns for 2011 and subsequent years are subject to examination by taxing authorities.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

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

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

Financial instruments where the contract amount represents the Bank's credit risk include commitments under pre-approved but unused lines of credit of $44.5 million and $30.8 million, undisbursed loans in process of $1.4 million and $3.5 million, and letters of credit of $802,000 and $2.2 million at December 31, 2014 and 2013, respectively.

These loan and letter of credit commitments are subject to the same credit policies and reviews as loans on the balance sheet.  Collateral, both the amount and nature, is obtained based upon management's assessment of the credit risk.  Since many of the extensions of credit are expected to expire without being drawn, the total commitment amounts do not necessarily represent future cash requirements.  In addition to these loan commitments noted above, the Bank had unused credit card loan commitments of $4.4 million and $4.5 million at December 31, 2014 and 2013, respectively.  The Bank also had outstanding commitments on mortgage loans not yet closed of $571,000 at December 31, 2014 compared to none at December 31, 2013.  These commitments, which are funded subject to certain limitations, extend over varying periods of time with the majority being funded within 45 days.  At December 31, 2014 and 2013, the Bank had outstanding commitments to sell approximately $1.9 million and $1.2 million of loans, respectively, which encompassed the Bank’s held for sale loans.  The Bank also has commitments to sell mortgage loans not yet closed, on a best efforts basis.  Best efforts means the Bank suffers no penalty if they are unable to deliver the loans to the potential buyers.  The fair value of the Bank’s commitment to originate mortgage loans at committed interest rates and to sell such loans to permanent investors is insignificant.

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Stock Issuance and Exchange (Details) (USD $)	0 Months Ended			3 Months Ended
	Jul. 31, 2013	Sep. 29, 2010	Dec. 22, 2010	Mar. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Class of Stock [Line Items]
Stock Issuance, Value		$ 8,000,000
Common Stock Par Value Per Share					$ 0.01	$ 0.01
Payments for Repurchase of Warrants	50,000
Warrant Issued In Conjunction With Serial Preferred Stock	400,000
Adjustments to Additional Paid in Capital, Warrant Repurchased	350,000
Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Liquidation Preference, Value		18,000,000
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Liquidation Preference, Value		18,000,000
Proceeds from Issuance of Preferred Stock and Preference Stock		4,000,000
Stock Issuance, Value		4,000,000
Common Stock | Private Placement [Member]
Class of Stock [Line Items]
Stock Issued During Period, Shares, New Issues			82,906
Shares Issued, Price Per Share			$ 10.00
Proceeds from Issuance of Private Placement			829,060
Common Stock Par Value Per Share			$ 0.01
Management [Member] | Common Stock | Private Placement [Member]
Class of Stock [Line Items]
Stock Issued During Period, Shares, New Issues		400,000
Shares Issued, Price Per Share		$ 10.00
Proceeds from Issuance of Private Placement		$ 4,000,000.0
Prior to February 15, 2014 [Member] | Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				5.00%
After February 15, 2014 [Member] | Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				9.00%
During First Eight Years from Date of Issuance [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				2.00%
After First Eight Years from Date of Issuance [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				9.00%
Ineligible as CDFI for 180 Days [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				5.00%
Ineligible as CDFI for 270 Days [Member] | Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred Stock, Dividend Rate, Percentage				9.00%

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Significant Accounting Policies (Change in Fiscal Year) (Details) (USD $)	3 Months Ended								9 Months Ended			12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Accounting Policies [Abstract]
Interest Income	$ 7,263,000	$ 7,389,000		$ 7,193,000	$ 7,357,000	$ 7,706,000	$ 7,680,000	$ 7,704,000	$ 22,288,689	$ 22,743,098	$ 24,791,224	$ 29,482,164	$ 30,447,367	$ 33,742,799
Interest Expense	1,370,000	1,385,000		1,550,000	1,664,000	1,796,000	1,959,000	2,114,000	4,262,965	5,419,314	7,459,816	5,813,056	7,532,936	10,273,737
Net Interest Income	5,893,000	6,004,000	6,130,000	5,643,000	5,693,000	5,910,000	5,721,000	5,590,000	18,025,724	17,323,784	17,331,408	23,669,108	22,914,431	23,469,062
Provision For Loan Losses	250,000	0		100,000	0	600,000	900,000	1,145,000	350,000	1,500,000	1,975,000	450,000	2,645,381	3,925,000
Net Interest Income After Provision For Loan Losses	5,643,000	6,004,000	6,030,000	5,543,000	5,693,000	5,310,000	4,821,000	4,445,000	17,675,724	15,823,784	15,356,408	23,219,108	20,269,050	19,544,062
Non-Interest Income	1,808,000	1,486,000		1,536,000	1,470,000	1,738,000	1,743,000	1,945,000	4,626,384	4,950,822	4,364,854	6,162,783	6,895,804	5,979,341
General And Administrative Expenses	5,602,000	5,023,000		5,326,000	5,464,000	5,665,000	5,392,000	5,513,000	15,941,304	16,520,424	17,062,554	21,267,983	22,033,308	22,187,423
Income Before Income Taxes	1,849,000	2,467,000	2,045,000	1,753,000	1,699,000	1,383,000	1,172,000	877,000	6,360,804	4,254,182	2,658,708	8,113,908	5,131,546	3,335,980
Provision For Income Taxes	528,000	756,000		451,000	480,000	361,000	293,000	206,000	1,852,584	1,134,389	703,759	2,303,168	1,340,384	951,084
Net Income	1,321,000	1,711,000	1,477,000	1,302,000	1,219,000	1,022,000	879,000	671,000	4,508,220	3,119,793	1,954,949	5,810,740	3,791,162	2,384,896
Preferred Stock Dividends	110,000	110,000	110,000	110,000	110,000	110,000	110,000	110,000	330,000	330,000	330,000	440,000	440,000	440,000
Net Income Available To Common Shareholders	$ 1,211,000	$ 1,601,000	$ 1,367,000	$ 1,192,000	$ 1,109,000	$ 912,000	$ 769,000	$ 561,000	$ 4,178,220	$ 2,789,793	$ 1,624,949	$ 5,370,740	$ 3,351,162	$ 1,944,896
Net Income Per Common Share (Basic)	$ 0.41	$ 0.54	$ 0.46	$ 0.41	$ 0.38	$ 0.31	$ 0.26	$ 0.19	$ 1.42	$ 0.95	$ 0.55	$ 1.82	$ 1.14	$ 0.66
Net Income Per Common Share (Diluted)	$ 0.40	$ 0.52	$ 0.44	$ 0.39	$ 0.36	$ 0.30	$ 0.26	$ 0.20	$ 1.36	$ 0.93	$ 0.55	$ 1.75	$ 1.12	$ 0.66
Cash Dividend Per Share On Common Stock									$ 0.24	$ 0.24	$ 0.24	$ 0.32	$ 0.32	$ 0.32

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Subsequent Events Securities Sold Subsequent Event Disclosures (Details) (USD $)	9 Months Ended	12 Months Ended		3 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Mar. 31, 2015
Subsequent Event [Line Items]
Subsequent Event, Description	$ 0	$ 178,067	$ 589,023
Gain On Sale Of Investment Securities	945,476	436,871	1,325,823
Repayments of Federal Home Loan Bank Borrowings		5,000,000	30,000,000
Subsequent Event [Member]
Subsequent Event [Line Items]
Proceeds from Sale of Other Investments				18,600,000
Subsequent Event, Description				511,000
Gain On Sale Of Investment Securities				979,000
Repayments of Federal Home Loan Bank Borrowings				$ 10,000,000

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Advances From Federal Home Loan Bank (FHLB) And Other Borrowings (Tables)

12 Months Ended

Dec. 31, 2014

Banking and Thrift [Abstract]

Advances from the FHLB summarized by year of maturity and weighted average interest rate

Advances from the FHLB are summarized by year of maturity and weighted average interest rate below:

	December 31, 2014
Year Ending December 31	Amount		Weighted Rate
2015	$	15,000,000	2.61	%
2016	20,000,000		4.61	%
2017	12,900,000		4.38	%
2018	5,000,000		3.39	%
	$	52,900,000	3.87	%

Callable FHLB advances

As of December 31, 2014
Borrow Date	Maturity Date	Amount	Int. Rate	Type	Call Dates
11/23/05	11/23/15	$5,000,000	3.933%	Multi-Call	05/23/08 and quarterly thereafter
07/11/06	07/11/16	5,000,000	4.800%	Multi-Call	07/11/08 and quarterly thereafter
11/29/06	11/29/16	5,000,000	4.025%	Multi-Call	05/29/08 and quarterly thereafter
05/24/07	05/24/17	7,900,000	4.375%	Multi-Call	05/27/08 and quarterly thereafter
07/25/07	07/25/17	5,000,000	4.396%	Multi-Call	07/25/08 and quarterly thereafter

During the year ended December 31, 2014, the Bank prepaid one FHLB advance totaling $5.0 million and incurred $178,000 in prepayment penalties related to this prepayment. During the year ended December 31, 2013, the Bank prepaid six FHLB advances totaling $30.0 million and incurred $589,000 in prepayment penalties. The Bank did not prepay any FHLB advances during the nine months ended December 31, 2012.

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Consolidated Statements of Comprehensive Income (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Statement of Comprehensive Income [Abstract]
Net Income	$ 1,954,949	$ 5,810,740	$ 3,791,162
Unrealized Gains On Securities:
Unrealized Holding Gains (Losses) On Securities Available For Sale, Net Of Taxes Of $3,224,059; $4,286,481 and $909,507 At December 31, 2014, 2013 and 2012, Respectively	1,483,932	5,274,829	(7,002,827)
Reclassification Adjustment For Gains Included In Net Income, Net Of Taxes Of $166,011; $503,813 and $359,281 At December 31, 2014, 2013 and 2012, Respectively	(586,195)	(270,860)	(822,010)
Other Comprehensive Income (Loss), Transfers from Held-to-maturity to Available-for-Sale Securities, Net of Tax	0	0	865,933
Other Comprehensive Income (Loss)	897,737	5,003,969	(6,958,904)
Comprehensive Income (Loss)	$ 2,852,686	$ 10,814,709	$ (3,167,742)

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Employee Benefit Plans (Activity under the incentive and non-qualified stock option plans) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance, Beginning of Period, Shares	72,900	61,500	68,400
Options Granted, Shares	0	0	0
Options Exercised, Shares	0	0	0
Options Forfeited, Shares	4,500	14,000	6,900
Balance, End of Period, Shares	68,400	47,500	61,500
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Balance, Beginning of Period, Weighted Avg. Exercise Price	$ 22.62	$ 22.49	$ 22.63
Options Granted, Weighted Avg. Exercise Price	$ 0	$ 0	$ 0
Options Exercised, Weighted Avg. Exercise Price	$ 0	$ 0	$ 0
Options Forfeited, Weighted Avg. Exercise Price	$ 22.58	$ 22.74	$ 23.87
Balance, End of Period, Weighted Avg. Exercise Price	$ 22.63	$ 22.41	$ 22.49
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Options Exercisable, Shares	43,800	34,300	42,300
Options Exercisable, Weighted Avg. Exercise Price	$ 22.14	$ 22.00	$ 22.03
Weighted-Average Remaining Life Of Exercisable Options	1 year 9 months 18 days	1 year 1 month 18 days	1 year 3 months 18 days
Options Available For Grant	50,000	50,000	50,000

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Investment and Mortgage-Backed Securities, Available for Sale

12 Months Ended

Dec. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Investment and Mortgage-Backed Securities, Available for Sale

Investment and Mortgage-Backed Securities, Available For Sale

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

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,317,462	$	83,691	$	154,492	$	13,246,661
Federal Farm Credit Bank ("FFCB") Securities	5,750,000		—		82,006		5,667,994
Federal National Mortgage Association ("FNMA") Bonds	996,822		7,559		—		1,004,381
Small Business Administration (“SBA”) Bonds	106,637,400		1,796,943		307,649		108,126,694
Tax Exempt Municipal Bonds	59,960,960		2,579,543		45,080		62,495,423
Mortgage-Backed Securities	233,963,842		5,704,855		815,984		238,852,713
Equity Securities	250,438		56,236		—		306,674
	$	420,876,924	$	10,228,827	$	1,405,211	$	429,700,540
	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,538,723	$	25,695	$	893,968	$	12,670,450
FFCB Securities	5,750,000		—		383,820		5,366,180
FNMA Bonds	1,993,473		—		18,543		1,974,930
SBA Bonds	99,228,708		1,914,720		319,443		100,823,985
Tax Exempt Municipal Bonds	63,590,959		410,151		2,685,988		61,315,122
Mortgage-Backed Securities	245,882,053		5,843,365		3,128,883		248,596,535
Equity Securities	257,938		—		1,688		256,250
	$	430,241,854	$	8,193,931	$	7,432,333	$	431,003,452

FHLB securities, FFCB securities, FNMA bonds, and FNMA and FHLMC mortgage-backed securities are issued by government-sponsored enterprises (“GSEs”).  GSEs are not backed by the full faith and credit of the United States government.  SBA bonds are backed by the full faith and credit of the United States government. Included in the tables above and below in mortgage-backed securities are GNMA mortgage-backed securities, which are also backed by the full faith and credit of the United States government.  At December 31, 2014 and 2013, the Bank held an amortized cost and fair value of $156.8 million and $160.6 million, respectively, and $170.4 million and $173.5 million, respectively, in GNMA mortgage-backed securities included in mortgage-backed securities listed above. All mortgage-backed securities above are either GSEs or GNMA mortgage-backed securities. The Company has not invested in any private label mortgage-backed securities.

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

The amortized cost and fair value of investment and mortgage-backed securities available for sale at December 31, 2014 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.

	Amortized Cost		Fair Value
Less Than One Year	$	760,264	$	773,573
One – Five Years	13,588,753		13,819,295
Five – Ten Years	68,880,177		69,887,727
After Ten Years	103,683,888		106,367,232
Mortgage-Backed Securities	233,963,842		238,852,713
	$	420,876,924	$	429,700,540

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 $120.7 million and $124.4 million, respectively, at December 31, 2014 and $118.3 million and $121.1 million, respectively, at December 31, 2013.

The Bank received $69.6 million, $62.8 million and $40.3 million in proceeds from sales of available for sale securities during the years ended December 31, 2014 and 2013 and the nine months ended December 31, 2012, respectively. As a result, the Bank recognized $1.1 million in gross gains and $623,000 gross losses for the year ended December 31, 2014, $1.6 million in gross gains and $279,000 in gross losses for the year ended December 31, 2013, and $945,000 in gross gains and no gross losses for the nine months ended December 31, 2012.

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

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

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

	December 31, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	10,288,110	$	651,608	$	1,757,640	$	242,360	$	12,045,750	$	893,968
FFCB Securities	4,435,070		314,930		931,110		68,890		5,366,180		383,820
FNMA Bonds	1,974,930		18,543		—		—		1,974,930		18,543
SBA Bonds	12,183,961		288,678		3,541,453		30,765		15,725,414		319,443
Tax Exempt Municipal Bond	39,848,206		2,556,014		2,008,272		129,974		41,856,478		2,685,988
Mortgage-Backed Securities	88,516,030		2,756,216		6,436,369		372,667		94,952,399		3,128,883
Equity Securities	—		—		101,250		1,688		101,250		1,688
	$	157,246,307	$	6,585,989	$	14,776,094	$	846,344	$	172,022,401	$	7,432,333

Securities classified as available-for-sale are recorded at fair market value.  At December 31, 2014, 67.8% of the unrealized losses, or twenty-four individual securities, consisted of securities in a continuous loss position for 12 months or more.  At December 31, 2013, 11.4% of the unrealized losses, or eleven individual securities, consisted of securities in a continuous loss position for 12 months or more. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature.  The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”). Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value.

If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or 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 years ended December 31, 2014 and 2013.

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Loans Receivable, Net (Schedule of Accounts, Notes, Loans and Financing Receivable) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 347,768,717	$ 371,385,036
Loans Held For Sale	1,864,999	1,234,158
Total Loans Receivable, Gross	349,633,716	372,619,194
Allowance For Loan Losses	8,357,496	10,241,970
Loans In Process	1,379,114	3,465,072
Deferred Loan Fees (Costs)	22,611	(4,513)
Loans, Allowances, and Fees	9,759,221	13,702,529
Total Loans Receivable, Net	339,874,495	358,916,665
Residential Real Estate Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	77,282,817	83,004,482
Consumer Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	50,391,224	52,205,901
Commercial Business
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	10,564,467	7,775,098
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total	$ 209,530,209	$ 228,399,555

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Income Taxes (Income tax expense) (Details) (USD $)	3 Months Ended							9 Months Ended			12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Current Income Tax Expense (Benefit), Continuing Operations [Abstract]
Federal										$ 348,588	$ 1,833,069	$ 380,143
State										91,108	267,904	164,491
Total Current Tax Expense										439,696	2,100,973	544,634
Deferred Income Tax Expense (Benefit), Continuing Operations [Abstract]
Federal										266,784	192,051	784,814
State										(2,721)	10,144	10,936
Total Deferred Tax Expense										264,063	202,195	795,750
Total Income Tax Expense	$ 528,000	$ 756,000	$ 451,000	$ 480,000	$ 361,000	$ 293,000	$ 206,000	$ 1,852,584	$ 1,134,389	$ 703,759	$ 2,303,168	$ 1,340,384	$ 951,084

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Premises and Equipment, Net (Future minimum payments under non-cancelable operating leases) (Details) (USD $)	9 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2014 lease_agreement	Dec. 31, 2013
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2013		$ 360,106
2014		261,736
2015		231,332
2016		128,361
2017		119,790
Thereafter		908,408
Total Future Minimum Payments		2,009,733
Total rental expense	306,000	424,000	415,000
Number of operating lease agreements		4
Lease One [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		6,593
Operating lease renewal option		30 years
Lease Two [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		800
Operating lease renewal option		10 years
Lease Three [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		8,571
Operating lease renewal option		45 years
Lease Four [Member]
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Monthly rent expense		$ 9,075
Operating lease renewal option		20 years

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Related Party Transactions

12 Months Ended

Dec. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

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

	For the Years Ended December 31,				For the Nine Months Ended December 31,
	2014		2013		2012
Balance, Beginning of Period	$	230,722	$	273,330	$	315,338
New Loans	1,116		10,956		5,364
Less Loan Payments	29,641		53,564		47,372
Balance, End of Period	$	202,197	$	230,722	$	273,330

Loans to all employees, officers, and directors of the Company, in the aggregate constituted approximately 3.4% and 5.7% of the Company’s total shareholders' equity at December 31, 2014 and 2013, respectively.  At December 31, 2014 and 2013, deposits from executive officers and directors of the Company and the Bank and their related interests in the aggregate approximated $15.1 million and $6.8 million, respectively.

The Company leased office space from a related party during the year ended December 31, 2014. The lease is with a company in which the related party, who is both a director and an officer of the Company, has an ownership interest.  The Company incurred expenses of $81,000, $79,000, and $58,000 for rent for the years ended December 31, 2014 and 2013, and the nine months ended December 31, 2012, respectively, related to this lease.   Management is of the opinion that the transactions with respect to office rent were made on terms that are comparable to those which would be made with unaffiliated persons.

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Deposits (Deposits outstanding by type) (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Deposits, by Type [Abstract]
Checking Accounts	$ 143,422,150	$ 136,695,876
Money Market Accounts	234,819,052	240,631,708
Statement Savings Accounts	28,622,933	24,485,648
Total	406,864,135	401,813,232
Certificate Accounts	253,251,029	256,883,540
Total Deposits	660,115,164	658,696,772
Weighted Average Rate Domestic Deposit Liabilities [Abstract]
Checking Accounts, Weighted Rate	0.03%	0.04%
Money Market Accounts, Weighted Rate	0.19%	0.28%
Statement Savings Accounts, Weighted Rate	0.10%	0.10%
Total, Weighted Rate	0.13%	0.19%
Certificate Accounts, Weighted Rate	0.79%	0.83%
Total Deposit, Weighted Rate	0.38%	0.44%
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest-bearing Domestic Deposit, Brokered	38,800,000	25,600,000
Weighted Average Rate Domestic Deposit, Brokered	1.14%	1.23%
Interest Bearing Domestic Deposit Maturities, Brokered, Next Twelve Months	1,900,000
Time Deposits, $100,000 or More	140,000,000	129,900,000
Overdrafts reclassified to loans	132,000	133,000
Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Checking	0.00%	0.00%
Interest Rate Domestic Deposit, Money Market	0.10%	0.10%
Interest Rate Domestic Deposit, Savings	0.00%	0.00%
Interest Rate Domestic Deposit, Excluding Time Deposits	0.00%	0.00%
Interest Rate Domestic Deposit, Time Deposits	0.05%	0.05%
Interest Rate Domestic Deposit	0.00%	0.00%
Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Checking	0.15%	0.15%
Interest Rate Domestic Deposit, Money Market	0.20%	0.30%
Interest Rate Domestic Deposit, Savings	0.10%	0.10%
Interest Rate Domestic Deposit, Excluding Time Deposits	0.20%	0.30%
Interest Rate Domestic Deposit, Time Deposits	3.01%	3.25%
Interest Rate Domestic Deposit	3.01%	3.25%
0.00 – 1.99%
Deposits, by Type [Abstract]
Certificate Accounts	227,473,082	226,750,180
0.00 – 1.99% | Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	0.00%
0.00 – 1.99% | Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	1.99%
2.00 – 2.99%
Deposits, by Type [Abstract]
Certificate Accounts	25,605,349	28,848,252
2.00 – 2.99% | Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	2.00%
2.00 – 2.99% | Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	2.99%
3.00 – 3.99%
Deposits, by Type [Abstract]
Certificate Accounts	$ 172,598	$ 1,285,108
3.00 – 3.99% | Minimum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	3.00%
3.00 – 3.99% | Maximum
Interest Rate Range Domestic Deposit Liabilities [Abstract]
Interest Rate Domestic Deposit, Time Deposits	3.99%

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Intangible Assets and Goodwill (Tables)

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in intangible assets and goodwill

Changes in intangible assets and goodwill for periods indicated consisted of the following:

	December 31,
	2014		2013
Customer List
Balance At Beginning Of Year	$	11,970	$	61,974
Amortization	11,970		50,004
Balance At End Of Year	—		11,970
Total Intangibles	—		11,970
Goodwill	1,199,754		1,199,754
Total	$	1,199,754	$	1,211,724

Amortization of the intangibles

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Senior Convertible Debentures

12 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Senior Convertible Debentures

Senior Convertible Debentures

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

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

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Carrying Amounts and Fair Value of Financial Instruments (Significant unobservable inputs used in the fair value measurements) (Details) (Fair Value, Measurements, Nonrecurring, USD $)	12 Months Ended
	Dec. 31, 2014		Dec. 31, 2013
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 24,867,664		$ 35,433,640
Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	19,772,955	[1]	30,252,256	[1]
Fair Value Measurements, Valuation Techniques	Appraised Value
Significant Unobservable Inputs	Discount Rates/ Discounts to Appraised Values
Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	3,229,710		3,947,226
Fair Value Measurements, Valuation Techniques	Appraised Value/Comparable Sales
Significant Unobservable Inputs	Discount Rates/ Discounts to Appraised Values
Minimum | Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	0.00%
Minimum | Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	14.00%
Maximum | Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	70.00%
Maximum | Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Significant Unobservable Inputs, Percentage Range	80.00%
Fair Value, Inputs, Level 3
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	23,002,665		34,199,482
Fair Value, Inputs, Level 3 | Impaired Loans
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	19,772,955	[1]	30,252,256	[1]
Fair Value, Inputs, Level 3 | Foreclosed Assets
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Assets, Fair Value Disclosure, Nonrecurring	$ 3,229,710		$ 3,947,226

[1] (1) IMPAIRED LOANS ARE REPORTED NET OF SPECIFIC RESERVES OF