U.S. SECURITIES AND EXCHANGE COMMISSION
                                     Washington, D.C.  20549

                                          FORM 10-QSB

(Mark One)

 X  Quarterly report under Section 13 or 15(d) of the Securities Exchange Act 
--- of 1934

For the quarterly period ended          June 30, 1998          . 
                               --------------------------------
    Transition report under Section 13 or 15(d) of the Exchange Act
---

For the transition period from                  to 
                              ------------------    -----------------

Commission file number    0-22553
                      ---------------

                             SECURITY BANCORP, INC.
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      (Exact Name of Small Business Issuer as Specified in Its Charter)

           Tennessee                                  62-1682697
---------------------------------           ---------------------------------
(State or Other Jurisdiction of                    (I.R.S. Employer
Incorporation or Organization)                     Identification No.)
                  
                  306 West Main Street, McMinnville, TN  37110
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                     (Address of Principal Executive Offices)

                               (931) 473-4483
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               (Issuer's Telephone Number, Including Area Code)
                                                                               
                                   N/A
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             (Former Name, Former Address and Former Fiscal Year,
                        If Changed Since Last Report)

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.

      X     Yes           No
     ---              ---

State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 436,425 shares outstanding on
June 30, 1998

Transitional Small Business Disclosure Format (check one):

            Yes        X  No
     ---              ---
<PAGE>

<PAGE>
                    Security Bancorp, Inc. and Subsidiary

                           McMinnville, Tennessee

                                   INDEX


PART I                                                               Page(s)
------          
FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets - (Unaudited) 
  as of December 31, 1997 and June 30, 1998. . . . . . . . . . . . . . 3

Consolidated Statements of Income (Unaudited)
  for the six month periods 
  ended June 30, 1997 and 1998 . . . . . . . . . . . . . . . . . . . . 4

Consolidated Statements of Stockholders' Equity (Unaudited). . . . . . 5

Consolidated Statements of Cash Flows - (Unaudited)
  for the six months ended June 30, 1997 and 1998. . . . . . . . . . . 6

Notes to (Unaudited) Consolidated Financial Statements . . . . . . . 7-9

Item 2.

Management's Discussion and Analysis of 
  Financial Condition and Results of Operations. . . . . . . . . . .9-14


PART II.

OTHER INFORMATION

Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . .15

Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . .15

Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . .15

Item 4. Submission of Matters to a Vote of Security Holders. . . . . .15

Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . .15

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . .15

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

                                    2

<PAGE>

<PAGE>
ITEM 1.  Financial Statements


                   Security Bancorp, Inc. and Subsidiary
                       Consolidated Balance Sheets
                              (Unaudited)
                  (in thousands except share information)


            ASSETS                                   December 31,   June 30,
                                                         1997         1998 

Cash & Noninterest Earning Deposits                  $ 1,896       $ 3,108
Investment Securities:  held to maturity               2,455         2,745
   Available for sale                                  1,379         1,430
Loans receivable, net                                 43,102        44,700
Real estate owned                                          5             6
Premises and equipment, net                            1,103         1,090
Federal Home Loan Bank stock                             550           570
Accrued interest receivable                              363           434
Prepaid expenses and other assets                         75           109
                                                     -------       -------
     TOTAL ASSETS                                    $50,928       $54,192
                                                     =======       =======
        LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits                                             $37,061       $39,944
FHLB Borrowings                                        6,500         6,500
Advances from Borrowers for property taxes & 
  insurance                                               59           190
Accrued interest payable                                  32            35
Accrued expenses and other liabilities                   172            71
Federal income taxes payable                             369           366
                                                     -------       -------
     Total Liabilities                                44,193        47,106

        STOCKHOLDERS' EQUITY
Common stock (436,425 shares, $.01 par value,
   issued and outstanding)                                 4             4
Paid-in capital                                        4,076         4,092
Retained earnings                                      2,763         3,055
Unrealized gain on securities available for sale, 
   net of income taxes                                   230           261
Employee Stock Ownership Plan (ESOP) borrowing          (338)         (326)
                                                     -------       -------
     Total stockholders' equity                        6,735         7,086
                                                     -------       -------
     Total Liabilities and stockholders' equity      $50,928       $54,192
                                                     =======       =======

The accompanying notes are an integral part of these consolidated financial
statements.

                                     3

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<PAGE>
                   Security Bancorp, Inc. and Subsidiary
                     Consolidated Statements of Income
                                (Unaudited)
               (in thousands, except per share information)
                                

                                         For Three Months    For Six Months
                                           Ended June 30,    Ended June 30, 
                                           1997     1998     1997     1998

INTEREST INCOME:
  Loans                                   $ 864    $1,007   $1,687   $1,999
  Investments                                67        58      135      117
  Interest earning deposits                   2         8        3       13
                                          -----    ------   ------   ------
     Total interest income                  933     1,073    1,825    2,129

INTEREST EXPENSE:
Deposits                                    440       453      862      888
Advances                                    107       104      207      216
                                          -----    ------   ------   ------
  Interest Expense                          547       557    1,069    1,104
  Provision for loan losses                  15        15       30       30
                                          -----    ------   ------   ------
    Net interest income after
    provision for loan losses               371       501      726      995

NON-INTEREST INCOME:                                                      
  Other                                      90       129      153      257
                                          -----    ------   ------   ------
    Total non-interest income                90       129      153      257
NON-INTEREST EXPENSES                                                     
  Compensation                              105       146      225      285
  Other employee benefits                    35        46       70       97
  Net occupancy expense                      40        72      106      157
  Deposit insurance premiums                  6         6       11       11
  Data processing                            28        39       57       79
  Other                                      96        89      134      143
                                          -----    ------   ------   ------
    Total non-interest expenses             310       398      603      772

    Income before income taxes              151       232      276      480

Income tax expense                           58        91       98      188
                                          -----    ------   ------   ------ 
     Net income                              93       141      178      292

Other comprehensive income, net of tax:
  (See Note 4)
  Unrealized gains (losses) on securities:
    Unrealized holding gains (losses) 
      arising for the three month period,
      before tax $84 for 1997 and $(2) for
      1998, and for the six month period, 
      before tax $64 for 1997 and $51 
      for 1998                               52        (1)      40       31
                                          -----    ------   ------   ------
        Comprehensive income              $ 145    $  140   $  218   $  323
                                          =====    ======   ======   ======
Weighted average shares outstanding: 
  (See Note 3)                              N/A   403,257      N/A  403,257
    Basic earnings per share                N/A     $ .35      N/A    $ .72

The accompanying notes are an integral part of these consolidated financial
statements.

                                        4

<PAGE>

<PAGE>
                     Security Bancorp, Inc. and Subsidiary
               Consolidated Statements of Stockholders' Equity
                                 (Unaudited)
                   (in thousands, except share information)

                                                                  
                                                Unrealized
                     Common  Paid-in  Retained   Gain on       ESOP
                      Stock  Capital  Earnings  Securities  Borrowing  Total

Balance at 12/31/97   $  4    $4,076   $2,763    $  230      $ (338)  $6,735

Net income              --        --      292        --          --      292

Unrealized gain on 
 securities avail-
 able for sale, net 
 of income taxes        --        --       --        31          --       31

ESOP shares earned      --        16       --        --          12       28
                      ----    ------   ------    ------      ------   ------
Balance at 6/30/98    $  4    $4,092   $3,055    $  261      $ (326)  $7,086
                      ====    ======   ======    ======      ======   ======

The accompanying notes are an integral part of these consolidated financial
statements.

                                  5

<PAGE>

<PAGE>
              Security Bancorp. Inc. and Subsidiary
              Consolidated Statements of Cash Flows
                           (Unaudited)
                         (in thousands)

                                                  Six months Ended June 30, 
                                                    1997            1998   

CASH FLOWS FROM OPERATING ACTIVITIES:                            
Net Income                                        $   178         $   292 
Adjustments to reconcile net income to net cash
 provided by operating activities:                     
  Depreciation and amortization                        28              38 
  Dividend on FHLB stock                              (18)            (20)
  (Gain) loss on sale of investments                    -               - 
  Provision for loan losses                            30              30 
  (Increase) decrease in interest receivable          (71)            (71)
  (Increase) decrease in other assets                (577)            (34)
  Increase (decrease) in accrued liabilities          460             (98)
  Increase (decrease) in income taxes payable          67              (3)
  Increase (decrease) in deferred taxes payable        25              48 
  Sale of mortgage loans held for sale              2,289           2,509 
  Originations of mortgage loans held for sale     (2,289)         (2,616)
  Total adjustments                                   (56)           (217)
                                                  -------         -------
Net cash provided by operating activities             122              75     
                                                       
CASH FLOWS FROM INVESTING ACTIVITIES:                            
  Loan originations net of principal payments      (2,915)         (1,569)
  Loans purchased                                       -               - 
  Purchase of:                                                   
    Available for sale - investment securities       (250)              - 
    Held to maturity - investment securities            -          (1,643)
  Proceeds from sale of:                                         
    Available for sale - investment securities          -               - 
    Available for sale - mortgage-backed securities     -               - 
  Proceeds from maturities and repayments of:                    
    Held to maturity investment securities            250           1,000
    Held to maturity mortgage-backed securities        69             360
  Cash payments for the purchase of property         (113)            (25)
  Proceeds from sale of foreclosed real estate          -               - 
                                                  -------         -------
Net cash provided (used) by investing activities   (2,959)         (1,877)
                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:                            
  Net increase (decrease) in deposit accounts        (365)          2,883 
  Repayment of FHLB advances                       (1,000)              - 
  Net increase (decrease) in escrow accounts          134             131 
  Net proceeds from issuance of capital stock       3,715               - 
                                                  -------         -------
Net cash provided (used) by financing activities    2,484           3,014 
                                                       
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS      (353)          1,212 
                                                       
CASH AND EQUIVALENTS, BEGINNING OF YEAR             1,098           1,896 
                                                  -------         -------      
CASH AND EQUIVALENTS, END OF PERIOD               $   745         $ 3,108 
                                                       
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:               
Cash paid during the year for:                                   
  Interest expense                                $ 1,070         $ 1,104 
  Income taxes                                    $    51         $   206 

The accompanying notes are an integral part of these consolidated financial
statements.

                                      6

<PAGE>


<PAGE>
              Security Bancorp, Inc. and Subsidiary
           Notes to Consolidated Financial Statements
                           (Unaudited)
                                
1.  SECURITY BANCORP, INC.

Security Bancorp, Inc. (the "Company"), a Tennessee corporation, is the
savings and loan holding company for Security Federal Savings Bank of
McMinnville, TN (the "Savings Bank").  The Savings Bank converted from a
federally chartered mutual savings bank to a federally chartered stock savings
bank effective June 30, 1997 (the "Conversion").

The consolidated financial statements included herein are for the Company and
the Savings Bank.

2.  BASIS OF PREPARATION

The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-QSB and, therefore, do not include
all disclosures necessary for a complete presentation of the consolidated
balance sheets, consolidated statements of income, consolidated statements of
stockholders' equity, and consolidated statements of cash flows in conformity
with generally accepted accounting principles.  However, all adjustments which
are, in the opinion of management, necessary for the fair presentation of the
interim financial statements have been included.  All such adjustments are of
a normal recurring nature.  The statements of income for the three and six
month period ended June 30, 1998 are not necessarily indicative of the results
which may be expected for the entire year.

The unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto for the
Company for the year ended December 31, 1997.

3.  EARNINGS PER SHARE

Earnings per share has been computed for the three and six months ended June
30, 1998 based upon weighted average common shares outstanding of 403,257. 
Earnings per share for the three and six months ended June 30, 1997 is not
presented as there was no common stock issued or outstanding.

Statement of Financial Accounting Standards No. 128, Earnings Per Share,
established new standards for computing and presenting earnings per share. 
The standard is effective for annual and interim periods ending after December
15, 1997.  This standard had no impact on the computation of the Company's
earnings per share upon adoption.

4.  COMPREHENSIVE INCOME

The Company has adopted FASB Statement No. 130, Reporting Comprehensive
Income.  Statement No. 130 requires the reporting of comprehensive income in
addition to net income from operations.  Comprehensive income is a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income.

                                 7

<PAGE>

<PAGE>
5.  STOCKHOLDERS' EQUITY

In connection with the Conversion, the Company issued and sold 436,425 shares
of common stock at a price of $10.00 per share for total net proceeds of
approximately $4.1 million after conversion expenses of approximately
$300,000.  The Company retained $406,000 of the net proceeds and used the
remaining net proceeds to purchase the newly issued capital stock of the
Savings Bank.

The ability of the company to pay dividends depends primarily on the ability
of the Savings Bank to pay dividends to the Company.  The savings Bank may not
declare or pay a cash dividend if the effect thereof would cause its net worth
to be reduced below either the amounts required for the liquidation account
discussed below or the regulatory capital requirements imposed by federal and
state regulations.  An annual cash dividend of 25 cents per share was declared
for shareholders of record as of the close of business on May 31, 1998.  The
cash dividend was paid on July 1, 1998 and represented the first dividend
since becoming a public company.

As required by the regulations of the Office of Thrift Supervision (OTS), at
the time of Conversion, the Savings Bank established a liquidation account in
an amount equal to its retained earnings as reflected in the latest balance
sheet used in the final conversion prospectus.  The liquidation account is
maintained for the benefit of eligible account holders who continue to
maintain their deposit accounts in the Savings Bank after conversion.  In the
event of a complete liquidation of the Savings Bank (and only in such an
event), eligible depositors who continue to maintain accounts shall be
entitled to receive a distribution from the liquidation account before any
liquidation may be made with respect to the Company's common stock.

6.  EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

As part of the Conversion discussed in Note 5, the Savings Bank established an
Employee Stock Ownership Plan (ESOP) for the benefit of all employees who have
attained the age of 21 and have been credited with at least 1000 hours of
service during a 12-month period.  The ESOP borrowed approximately $349,000
from the Company and used the funds to purchase 34,914 shares of common stock
of the Company issued in the Conversion.  The loan will be repaid principally
from the Company's discretionary contributions to the ESOP over a period of 10
years.  On June 30, 1998, the loan had an outstanding balance of approximately
$326,000 and an interest rate of 8.50%.  The loan obligation of the ESOP is
considered unearned compensation and, as such, recorded as a reduction of the
Company's stockholders' equity.  Both the loan obligation and the unearned
compensation are reduced by an amount of the loan repayments made by the ESOP. 
Shares purchased with the loan proceeds are held in a suspense account for
allocation among participants as the loan is repaid.  Contributions to the
ESOP and shares released from the suspense account are allocated among
participants on the basis of compensation in the year of allocation.  Benefits
become fully vested at the end of six years of service under the terms of the
ESOP Plan.  Benefits may be payable upon retirement, death, disability, or
separation from service. 

Since the Savings Bank's annual contributions are discretionary, benefits
payable under the ESOP cannot be estimated.  Compensation expenses are
recognized to the extent of the fair value of shares committed to be released.
For the three and six months ending June 30, 1998, compensation expense was
approximately $14,000 and $28,000, respectively.  Compensation is recognized
at the average fair value of the ratably released shares during the accounting
period as the employees performed services.  At June 30, 1998, the ESOP had
1,746 allocated shares and 33,168 unallocated shares. 

                                     8

<PAGE>

<PAGE>
The ESOP administrators will determine whether dividends on allocated and
unallocated shares will be used for debt service.  Any allocated dividends
used will be replaced with common stock of equal value.  For the purpose of
computing earnings per share, all ESOP shares committed to be released have
been considered outstanding.

7.  ASSET QUALITY

At June 30, 1998, the Company had total nonperforming loans (i.e., loans which
are contractually past due 90 days or more) of approximately $31,000.  The
Company had $6,000 of real estate acquired through foreclosure as of June 30,
1998.  As a percentage of net loans receivable at June 30, 1998, nonperforming
loans was .1%.  Total nonperforming assets as a percentage of total assets at
June 30, 1998 were .1%.

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

General

The following discussion and analysis is intended to assist in understanding
the consolidated financial condition and the consolidated results of
operations of the Company.  References to the "Company" include Security
Bancorp, Inc. and/or Security Federal Savings Bank of McMinnville, TN, as
appropriate.

Comparison of Financial Condition at December 31, 1997 and June 30, 1998

The Company's total consolidated assets increased by approximately $3.3
million or 6.5%, from $50.9 million at December 31, 1997 to $54.2 million at
June 30, 1998.  The increase in assets for the period was primarily
attributable to an increase in loans receivable and an increase in investment
securities.

Loans receivable, net, were $44.7 million at June 30, 1998 compared to $43.1
million at December 31, 1997, a 3.7% increase.  This increase was attributable
to an increase in first mortgage residential loans of $800,000, an increase in
commercial business and real estate loans of $600,000, and an increase in
consumer loans of $200,000.  The largest loan originated during this period
was a commercial line of credit loan for $500,000 at 8.5% fixed for one year.

Deposits increased $2.8 million or 7.6%, from $37.1 million at December 31,
1997 to $39.9 million at June 30, 1998.  The increase in deposits was
primarily attributable to an increase in certificates of deposit and 
commercial checking accounts. 

Comparison of Results of Operations for the Three months Ended June 30, 1997
and 1998.

Net Income.  Net income for the three months ended June 30, 1998 was $141,000
compared to $93,000 for the same quarter last year.  The increase resulted
from an increase in net interest income and non-interest income, offset to a
lesser degree by an increase in other expenses.  The return on average assets
was 1.05% for the three months ended June 30, 1998.

                                     9

<PAGE>

<PAGE>
Net Interest Income.  Net interest income increased $130,000 or 35.0% from
$371,000 for the three months ended June 30, 1997 to $501,000 for the three
months ended June 30, 1998.  The interest rate spread increased from 3.53% for
three months ending June 30, 1997 to 3.78% for the three months ending June
30, 1998 as a result of the weighted average yield on the loan portfolio
increasing while the weighted average rate of deposits and borrowings
declining from the period a year ago.

Total interest income increased $140,000 from $933,000 for the three months
ended June 30, 1997 to $1.1 million for the three months ended June 30, 1998. 
Interest on loans increased $143,000 or 16.6% as a result of a $5.7 million
increase in average loans outstanding substantially in residential mortgage
loans and commercial business loans.

Interest expense increased $10,000 from $547,000 for the three months ended
June 30, 1997 to $557,000 for the three months ended June 30, 1998.  The
increase for the three months ending June 30, 1998 was the result of an
increase in the average balance of deposits which were used to fund loan
demand.

Provision for Loan Losses.  Provisions for loan losses are charges to earnings
to bring the total allowance for loan losses to a level considered adequate by
management to provide for estimated loan losses based on management's
evaluation of the collectability of the loan portfolio, including past loan
loss experience, adverse situations that may affect the borrower's ability to
repay, the estimated value of any underlying collateral, and current economic
conditions.   The provision for loan losses for each of the three month
periods ended June 30, 1997 and 1998 was $15,000.  Historically, management
has emphasized the Company's loss experience over other factors in
establishing provisions for loan losses.  Management deemed the allowance for
loan losses adequate at June 30, 1998.

Noninterest Income.  Noninterest income increased 43.3% to $129,000 for the
three months ended June 30, 1998 from $90,000 for the three months ended June
30, 1997.  This increase is primarily due to gains from the sale of
residential loans increasing $39,000 in the second quarter of 1998 due to
selling $1.3 million more residential loans in the second quarter of 1998
compared to the same quarter for 1997.  Additionally, noninterest income
increased as a result of increased mortgage servicing income on loans sold and
increased service charges on deposit accounts.

Noninterest Expense.  Noninterest expenses increased 28.4% to $398,000 for the
three months ended June 30, 1998 from $310,000 for the three months ended June
30, 1997.  Compensation and benefits increased to $192,000 for the three
months ended June 30, 1998 from $140,000 for the three months ended June 30,
1997 as a result of hiring additional personnel for the new branch office that
opened on March 6, 1997 and the costs associated with the ESOP.  Occupancy and
equipment expense increased to $72,000 for the three months ended June 30,
1998 from $40,000 for the same three months a year earlier as a result of
increased depreciation expense.  Data processing and other expenses increased
to $128,000 for the three months ended June 30, 1998 from $124,000 for the
three months ended June 30, 1997 primarily as a result of increased service
bureau expense for the new branch office and the cost associated with being a
public company.

Income Taxes.  Income tax expense for the three months ending June 30, 1998
was $91,000 compared to $58,000 for the three months ending June 30, 1997. 
This increase was the result of pre-tax income increasing by $81,000 for the
three months ending June 30, 1998.

                                   10


<PAGE>

<PAGE>
Comparison of Results of Operations for the Six Months Ended June 30, 1997 and
1998

Net Income.  Net income for the six months ended June 30, 1998 was $292,000
compared to $178,000 for the six months ended June 30, 1997, a 64.0% increase. 
The increase resulted from an increase in net interest income and noninterest
income, offset to a lesser degree by an increase in other expenses.  The
return on average assets was 1.09% for the six months ended June 30, 1998
compared to .76% for the six months ended June 30, 1997.

Net Interest Income.  Net interest income increased 37.1% to $995,000 for the
six months ended June 30, 1998 from $726,000 for the six months ended June 30,
1997, as a result of an increase in total interest income that more than
offset an increase in total interest expense.

Total interest income increased 16.7% to $2,129,000 for the six months ended
June 30, 1998 from $1,825,000 for the same 1997 period primarily as a result
of increases in the average balance of and average yield on loans receivable,
net.  The average balance and average yield on loans receivable, net increased
to $44.3 million from $39.1 million, and the average yield increased to 8.82%
from 8.78%.  Both increases are attributable to the substantial increase in
commercial real estate and commercial business loans.

Interest expense increased 3.3% to $1,104,000 for the six months ended June
30, 1998 from $1,069,000 for the same 1997 period, primarily as a result of an
increase in average balances of interest-bearing deposits which were used to
fund loan demand.

Provision for Loan Losses.  The provision for loan losses for each of the six
month periods ended June 30, 1997 and 1998 was $30,000.  Historically,
management has emphasized the company's loss expense over other factors in
establishing provisions for loan losses.  Management deemed the allowance for
loan losses adequate at June 30, 1998.

Noninterest Income.  Noninterest income increased 68.0% to $257,000 for the
six months ended June 30, 1998 from $153,000 for the same 1997 period.  This
increase is primarily due to gains from the sale of residential loans
increasing by $68,000 for the six months ended June 30, 1998 due to selling
$2.3 million more residential loans for the first half of 1998 compared to the
same period a year ago.  Additionally, noninterest income increased as a
result of increased mortgage servicing income on loans sold and increased
service charges on deposit accounts.

Noninterest Expense.  Noninterest expenses increased 28.0% from $772,000 for
the six months ended June 30, 1998 from $603,000 for the six months ended June
30, 1997.  Compensation and benefits increased to $382,000 for the six months
ended June 30, 1998 from $295,000 for the six months ended June 30, 1997 as a
result of hiring additional personnel for the new branch office that opened on
March 6, 1997 and the costs associated with the ESOP.  Occupancy and equipment
expense increased to $157,000 for the six months ended June 30, 1998 from
$106,000 for the same six months a year earlier as a result of increased
depreciation expense.  Data Processing and other expenses increased to
$222,000 for the six months ended June 30, 1998 from $191,000 for the six
months ended June 30, 1997 primarily as a result of increased service bureau
expense for the new branch office and the cost associated with being a public
company. 

Income Tax Expense.  Income tax expense for the six months ended June 30, 1998
was $188,000 compared to $98,000 for the same period in 1997.  The increase
was the result of pre-tax income increasing by $204,000 for the six months
ending June 30, 1998.


                                    11

<PAGE>

<PAGE>
Liquidity and Capital Resources.  The Company's primary sources of funds are
deposits and proceeds from principal and interest payments on loans.  While
maturities and scheduled amortization of loans are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by
general interest rates, economic conditions and competition.  The Company's
primary investing activity is loan originations.  The Company maintains
liquidity levels adequate to fund loan commitments, investment opportunities,
deposit withdrawals and other financial commitments.  At June 30, 1998, the
Savings Bank's liquidity ratio was 11.9% (required ratio at that date was 4%
pursuant to OTS regulations). At June 30, 1998, there were no material
commitments for capital expenditures and the Company had unfunded loan
commitments of approximately $2.4 million and unfunded letters of credit of
$805,000.  At June 30, 1998, management had no knowledge of any trends, events
or uncertainties that will have or are reasonably likely to have material
effects on the liquidity, capital resources or operations of the Company. 
Further at June 30, 1998, management was not aware of any current
recommendations by the regulatory authorities which, if implemented, would
have such an effect. 

The company is not subject to any separate regulatory capital requirements.
The Savings Bank exceeded all of its regulatory capital requirements at June
30, 1998.  The Savings Bank had the following regulatory capital ratios at
June 30, 1998:

                                  12

<PAGE>


<PAGE>
                       Security Federal Savings Bank
                                (Unaudited)


As of June 30, 1998        Actual        For Capital        Categorized as
                                      Adequacy Purposes  "Well Capitalized"(1)

                      Amount   Ratio    Amount   Ratio      Amount   Ratio 

Total Capital
(to risk weighted 
  assets)             $ 6,793   18.34%   $ 2,964  8.00%     $ 3,705   10.00%

Tier I Capital
(to risk weighted 
 assets)                6,420   17.33%     1,482  4.00%       2,223    6.00%

Tier 1 Capital
(to adjusted total
 assets)                6,420   11.90%     1,618  3.00%       2,697    5.00%

Tangible Capital
(to tangible assets)    6,420   11.90%       809  1.50%         N/A     ---


1.  As categorized under the OTS Prompt Corrective Action Provisions.

                                     13

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The Year 2000 Issue.  As the Year 2000 approaches, a significant undertaking
for all financial institutions exists in addressing the impact this event will
have on information systems and overall operations as the consequences for
noncompliance would be significant.  The Bank has developed a plan to analyze
how the Year 2000 will impact its operations and related vendors given the
service bureau environment that the Bank operates.  The Bank will continue to
monitor its status as well as its service providers' status in their efforts
to become Year 2000 compliant.  Given the service bureau environment under
which the Bank operates, management does not believe the internal costs to
address the Year 2000 issue will have a material impact on future operations
other than the impact such event will have on the cost of services provided by
its vendors which is unknown at this time.  Management believes that the
company has limited exposure and expects the cost of addressing the Year 2000
issue to be approximately $20,000.  The Bank will implement a contingency plan
to handle certain situations that may occur with the Year 2000.

                                   14

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<PAGE>
PART II.                    OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------
From time to time, the Company and any subsidiaries may be a party to various
legal proceedings incident to its or their business.  At June 30, 1998, there
were no legal proceedings to which the Company or any subsidiary was a party,
or to which of any of their property was subject, which were expected my
management to result in a material loss.

Item 2.  Changes in Securities and Use of Proceeds
         -----------------------------------------
None

Item 3.  Defaults Upon Senior Securities
         -------------------------------
None

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

The Company's annual Meeting of Stockholders ("Meeting") was held on April 16,
1998.  The results of the vote on the matters presented at the Meeting were as
follows:

1.  The following individuals were elected as directors for the terms     
specified:

                                       VOTE FOR     VOTE WITHHELD
                                       --------     -------------

        Robert W. Newman                370,561        9,500
        (term expires 1999)             -------        -----

        Donald R. Collette              370,561        9,500
        (term expires 1999)             -------        -----

        Franklin J. Noblin              370,561        9,500
        (term expires 1999)             -------        -----

        Earl H. Barr                    370,561        9,500
        (term expires 2000)             -------        -----

        John T. Mason, III              370,561        9,500
        (term expires 2000)             -------        -----

        Joe H. Pugh                     370,561        9,500
        (term expires 2001)             -------        -----

        R. Neil Schultz                 370,561        9,500
        (term expires 2001)             -------        -----

The above individuals constitute all of the members of the Company's Board of
Directors.

2.  The Company's 1998 Stock Option Plan was approved by stockholders by the
    following vote:

        FOR  324,688        AGAINST  17,000          ABSTAIN     0
            ---------               ---------                ----------
        Broker non-votes totaled  38,373.
                                  ------   


3.  The Company's Management Recognition and Development Plans was approved by
    stockholders by the following vote:

        FOR  295,188        AGAINST  46,500          ABSTAIN     0
            ---------               ---------                ----------
        Broker non-votes totaled  38,373.
                                  ------

Item 5.  Other Information
         -----------------
None

Item 6.  Exhibits and Reports on Form 8-K.
         ---------------------------------
        Exhibits
        3.1    Charter of Security Bancorp, Inc.*
        3.2    Bylaws of Security Bancorp, Inc.*
        10.1   Employment Agreement with Joe H. Pugh**
        10.2   Severance Agreement with John W. Duncan**
        10.3   Severance Agreement with Ray Talbert**
        10.4   Security Federal Savings Bank of McMinnville, TN 
                  401(k) Plan*
        10.5   Security Federal Savings Bank of McMinnville, TN
                  Employee Stock Ownership Plan***
        10.6   Security Bancorp, Inc. Management Recognition and
                  Development Plan****
        10.7   Security Bancorp, Inc. 1998 Stock Option Plan****
        27     Financial Data Schedule

     No reports on Form 8-K were filed during the quarter ended June 30, 1998.

         _____________________
         * Incorporated by reference to Registrant's Registration
          Statement on Form SB-2, as amended (File No. 333-6670)         
       ** Incorporated by reference to Registrant's Form 10-QSB for the
          quarter ended June 30, 1997.
      *** Incorporated by reference to Registrant's Form 10-KSB for the year
          ended December 31, 1997.
     **** Incorporated by reference to Registrant's Annual Meeting Proxy
          Statement dated March 16, 1998.
                                
                                     15

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<PAGE>
                                 SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             Security Bancorp, Inc.


Date: August 12, 1998        By /s/ Joe H. Pugh                                
                             ----------------------------------------  
                                Joe H. Pugh
                                President and Chief Executive Officer


                             Security Bancorp, Inc. 


Date: August 12, 1998        By /s/ John W. Duncan                             
                             ----------------------------------------  
                                John W. Duncan
                                Chief Financial Officer

                                 16

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