SECURITIES AND EXCHANGE COMMISSION

                           WASHINGTON, DC  20549

                                FORM 10-Q
(Mark one)

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

            FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

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

     FOR THE TRANSITION PERIOD: FROM_____________TO_____________

                     COMMISSION FILE NUMBER:  0-16120

                       SECURITY FEDERAL CORPORATION
            (Exact name of Registrant as specified in Its Charter)

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


        238 RICHLAND AVENUE, WEST, AIKEN, SOUTH CAROLINA      29801
           (Address of Principal Executive Office)         (Zip code)

                                (803) 641-3000
            (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                              YES  X         NO
                                 ------         -----

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.  See definition of "large
accelerated filer" and "accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filed [ ]   Accelerated filer[ ]  Non-accelerated filer [X]


Indicate by check mark whether the registrant is a shell company (defined in
Rule 12b-2 of the Exchange Act).

                              YES            NO   X
                                 ------        ------

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


            CLASS:                OUTSTANDING SHARES AT:      SHARES
            --------------------  -----------------------    ---------------

            Common Stock, par          July 31, 2006          2,608,617
            value $0.01 per share

<PAGE>





                                     INDEX
------------------------------------------------------------------------------
PART I.   FINANCIAL INFORMATION                                  PAGE NO.

Item 1.   Financial Statements :

             Consolidated Balance Sheets at June 30,
              2006 and March 31, 2006                                   1

             Consolidated Statements of Income for the Three
              Months Ended June 30, 2006 and 2005                       2

             Consolidated Statements of Shareholders' Equity and
              Comprehensive Income at June 30, 2005 and 2006            3

             Consolidated Statements of Cash Flows for the Three
              Months Ended June 30, 2006 and 2005                       4

             Notes to Consolidated Financial Statements                 6

Item 2.   Management's Discussion and Analysis of Financial
           Condition and Results of Operations                         12

Item 3.   Quantitative and Qualitative Disclosures About Market
           Risk                                                        20

Item 4.   Controls and Procedures                                      20

------------------------------------------------------------------------------
PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                            21

Item 2.   Unregistered Sales of Equity Securities and
           Use of Proceeds                                             21

Item 3.   Defaults Upon Senior Securities                              21

Item 4.   Submission of matters to a Vote of Security Holders          21

Item 5.   Other Information                                            21

Item 6.   Exhibits                                                     21

          Signatures                                                   22

------------------------------------------------------------------------------



                                SCHEDULES OMITTED

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


<PAGE>



Part I.  Financial Information

Item 1.  Financial Statements

                       Security Federal Corporation and Subsidiaries
                              Consolidated Balance Sheets


                                              June 30, 2006     March 31, 2006
                                           ------------------  ---------------
Assets:                                        (Unaudited)           (Audited)
 Cash And Cash Equivalents                   $ 11,078,009        $ 14,351,208
 Investment And Mortgage-Backed
  Securities:
   Available For Sale:
    (Amortized cost of $163,391,871 at
    June 30, 2006 and $166,808,236 at
    March 31, 2006)                           158,731,338         163,445,066

   Held To Maturity: (Fair value of
    $69,623,220 at June 30, 2006 and
    $73,084,450 at March 31, 2006)             71,987,413          74,987,805
                                            -------------       -------------
 Total Investment And Mortgage-Backed
  Securities                                  230,718,751         238,432,871
                                            -------------       -------------
 Loans Receivable, Net:
  Held For Sale                                 2,476,068           1,320,644
  Held For Investment: (Net of allowance
   of $6,853,908 at June 30, 2006 and
   $6,704,734 at March 31, 2006)              395,359,383         373,788,432
                                            -------------       -------------
 Total Loans Receivable, Net                  397,835,451         375,109,076
                                            -------------       -------------
 Accrued Interest Receivable:
  Loans                                         1,238,672           1,096,014
  Mortgage-Backed Securities                      499,662             508,432
  Investments                                     892,910             945,620
 Premises And Equipment, Net                   12,272,082          11,662,976
 Federal Home Loan Bank Stock, At Cost          7,763,900           7,149,800
 Bank Owned Life Insurance                      5,597,509           5,000,001
 Repossessed Assets Acquired In
  Settlement Of Loans                              20,000              91,022
 Other Assets                                   7,705,728           4,330,795
                                            -------------       -------------
Total Assets                                $ 675,622,674       $ 658,677,815
                                            =============       =============
Liabilities And Shareholders' Equity
Liabilities:
 Deposit Accounts                           $ 480,647,530       $ 479,229,339
 Advances From Federal Home Loan Bank         144,585,523         131,363,000
 Other Borrowed Money                           6,864,849           7,289,773
 Advance Payments By Borrowers For Taxes
  And Insurance                                   674,298             501,998
 Mandatorily Redeemable Financial
  Instrument                                    1,440,270                   -
 Other Liabilities                              3,528,277           2,691,946
                                            -------------       -------------
Total Liabilities                           $ 637,740,747       $ 621,076,056
                                            -------------       -------------
Shareholders' Equity:
 Serial Preferred Stock, $.01 Par Value;
  Authorized Shares - 200,000; Issued
  And Outstanding Shares - None             $           -       $          -

 Common Stock, $.01 Par Value; Authorized
  Shares - 5,000,000; Issued - 2,613,629
  And Outstanding Shares - 2,602,317 At
  June 30, 2006 And 2,558,234 And 2,537,378
  At March 31, 2006                                25,582             25,582
 Additional Paid-In Capital                     4,404,110          4,404,110
 Treasury Stock, (At Cost, 11,312 shares)        (238,656)          (238,656)
 Indirect Guarantee Of Employee Stock
  Ownership Trust Debt                                  -           (215,503)
 Accumulated Other Comprehensive Loss          (2,891,401)        (2,086,509)
 Retained Earnings, Substantially Restricted   36,582,292         35,712,735
                                            -------------      -------------
Total Shareholders' Equity                  $  37,881,927      $  37,601,759
                                            -------------      -------------
Total Liabilities And Shareholders'
 Equity                                     $ 675,622,674      $ 658,677,815
                                            =============      =============

         See accompanying notes to consolidated financial statements.

                                        1

<PAGE>

                  Security Federal Corporation and Subsidiaries
                  Consolidated Statements of Income (Unaudited)

                                              Three Months Ended June 30,
                                            ------------------------------
                                                  2006             2005
                                             ------------     ------------
Interest Income:
 Loans                                        $ 7,020,675      $ 5,185,122
 Mortgage-Backed Securities                     1,443,350        1,393,287
 Investment Securities                          1,146,342          819,557
 Other                                             14,483           14,227
                                              -----------     ------------
Total Interest Income                           9,624,850        7,412,193
                                              -----------     ------------
Interest Expense:
 NOW And Money Market Accounts                  1,581,170        1,253,183
 Passbook Accounts                                 41,876           44,199
 Certificate Accounts                           2,155,401        1,212,583
 Advances And Other Borrowed Money              1,435,727          979,237
                                              -----------     ------------
Total Interest Expense                          5,214,174        3,489,202
                                              -----------     ------------

Net Interest Income                             4,410,676        3,922,991
 Provision For Loan Losses                        150,000          165,000
                                              -----------     ------------
 Net Interest Income After Provision For
  Loan Losses                                   4,260,676        3,757,991
                                              -----------     ------------
Non-Interest Income:
 Net Gain On Sale Of Investments                        -           17,540
 Gain On Sale Of Loans                            113,255          135,310
 Service Fees On Deposit Accounts                 277,868          283,197
 Income from cash value of life insurance          56,508                -
 Other                                            304,363          254,328
                                              -----------     ------------
Total Other Income                                751,994          690,375
                                              -----------     ------------
Non-Interest Expense:
 Salaries And Employee Benefits                 2,125,369        1,760,947
 Occupancy                                        317,595          311,847
 Advertising                                       74,649           25,469
 Depreciation And Maintenance Of Equipment        291,469          251,801
 FDIC Insurance Premiums                           14,142           14,519
 Other                                            620,080          631,541
                                              -----------     ------------
Total Non-Interest Expense                      3,443,304        2,996,124
                                              -----------     ------------

 Income Before Income Taxes                     1,569,366        1,452,242
 Provision For Income Taxes                       546,994          523,000
                                              -----------     ------------
Net Income                                    $ 1,022,372     $    929,242
                                              ===========     ============

Basic Net Income Per Common Share             $      0.40     $       0.37
                                              ===========     ============
Diluted Net Income Per Common Share           $      0.40     $       0.36
                                              ===========     ============
Cash Dividend Per Share On Common Stock       $      0.06     $       0.04
                                              ===========     ============
Basic Weighted Average Shares Outstanding       2,538,951        2,530,389
                                              ===========     ============
Diluted Weighted Average Shares Outstanding     2,564,893        2,556,205
                                              ===========     ============

      See accompanying notes to consolidated financial statements.

                                         2

<PAGE>


<TABLE>
                       Security Federal Corporation and Subsidiaries

       Consolidated Statements of Shareholders' Equity and Comprehensive Income (Unaudited)

                                                                        Accumulated
                                                           Indirect       Other
                                    Additional             Guarantee     Comprehen-
                            Common   Paid-In   Treasury       of        sive Income  Retained
                             Stock   Capital    Stock      ESOP Debt      (Loss)     Earnings       Total
                           -------- ---------- --------    ----------    --------- -----------  -----------

                        <c>       <c>        <c>        <c>          <c>         <c>          <c>
Balance At March 31, 2005  $ 25,438 $ 4,181,804 $(165,089)  $(276,217)  $(961,504) $32,306,633  $35,111,065
Net Income                        -           -                     -           -      929,242      929,242
Other Comprehensive Income,
 Net Of Tax:
 Unrealized Holding Gains
  On Securities Available
  For Sale                        -           -          -          -     403,917            -      403,917
 Plus Reclassification
  Adjustments for Gains
  Included in Net Income          -           -          -          -      10,875            -       10,875
                                                                                                -----------
 Comprehensive Income             -           -          -          -           -            -    1,344,034
 Purchase of Treasury Stock
  At Cost, 1,200 Shares                            (25,800)                                        (25,800)
 Exercise Of Stock Options        6       9,996                                                     10,002
 Decrease In Indirect
  Guarantee Of ESOP Debt          -           -          -     60,714           -            -       60,714
 Cash Dividends                   -           -          -          -           -     (101,449)    (101,449)
                           --------  ----------  ---------  ---------   ---------  -----------  -----------
Balance At June 30, 2005   $ 25,444  $4,191,800  $(190,889) $(215,503)  $(546,712) $33,134,426  $36,398,566
                           ========  ==========  =========  =========   =========  ===========  ===========

</TABLE>

<TABLE>

                                                                        Accumulated
                                                           Indirect       Other
                                    Additional             Guarantee     Comprehen-
                            Common   Paid-In   Treasury       of        sive Income  Retained
                             Stock   Capital    Stock      ESOP Debt      (Loss)     Earnings       Total
                           -------- ---------- --------    ----------    --------- -----------  -----------

                        <c>      <c>        <c>        <c>          <c>         <c>          <c>
Balance At March 31, 2006  $ 25,582 $4,404,110 $(238,656) $(215,503)  $(2,086,509) $ 35,712,735 $37,601,759
Net Income                        -          -                    -             -     1,022,372   1,022,372
Other Comprehensive Income,
 Net Of Tax:
 Unrealized Holding Losses
  On Securities Available
  For Sale                        -          -         -          -      (804,892)            -    (804,892)
                                                                                                -----------
Comprehensive Income              -          -         -          -             -             -     217,480
Decrease In Indirect
 Guarantee Of ESOP Debt           -          -         -    215,503             -             -     215,503
Cash Dividends                    -          -         -          -             -      (152,815)   (152,815)
                           -------- ----------- ---------   -------  ------------   ----------- -----------
Balance At June 30, 2006   $ 25,582  $4,404,110 $(238,656)  $     -  $ (2,891,401)  $36,582,292 $37,881,927
                           ======== =========== =========   =======  ============   =========== ===========

                                   See accompanying notes to consolidated financial statements.

                                                                3
</TABLE>

<PAGE>

                  Security Federal Corporation and Subsidiaries

                Consolidated Statements of Cash Flows (Unaudited)

                                               Three Months Ended June 30,
                                             --------------------------------
                                                 2006                2005
                                              -----------        ------------

Cash Flows From Operating Activities:
Net Income                                     $ 1,022,372          $ 929,242
Adjustments To Reconcile Net Income To
 Net Cash (Used) Provided By
Operating Activities:
 Depreciation Expense                              232,989            241,003
 Discount Accretion And Premium Amortization       122,918            259,436
 Provisions For Losses On Loans And Real Estate    150,000            165,000
 Gain On Sale Of Loans                            (113,255)          (135,310)
 Gain On Sale Of Mortgage Backed Securities
  Available For Sale                                     -            (17,540)
 (Gain) Loss On Sale Of Real Estate                (48,678)            14,230
 Amortization Of Deferred Fees On Loans            (63,989)           (48,034)
 Proceeds From Sale Of Loans Held For Sale       6,154,987          8,285,951
 Origination Of Loans For Sale                  (7,197,156)        (6,622,045)
 (Increase) Decrease In Accrued Interest
  Receivable:
  Loans                                           (142,658)            (8,484)
  Mortgage-Backed Securities                         8,770             20,508
  Investments                                       52,710             90,377
 Increase In Advance Payments By Borrowers         172,300            180,196
 Other, Net                                       (390,544)           471,610
                                               -----------       ------------
 Net Cash (Used) Provided By Operating
  Activities                                       (39,234)         3,826,140
                                               -----------       ------------
Cash Flows From Investing Activities:
 Principal Repayments On Mortgage-Backed
  Securities Available For Sale                  9,666,628         12,417,076
 Principal Repayments On Mortgage-Backed
  Securities Held To Maturity                            -              5,230
 Purchase Of Investment Securities Available
  For Sale                                      (2,976,845)        (8,998,000)
 Purchase Of Mortgage-Backed Securities
  Available For Sale                            (4,614,465)        (5,596,261)
 Proceeds From Sale Of Mortgage-Backed
  Securites Available For Sale                           -          1,968,194
 Maturities Of Investment Securities
  Available For Sale                             1,218,707          2,190,338
 Maturities of Investment Securities
  Held To Maturity                               3,000,000                  -
 Purchase Of FHLB Stock                         (1,813,100)        (1,575,000)
 Redemption Of FHLB Stock                        1,199,000          1,449,000
 (Increase) Decrease In Loans To Customers     (21,656,962)       (18,529,421)
 Proceeds From Sale Of Repossessed Assets          119,700             16,384
 Purchase And Improvement Of Premises And
  Equipment                                       (842,095)          (335,492)
 Purchase Of Bank Owned Life Insurance            (597,508)                 -
                                               -----------       ------------
Net Cash Used By Investing Activities          (17,296,940)       (16,987,952)
                                               -----------       ------------
Cash Flows From Financing Activities:
 Increase In Deposit Accounts                    1,418,191         10,917,946
 Proceeds From FHLB Advances                    77,845,000         48,195,000
 Repayment Of FHLB Advances                    (64,622,477)       (45,270,000)
 Net Proceeds Of Other Borrowings                 (424,924)           892,086
 Dividends To Shareholders                        (152,815)          (101,449)
 Purchase Of Treasury Stock                              -            (25,800)
 Proceeds From Exercise of Stock Options                 -             10,002
                                               -----------       ------------
Net Cash Provided By Financing Activities       14,062,975         14,617,785
                                               -----------       ------------
                                                                   (Continued)

                                        4

<PAGE>



                  Security Federal Corporation and Subsidiaries
           Consolidated Statements of Cash Flows (Unaudited) Continued


                                                Three Months Ended June 30,
                                            ---------------------------------
                                                 2006                2005
                                            ------------          -----------
Net (Decrease) Increase In Cash And
 Cash Equivalents                             (3,273,199)           1,455,973
Cash And Cash Equivalents At Beginning
 Of Period                                    14,351,208            7,916,488\
                                            ------------          -----------
Cash And Cash Equivalents At End Of Period  $ 11,078,009          $ 9,372,461
                                            ============          ===========
Supplemental Disclosure Of Cash Flows
 Information:
Cash Paid During The Period For Interest    $  5,109,698          $ 3,442,441

Cash Paid During The Period For Income
 Taxes                                      $          -          $    51,195
Additions To Repossessed Assets Acquired
 Through Foreclosure                        $          -          $    54,614
Decrease (Increase) In Unrealized Net
 Gain On Securities Available For Sale,
 Net Of Taxes                               $   (804,892)         $   414,792
Issuance Of A Mandatorily Redeemable
 Financial Instrument Through The
 Issuance Of Common Stock                   $  1,440,270                    -

            See accompanying notes to consolidated financial statements.

                                       5

<PAGE>



                Security Federal Corporation and Subsidiaries
            Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and accounting principles generally
accepted in the United States of America; therefore, they do not include all
disclosures necessary for a complete presentation of financial condition,
results of operations, and cash flows.  Such statements are unaudited but, in
the opinion of management, reflect all adjustments, which are of a normal
recurring nature and necessary for a fair presentation of results for the
selected interim periods.  Users of financial information produced for interim
periods are encouraged to refer to the footnotes contained in the audited
financial statements appearing in Security Federal Corporation's
(the "Company") 2006 Annual Report to Shareholders when reviewing interim
financial statements.  The results of operations for the three-month period
ended June 30, 2006 are not necessarily indicative of the results that may be
expected for the entire fiscal year.  This Quarterly Report on Form 10-Q
contains certain forward-looking statements with respect to the financial
condition, results of operations, and business of the Company.  These
forward-looking statements involve certain risks and uncertainties.  Factors
that may cause actual results to differ materially from those anticipated by
such forward-looking statements include, but are not limited to, changes in
interest rates, the demand for loans, the regulatory environment, general
economic conditions and inflation, and the securities markets.  Management
cautions readers of this Form 10-Q not to place undue reliance on the
forward-looking statements contained herein.

2. Principles of Consolidation

The accompanying unaudited 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"), Security Federal
Investments, Inc. ("SFINV"), Security Federal Trust, Inc. ("SFT"),
and Security Financial Services Corporation ("SFSC").  The Bank is primarily
engaged in the business of accepting savings and demand deposits and
originating mortgage and other loans to individuals and small businesses for
various personal and commercial purposes.  SFINS, SFINV, and SFT were formed
during fiscal 2002 and began operation during the December 2001 quarter.
SFINS is an insurance agency offering business, health, home and life
insurance.  SFINV engages primarily in investment brokerage services.  SFT
offers trust, financial planning and financial management services.  SFSC is
currently inactive.

3. Critical Accounting Policies

The Company has adopted various accounting policies, which govern the
application of accounting principles generally accepted in the United States
in the preparation of our financial statements.  Our significant accounting
policies are described in the footnotes to the audited consolidated financial
statements at March 31, 2006 included in our 2006 Annual Report to
Stockholders, which was filed as an exhibit to our Annual Report on Form 10-K
for the year ended March 31, 2006.  Certain accounting policies involve
significant judgments and assumptions by management, which have a material
impact on the carrying value of certain assets and liabilities.  We consider
these accounting policies to be critical accounting policies.  The judgments
and assumptions we use are based on historical experience and other factors,
which we believe to be reasonable under the circumstances.  Because of the
nature of the judgments and assumptions we make, actual results could differ
from these judgments and estimates which could have a material impact on our
carrying values of assets and liabilities and our results of operations.

We believe the allowance for loan losses is a critical accounting policy that
requires the most significant judgments and estimates used in preparation of
our 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 borrow, if applicable, the borrower's ability to repay from
other economic resources, growth and composition of the loan portfolios, 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.
Allowance for loan losses are subject to periodic evaluations by various
authorities and may be subject to adjustments based upon the information that
is available at the time of their examination.

                                        6

<PAGE>


                 Security Federal Corporation and Subsidiaries
       Notes to Consolidated Financial Statements (Unaudited), Continued

3. Critical Accounting Policies, continued

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

4. Acquistion

On June 30, 2006, the Company completed the acquisition of the insurance and
premium finance businesses of Collier-Jennings Financial Corporation and it
subsidiaries Collier-Jennings, Inc., The Auto Insurance Store, Inc., and
Collier-Jennings Premium Pay Plans, Inc (the "Collier-Jennings Companies").
The purpose of the acquisition was to expand the insurance services and
increase non-interest income.  The shareholder of the Collier-Jennings
Companies received $180,000 in cash and approximately 55,000 shares of the
Company's common stock valued at $26 per share for an approximate purchase
price of $1,620,270.  The Company will release the shares to the shareholder
of the Collier-Jennings Companies over a three-year period.  The stock is
mandatorily redeemable by the shareholder of Collier-Jennings Companies at his
option in cumulative increments of 20% per year for a five- year period at the
greater of $26 per share or one and one-half times the book value of the
Company's stock.

5. Earnings Per Share

The Company calculates earnings per share ("EPS") in accordance with Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."
SFAS No. 128 specifies the computation, presentation and disclosure
requirements for EPS for entities with publicly held common stock or potential
common stock such as options, warrants, convertible securities or contingent
stock agreements if those securities trade in a public market.

This standard specifies computation and presentation requirements for both
basic EPS and, for entities with complex capital structures, diluted EPS.
Basic EPS is computed by dividing net income by the weighted average number of
common shares outstanding.  Diluted EPS is similar to the computation of basic
EPS except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the dilutive
potential common shares had been issued.  The dilutive effect of options
outstanding under the Company's stock option plan is reflected in diluted
earnings per share by application of the treasury stock method.


                                        7

<PAGE>



                Security Federal Corporation and Subsidiaries
       Notes to Consolidated Financial Statements (Unaudited), Continued

5. Earnings Per Share, Continued

The following table provides a reconciliation of the numerators and
denominators of the basic and diluted EPS computations:

                                       For the Quarter Ended
                           ----------------------------------------------
                                           June 30, 2006
                           ----------------------------------------------
                              Income
                           (Numerator)         Shares
                              Amount       (Denominator)        Per Share
                           ----------      -------------        ---------

Basic EPS                 $ 1,022,372        2,538,951          $   0.400
Effect of Diluted
 Securities:
 Stock Options                      -           17,971                  -
 ESOP                               -            7,971                  -
                          -----------       ----------          ---------
Diluted EPS               $ 1,022,372        2,564,893          $   0.400
                          ===========       ==========          =========

                                       For the Quarter Ended
                           ----------------------------------------------
                                           June 30, 2005
                           ----------------------------------------------
                              Income
                           (Numerator)         Shares
                              Amount       (Denominator)        Per Share
                           ----------      -------------        ---------

Basic EPS                   $ 929,242        2,530,389          $   0.370
Effect of Diluted
 Securities:
 Stock Options                      -           20,227             (0.008)
 ESOP                               -            5,589             (0.002)

                            ---------        ---------          ---------
Diluted EPS                 $ 929,242        2,556,205          $   0.360
                            =========        =========          =========

6. Stock-Based Compensation

On April 1, 2006, the Company adopted the fair value recognition provisions of
Financial Accounting Standards Board ("FASB") Statement of Financial
Accounting Standards ("SFAS") No. 123(R), Accounting for Stock-Based
Compensation, to account for compensation costs under its stock option plans.
The Company previously utilized the intrinsic value method under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (as
amended) ("APB 25").  Under the intrinsic value method prescribed by APB 25,
no compensation costs were recognized for the Company's stock options because
the option exercise price in its plans equals the market price on the date of
grant.  Prior to January 1, 2006, the Company only disclosed the pro forma
effects on net income and earnings per share as if the fair value recognition
provisions of SFAS 123(R) had been utilized.

In adopting SFAS No. 123, the Company elected to use the modified prospective
method to account for the transition from the intrinsic value method to the
fair value recognition method.  Under the modified prospective method,
compensation cost is recognized from the adoption date forward for all new
stock options granted and for any outstanding unvested awards as if the fair
value method had been applied to those awards as of the date of grant. The
following table illustrates the effect on net income and earnings per share as
if the fair value based method had been applied to all outstanding and
unvested awards in each period.


                                        8

<PAGE>



                 Security Federal Corporation and Subsidiaries
        Notes to Consolidated Financial Statements (Unaudited), Continued

6. Stock-Based Compensation, Continued

                                                 Three Months Ended June 30,
                                             --------------------------------
                                                 2006                2005
                                              -----------        ------------
Net income as reported                        $ 1,022,372        $   929,242
Add: Stock-based employee compensation
expense included in reported net income,
net of related tax effects                              -                  -
Deduct: Total stock-based employee
compensation expense determined under fair
value based method for all awards, net of
related tax effects                                     -            (30,570)
                                              -----------        -----------
Pro forma net income including stock-based
compensation cost based on fair-value method  $ 1,022,372        $   898,672
                                              ===========        ===========
Earnings per share:

 Basic - as reported                          $      0.40        $      0.37
                                              ===========        ===========
 Basic - pro forma                            $      0.40        $      0.36
                                              ===========        ===========

 Diluted - as reported                        $      0.40        $      0.36
                                              ===========        ===========
 Diluted - pro forma                          $      0.40        $      0.35
                                              ===========        ===========

The following is a summary of the activity under the Company's incentive stock
option plan for the quarter ended June 30, 2006.

                                          Three
                                          Months
                                        Ended June
                                         30,2006
                                 ----------------------
                                              Weighted
                                              Average
                                              Exercise
                                   Shares      Price
                                 ----------------------
Balance, Beginning of Year         118,046    $ 19.50
 Options granted                         -          -
 Options exercised                       -          -
 Options forfeited                       -          -
                                 ---------
Balance, March 31                  118,046    $ 19.50
                                 =========
Options Exercisable                118,046    $ 19.50
                                 =========
Options Available For Grant         13,750
                                 =========

                                        9

<PAGE>



                    Security Federal Corporation and Subsidiaries
          Notes to Consolidated Financial Statements (Unaudited), Continued

6. Stock-Based Compensation, Continued

At June 30, 2006, the Company had the following options outstanding:


                     Outstanding
   Grant Date          Options         Option Price      Expiration Date
 ----------------  ----------------  ----------------   ----------------
     1/07/97            1,546            $5.33         12/31/05 to 12/31/06

    10/19/99           51,000           $16.67          9/30/05 to 9/30/09

     1/16/03            1,500           $22.39               12/31/12

      9/1/03            3,000           $24.00                8/31/13

     12/1/03            3,000           $23.65               11/30/13

     1/01/04            8,500           $24.22               12/31/13

      3/8/04           13,000           $21.43                2/28/14

      6/7/04            2,000           $24.00                5/31/14

      1/1/05           26,000           $20.55               12/31/14

      1/1/05            2,000           $22.61               12/31/15

      1/1/06            6,500           $22.91               12/31/16


7. Accounting and Reporting Changes

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

In February 2006, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments an
amendment of FASB Statements No. 133 and 140." This Statement amends SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This Statement resolves issues addressed in
SFAS No. 133 Implementation Issue No. D1, "Application of Statement 133 to
Beneficial Interests in Securitized Financial Assets." SFAS No. 155 is
effective for all financial instruments acquired or issued after the beginning
of an entity's first fiscal year that begins after September 15, 2006. The
Company does not believe that the adoption of SFAS No. 155 will have a
material impact on its financial position, results of operations and cash
flows.

                                         10

<PAGE>



                 Security Federal Corporation and Subsidiaries
        Notes to Consolidated Financial Statements (Unaudited), Continued

7. Accounting and Reporting Changes, Continued

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of
Financial Assets an amendment of FASB Statement No. 140."  This Statement
amends FASB No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," with respect to the accounting for
separately recognized servicing assets and servicing liabilities. SFAS No. 156
requires an entity to recognize a servicing asset or servicing liability each
time it undertakes an obligation to service a financial asset by entering into
a servicing contract; requires all separately recognized servicing assets and
servicing liabilities to be initially measured at fair value, if practicable;
permits an entity to choose its subsequent measurement methods for each class
of separately recognized servicing assets and servicing liabilities; at its
initial adoption, permits a one-time reclassification of available-for-sale
securities to trading securities by entities with recognized servicing rights,
without calling into question the treatment of other available-for-sale
securities under Statement 115, provided that the available-for-sale
securities are identified in some manner as offsetting the entity's exposure
to changes in fair value of servicing assets or servicing liabilities that a
servicer elects to subsequently measure at fair value; and requires separate
presentation of servicing assets and servicing liabilities subsequently
measured at fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and servicing
liabilities. An entity should adopt SFAS No. 156 as of the beginning of its
first fiscal year that begins after September 15, 2006. The Company does not
believe the adoption of SFAS No. 156 will have a material impact on its
financial position, results of operations and cash flows.

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

8. Securities

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 are as
follows:

                                          Gross        Gross
June 30, 2006             Amortized     Unrealized   Unrealized
------------------          Cost          Gains        Losses     Fair Value
                        ------------   ----------   ----------   -----------
US Government and
 Agency Obligations     $ 30,229,301    $      -    $  579,950  $ 29,649,351
Mortgage-Backed
 Securities              133,059,632      50,935     4,131,330   128,979,237
Equity Securities            102,938           -           188       102,750
                        ------------    --------    ----------  ------------
Total                   $163,391,871    $ 50,935    $4,711,468  $158,731,338
                        ============    ========    ==========  ============

March 31, 2006
--------------

US Government and
 Agency Obligations     $ 28,466,546    $      -    $  311,234  $ 28,155,312
Mortgage-Backed
 Securities              138,238,752     126,648     3,178,584   135,186,816
Equity Securities            102,938           -             -       102,938
                        ------------    --------    ----------  ------------
Total                   $166,808,236    $126,648    $3,489,818  $163,445,066
                        ============    ========    ==========  ============



                                       11

<PAGE>



                 Security Federal Corporation and Subsidiaries
        Notes to Consolidated Financial Statements (Unaudited), Continued


8.Securities, Continued

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

The amortized cost, gross unrealized gains, gross unrealized losses, and fair
values of investment and mortgage-backed securities held to maturity are as
follows:

                                          Gross        Gross
June 30, 2006             Amortized     Unrealized   Unrealized
------------------          Cost          Gains        Losses     Fair Value
                        ------------   ----------   ----------   -----------
US Government and
 Agency Obligations     $ 71,987,413    $      -    $2,364,193   $ 69,623,220
                        ============    =========   ==========   ============

March 31, 2006
------------------
                        ------------    ---------   ----------   ------------
US Government and
 Agency Obligations     $ 74,987,805    $       -   $1,903,355   $ 73,084,450
                        ============    =========   ==========   ============

9. Loans Receivable, Net

Loans receivable, net, at June 30, 2006 and March 31, 2006 consisted of the
following:

                                         June 30, 2006      March 31, 2006
                                     -----------------   -----------------
  Residential Real Estate                $ 124,288,489       $ 122,026,298
  Consumer                                  60,350,671          58,612,669
  Commercial Business & Real Estate        225,358,542         209,214,332
  Loans Held For Sale                        2,476,068           1,320,644
                                     -----------------   -----------------
                                           412,473,770         391,173,943
                                     -----------------   -----------------
Less:
  Allowance For Possible Loan Loss           6,853,908           6,704,734
  Loans In Process                           7,512,708           9,185,133
  Deferred Loan Fees                           271,703             175,000
                                     -----------------   -----------------
                                            14,638,319          16,064,867
                                     -----------------   -----------------
                                         $ 397,835,451       $ 375,109,076
                                     =================   =================


                                        12

<PAGE>



                 Security Federal Corporation and Subsidiaries
     Item 2. Management's Discussion and Analysis of Financial Condition and
                           Results of Operations

Safe Harbor Statement

Certain matters in this Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.  These forward-looking
statements relate to, among others, expectations of the business environment
in which the Company operates, projections of future performance, perceived
opportunities in the market, potential future credit experience, and
statements regarding the Company's mission and vision.  These forward-looking
statements are based upon current management expectations, and may, therefore,
involve risks and uncertainties.  The Company's actual results, performance,
or achievements may differ materially from those suggested, expressed, or
implied by forward-looking statements as a result of a wide range of factors
including, but not limited to, the general business environment, interest
rates, the South Carolina real estate market, the demand for loans,
competitive conditions between banks and non-bank financial services
providers, regulatory changes, and other risks detailed in the Company's
reports filed with the Securities and Exchange Commission, including the
Annual Report on Form 10-K for the fiscal year ended March 31, 2006.
Forward-looking statements are effective only as of the date that they are
made and the Company assumes no obligation to update this information

Comparison Of Financial Condition At June 30, 2006 and March 31, 2006

General - Total assets increased $16.9 million or 2.6% to $675.6 million at
June 30, 2006 from $658.7 million at March 31, 2006.  The primary reason for
the growth in total assets was a $22.7 million or 6.1% increase in net loans
receivable to $397.8 million.  For the quarter ending June 30, 2006, the
demand for loans was funded with decreased investments and mortgage-backed
securities, available for sale of $4.7 million or 2.9% and investments and
mortgage-backed securities, held to maturity of $3.0 million or 4.0% and
increased deposits of $1.4 million and advances from the Federal Home Loan
Bank ("FHLB") of $13.2 million or 10.1%.

Assets - The increases and decreases in total assets were primarily
concentrated in the following asset categories:

                                                          Increase (Decrease)
                                                       -----------------------
                     June 30, 2006    March 31, 2006     Amount       Percent
                     -------------    --------------   ----------    ---------
Cash And Cash
 Equivalents         $ 11,078,009      $ 14,351,208   $ (3,273,199)   (22.8)%
Investment And
   Mortgage-Backed
   Securities -
   Available For
   Sale               158,731,338       163,445,066     (4,713,728)    (2.9)
Investment And
   Mortgage-Backed
   Securities-Held -
   To Maturity         71,987,413        74,987,805     (3,000,392)    (4.0)
Loan Receivable, Net  397,835,451       375,109,076     22,726,375      6.1
Premises And
 Equipment, Net        12,272,082        11,662,976        609,106      5.2
FHLB Stock, At Cost     7,763,900         7,149,800        614,100      8.6
Bank Owned Life
 Insurance              5,597,509         5,000,001        597,508     12.0
Other Assets            7,705,728         4,330,795      3,374,933     77.9


Cash and cash equivalents decreased $3.3 million to $11.1 million at June 30,
2006 from $14.4 million at March 31, 2006.  The reason for the decrease is
that the Company used cash and cash equivalents to fund loans.
Investments and mortgage-backed securities decreased $7.7 million or 3.2% to
$230.7 million at June 30, 2006 from $238.4 million at March 31, 2006.  The
decrease in investments and mortgage-backed securities is attributable to
paydowns on mortgage-backed securities, calls and maturities on investments,
and a decrease in market value on mortgage-backed securities and investments,
offset partially by purchases of mortgage-backed securities and investments.

                                        13

<PAGE>



                  Security Federal Corporation and Subsidiaries
     Item 2. Management's Discussion and Analysis of Financial Condition and
                           Results of Operations

Loans receivable, net increased $22.7 million or 6.1% to $397.8 million at
June 30, 2006 from $375.1 million at March 31, 2006.  Residential real estate
loans increased $2.3 million to $124.3 million at June 30, 2006 from $122.0
million at March 31, 2006.  Consumer loans increased $1.8 million to $60.4
million at June 30, 2006 from $58.6 at March 31, 2006.  The increase in
consumer loans is attributable to a special rate promotion that is being
advertised in print media.  Commercial business and real estate loans
increased $16.2 million to $225.4 million at June 30, 2006 from $209.2 million
at March 31, 2006.  The increase in commercial loans is attributable to the
Company's continued focus on originating this type of loan.  Loans held for
sale increased $1.2 million to $2.5 million at June 30, 2006 from $1.3 million
at March 31, 2006.

Premises and equipment, net increased $609,000 to $12.3 million at June 30,
2006 from $11.7 million at March 31, 2006.  The majority of the increase is
for furniture and equipment.

FHLB stock, at cost increased $614,000 to $7.8 million at June 30, 2006 from
$7.2 million at March 31, 2006.  The increase is attributable to a FHLB
requirement that the Company maintain stock equal to 0.20% of total assets at
December 31, 2005 plus a transaction component, which equals 4.5% of
outstanding advances (borrowings) from the FHLB of Atlanta.

Bank Owned Life Insurance increased $598,000 to $5.6 million at June 30, 2006
from $5.0 million at March 31, 2006.  The Company purchased additional life
insurance during the quarter ending June 30, 2006 to provide key man life
insurance for additional officers.

Other assets increased $3.4 million to $7.7 million at June 30, 2006 from $4.3
million at March 31, 2006.  The majority of the increase is the result of the
acquisition of the Collier-Jennings Companies.  Accounts receivable,
intangible assets and goodwill associated with the acquisition of the
Collier-Jennings Companies are included in other assets.

Liabilities

Deposit Accounts
                                                                Balance
                                                         --------------------
                     June 30, 2006      March 31, 2006    Increase (Decrease)
                  ------------------- ------------------ --------------------
                             Weighted           Weighted
                   Balance     Rate    Balance     Rate     Amount    Percent
                  -----------  ----  ------------  ----  ------------ -------
Demand Accounts:
Checking         $ 98,678,589  0.98% $105,347,713  0.97% $(6,669,124)   (6.3)%
Money Market      148,885,581  3.83   151,494,548  3.50   (2,608,967)   (1.7)
Regular Savings    17,001,856  0.98    17,795,109  0.98     (793,253)   (4.5)
                 ------------  ----  ------------  ----   ----------  ------
Total             264,566,026  2.58   274,637,370  2.36  (10,071,344)   (3.7)
                 ------------  ----  ------------  ----   ----------  ------
Certificate Accounts
0.00 - 1.99%                -              59,797            (59,797) (100.0)
2.00 - 2.99%       17,970,170          26,836,415         (8,866,245)  (33.0)
3.00 - 3.99%       52,830,050          72,831,817        (20,001,767)  (27.5)
4.00 - 4.99%      114,493,335          94,240,989         20,252,346    21.5
5.00 - 5.99%       30,787,949          10,622,951         20,164,998   189.8
                 ------------  ----  ------------  ----   ----------  ------
Total             216,081,504  4.28   204,591,969  3.98   11,489,535     5.6
                 ------------  ----  ------------  ----   ----------  ------
Total Deposits   $480,647,530  3.35% $479,229,339  3.05%  $1,418,191     0.3%
                 ============  ====  ============  ====   ==========  ======

                                       14
<PAGE>



                   Security Federal Corporation and Subsidiaries
   Item 2. Management's Discussion and Analysis of Financial Condition and
                            Results of Operations

Advances From FHLB   FHLB advances are summarized by year of maturity and
weighted average interest rate in the table below:
                                                               Balance
                                                         --------------------
                     June 30, 2006      March 31, 2006    Increase (Decrease)
                  ------------------- ------------------ --------------------
Fiscal Year Due:   Balance     Rate    Balance     Rate     Balance   Percent
                  -----------  ----  ------------  ----  ------------ -------

2007               26,225,000  4.43%   18,000,000  2.83%  $8,225,000   45.69%
2008                5,000,000  3.09     5,000,000  3.09            -       -
2009               20,000,000  3.28    20,000,000  3.28            -       -
2010                5,000,000  3.09     5,000,000  3.09            -       -
2011               15,000,000  4.61    20,000,000  4.37   (5,000,000) (25.00)
Thereafter         73,360,523  4.15    63,363,000  4.04    9,997,523   15.78
                 ------------ -----  ------------ -----  -----------  ------
Total Advances   $144,585,523  4.06% $131,363,000  3.74% $13,222,523   10.07%
                 ============ =====  ============ =====  ===========  ======

These advances are secured by a blanket collateral agreement with the FHLB by
pledging the Bank's portfolio of residential firs mortgage loans and
investment securities with approximate amortized cost and fair value of $81.3
million and $78.8 million at June 30, 2006.  Advances are subject to
prepayment penalties.

The following table shows callable FHLB advances as of the dates indicated.
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 payoff the advance without penalty, re-borrow funds on different
terms, or convert the advance to a three-month floating rate advance tied to
LIBOR.

<PAGE>
<TABLE>
                                         As of June 30, 2006
------------------------------------------------------------------------------------------------------------
Borrow Date       Maturity Date     Amount    Int. Rate    Type          Call Dates
------------     ---------------   ---------  -----------  ---------     ---------------------------------

                 <c>            <c>          <c>        <c>           <c>
11/07/02            11/07/12      $5,000,000     3.354%    1 Time Call    11/07/07
10/24/03            10/24/08      10,000,000     2.705     Multi-Call     10/24/06 and quarterly thereafter
02/20/04            02/20/14       5,000,000     3.225     1 Time Call    02/20/09
04/16/04            04/16/14       3,000,000     3.330     1 Time Call    04/16/08
09/16/04            09/16/09       5,000,000     3.090     1 Time Call    09/17/07
06/24/05            06/24/15       5,000,000     3.710     1 Time Call    06/24/10
07/22/05            07/22/15       5,000,000     3.790     1 Time Call    07/22/08
10/21/05            10/21/10       5,000,000     4.325     1 Time Call    10/23/06
11/10/05            11/10/15       5,000,000     4.400     1 Time Call    11/10/09
11/23/05            11/23/15       5,000,000     3.933     Multi-Call     11/23/07 and quarterly thereafter
11/29/05            11/29/13       5,000,000     4.320     1 Time Call    05/29/09
12/14/05            12/14/11       5,000,000     4.640     1 Time Call    09/14/09
01/12/06            01/12/16       5,000,000     4.450     1 Time Call    01/12/11
03/01/06            03/03/14       5,000,000     4.720     1 Time Call    03/03/10
03/24/06            03/24/16       5,000,000     4.120     Multi-Call     03/26/07 and quarterly thereafter
03/24/06            03/25/13       5,000,000     4.580     1 Time Call    03/25/08
04/21/06            04/22/13       5,000,000     4.530     Multi-Call     04/23/07 and quarterly thereafter
06/02/06            06/02/16       5,000,000     5.16%     1 Time Call    06/02/11

</TABLE>

                                        15



<TABLE>

                       Security Federal Corporation and Subsidiaries
    Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


                                        As of March 31, 2006
------------------------------------------------------------------------------------------------------------
Borrow Date       Maturity Date     Amount    Int. Rate     Type         Call Dates
------------     ---------------   ---------  ----------    ---------    ---------------------------------

                 <c>            <c>          <c>        <c>           <c>
11/07/02             11/07/12      $5,000,000    3.354%     1 Time Call   11/07/07
10/24/03             10/24/08      10,000,000    2.705      Multi-Call    10/24/06 and quarterly thereafter
02/20/04             02/20/14       5,000,000    3.225      1 Time Call   02/20/09
04/16/04             04/16/14       3,000,000    3.330      1 Time Call   04/16/08
09/16/04             09/16/09       5,000,000    3.090      1 Time Call   09/17/07
06/24/05             06/24/15       5,000,000    3.710      1 Time Call   06/24/10
06/24/05             06/24/10       5,000,000    4.092      1 Time Call   06/24/06
07/22/05             07/22/15       5,000,000    3.790      1 Time Call   07/22/08
10/21/05             10/21/10       5,000,000    3.864      1 Time Call   10/23/06
11/10/05             11/10/15       5,000,000    4.400      1 Time Call   11/10/09
11/23/05             11/23/15       5,000,000    3.933      Multi-Call    11/23/07 and quarterly thereafter
11/29/05             11/29/13       5,000,000    4.320      1 Time Call   05/29/09
12/14/05             12/14/11       5,000,000    4.640      1 Time Call   09/14/09
01/12/06             01/12/16       5,000,000    4.450      1 Time Call   01/12/11
03/24/06             03/24/16       5,000,000    4.120      Multi-Call    03/26/07 and quarterly thereafter
03/24/06             03/25/13       5,000,000    4.580      1 Time Call   03/25/08
03/01/06             03/03/14       5,000,000    4.720%     1 Time Call   03/03/10

</TABLE>



Mandatorily Redeemable Financial Instrument   On June 30, 2006, the Company
recorded a $1.4 million mandatorily redeemable financial instrument as a
result of the acquisition of the Collier-Jennings Companies.  See Note 4,
"Acquisition".  The shareholder of Collier-Jennings Companies received cash
and issued stock to settle the acquisition.  The Company will release the
shares to the shareholder of Collier-Jennings Companies over a three-year
period.  The stock is mandatorily redeemable by the shareholder of
Collier-Jennings Companies in cumulative increments of 20% per year for a
five-year period at the greater of $26 per share or one and one-half times the
book value of the Company's stock.

Equity - Shareholders' equity increased $280,000 or 1.0% to $37.9 million at
June 30, 2006 from $37.6 million at March 31, 2006.  The employee stock
ownership trust of the Company paid $216,000 of principal on the employee
stock ownership plan loan during the three-month period.  Accumulated Other
Comprehensive Loss, net of tax, increased $805,000 to $2.9 million during the
three months ended June 30, 2006.  The Company's net income for the
three-month period was $1.0 million.  The Board of Directors of the Company
declared the 62nd consecutive quarterly dividend, which was $.06 per share, in
April 2006, which totaled $153,000.  Book value per share was $14.56 at June
30, 2006 compared to $14.82 at March 31, 2006.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
2006 AND 2005
---------------------------------------------------------------------------

Net Income - Net income increased $93,000 or 10.0% to $1.0 million for the
three months ended June 30, 2006 compared to $929,000 for the three months
ended June 30, 2005.  The primary reason for the increased earnings was an
increase in net interest income and non-interest income offset partially by an
increase in non-interest expenses.

Net Interest Income - Net interest income increased $488,000 or 12.4% to $4.4
million during the three months ended June 30, 2006, compared to $3.9 million
for the same period in 2005, as a result of an increase in interest income
offset in part by an increase in interest expense.  Average interest earning
assets increased $59.3 million to $635.4 million while average
interest-bearing liabilities increased $61.1 million to $587.3 million.  The
interest rate spread increased one basis point to 2.51% during the three
months ended June 30, 2006 compared to the same period in 2005. The Company's
net interest margin increased 2 basis points to 2.78% for the quarter ended
June 30, 2006 from 2.76% for the same quarter last year.  The increase in net
interest margin is primarily attributable to loan growth. Interest Income -
Total interest income increased $2.2 million or 29.9% to $9.6 million during
the three months ended June 30, 2006 from $7.4 million for the same period in
2005.  Total interest income on loans increased $1.8 million or 35.4% to $7.0
million during the three months ended June 30, 2006 as a result of the average
loan portfolio balance increasing $60.1 million and the yield in the loan
portfolio increasing 90 basis points.  Interest income from mortgage-backed
securities increased $50,000 or 3.6% as a result of an increase in the yield
in the mortgage-backed portfolio despite a decrease in the average balance of
the portfolio of $17.7 million.  Interest income from investment securities
increased  $327,000 or 39.9% as a result of an increase in the yield and
average balance of the investment securities portfolio.

                                        16

<PAGE>



                Security Federal Corporation and Subsidiaries
     Item 2. Management's Discussion and Analysis of Financial Condition and
                            Results of Operations

The following table compares detailed average balances, associated yields, and
the resulting changes in interest income for the three months ended June 30,
2006 and 2005:
                                   Three Months Ended June 30,
                  ----------------------------------------------------------
                            2006                 2005
                  -------------------  -------------------
                                                               Increase/
                                                               (Decrease)
                                                             In Interest And
                    Average               Average           Dividend Income
                    Balance    Yield      Balance    Yield      From 2005
                  -----------  -----   -----------   -----  ----------------
Loans Receivable,
 Net              $384,991,473  7.29%  $324,841,826   6.39%   $ 1,835,553
Mortgage-Backed
 Securities        136,802,790  4.22    154,508,432   3.61         50,063
Investments        112,271,060  4.08     94,738,838   3.46        326,785
Overnight Time       1,302,992  4.45      1,932,020   2.95            256
                  ------------  ----   ------------  -----    -----------
Total Interest-
 Earning Assets   $635,368,315  6.06%  $576,021,116   5.15%   $ 2,212,657
                  ============  ====   ============  =====    ===========

Interest Expense - Total interest expense increased $1.7 million or 49.4% to
$5.2 million during the three months ended June 30, 2006 compared to $3.5
million for the same period one-year earlier.  The increase in total interest
expense is attributable to the increases in short-term interest rates,
interest-bearing deposits, and borrowings.  Interest expense on deposits
increased $1.3 million or 50.5% during the period as average interest bearing
deposits grew $30.1 million compared to the average balance in the three
months ended June 30, 2005 while the cost of deposits increased 98 basis
points.  Interest expense on advances and other borrowings increased $456,000
or 46.6% as the cost of debt outstanding increased 53 basis points during the
2006 period compared to 2005 while average total borrowings outstanding
increased approximately $31.0 million.

The following table compares detailed average balances, cost of funds, and the
resulting changes in interest expense for the three months ended June 30, 2006
and 2005:

                                   Three Months Ended June 30,
                  ----------------------------------------------------------
                            2006                 2005
                  -------------------  -------------------
                                                               Increase/
                                                               (Decrease)
                                                             In Interest And
                    Average               Average           Dividend Income
                    Balance    Yield      Balance    Yield      From 2005
                  -----------  -----   -----------   -----  ----------------
Now And Money
 Market Accounts  $214,426,429  2.95%  $231,490,912   2.17%  $    327,987
Passbook Accounts   17,132,517  0.98     18,090,035   0.98         (2,323)
Certificates
 Accounts          210,361,963  4.10    162,230,838   2.99        942,818
FHLB Advances And
 Other Borrowed
 Money             145,409,127  3.95    114,404,114   3.42        456,490
                  ------------ -----    -----------  -----    -----------
Total Interest-
  Bearing
  Liabilities     $587,330,036  3.55%   $526,215,899  2.65%   $ 1,724,972
                  ============  ====    ============  ====    ===========


Provision for Loan Losses - The amount of the provision is determined by
management's on-going monthly analysis of the loan portfolio.  Management uses
three methods to measure the estimate of the adequacy of the allowance for
loan losses.  These methods incorporate percentage of classified loans,
five-year averages of historical loan losses in each loan category and current
economic trends, and the assignment of percentage targets of reserves in each
loan category.  Management has used all three methods for the past seven
fiscal years.

The Bank's provision for loan losses was $150,000 during the three months
ended June 30, 2006 compared to $165,000 for the quarter ended June 30, 2005.
The $15,000 or 9.1% decrease reflects the Company's current credit quality and
reduction in classified assets, impaired loans and net charge-offs.  The
following table details selected activity associated with the allowance for
loan losses for the three months ended June 30, 2006 and 2005:

                                        17

<PAGE>



                  Security Federal Corporation and Subsidiaries
     Item 2. Management's Discussion and Analysis of Financial Condition and
                            Results of Operations


                                             June 30, 2006     June 30, 2005
                                           ----------------  -----------------
Beginning Balance                           $   6,704,734     $    6,284,055
 Provision                                        150,000            165,000
 Charge-offs                                      (29,619)           (29,904)
 Recoveries                                        28,793              9,749
                                            -------------     --------------
Ending Balance                              $   6,853,908     $    6,428,900
                                            =============     ==============

Allowance For Loan Losses As A
 Percentage Of Gross Loans Receivable
 And Loans Held For Sale At The End Of
 The Period                                          1.69%              1.89%
Allowance For Loan Losses As A
 Percentage Of Impaired Loans At The
 End Of The Period                                 508.93%            738.95%
Impaired Loans                                  1,346,727            870,000
Nonaccrual Loans And 90 Days Or More
 Past Due Loans As A Percentage Of Loans
 Receivable And Loans Held For Sale At The
 End Of The Period                                   0.27%              0.49%
Loans Receivable, Net                        $397,835,451       $375,109,076


Non-Interest Income - Non-interest income increased $62,000 or 8.9% to
$752,000 for the three months ended June 30, 2006 from $690,000 for the same
period one year ago.  The following table provides a detailed analysis of the
changes in the components of non-interest income:

                                     Three Months           Increase/
                                    Ended June 30,         (Decrease)
                                  ------------------  -----------------------
                                    2006       2005   Amounts       Percent
                                  --------    ------  ---------    ----------
Gain On Sale Of Investments      $      -   $ 17,540  $(17,540)    (100.0)%
Gain On Sale Of Loans             113,255    135,310   (22,055)     (16.3)
Service Fees On Deposit
 Accounts                         277,868    283,197    (5,329)      (1.9)
Income from cash value of
 life insurance                    56,508          -    56,508      100.0
Other                             304,363    254,328    50,035       19.7
                                 --------   --------   -------      -----
Total non-interest income        $751,994   $690,375   $61,619        8.9%
                                 ========   ========   =======      =====

Income from cash value of life insurance was $57,000 for the three months
ended June 30, 2006 compared no income for the same period one year ago.  This
increase is the result of the Company purchasing bank owned life insurance for
certain officers of the Company.  Other miscellaneous income including credit
life insurance commissions, safe deposit rental income, annuity and stock
brokerage commissions, trust fees, and other miscellaneous fees increased
$50,000 to $304,000 during the three months ended June 30, 2006 compared to
the same period one year ago.

Non-Interest Expense - Non-interest expense increased $447,000 or 14.9% to
$3.4 million for the three months ended June 30, 2006 from $3.0 million for
the same period one year ago.  The following table provides a detailed
analysis of the changes in the components of non-interest expense:

                                     Three Months            Increase/
                                    Ended June 30,          (Decrease)
                                  ------------------   -----------------------
                                    2006       2005     Amounts      Percent
                                  --------    ------   ---------   ----------
Salaries And Employee Benefits   $2,125,368 $1,760,947  $364,422      20.7%
Occupancy                           317,595    311,847     5,748       1.8
Advertising                          74,649     25,469    49,180     193.1
Depreciation And Maintenance
 Of Equipment                       291,469    251,801    39,668      15.8
FDIC Insurance Premiums              14,142     14,519      (377)     (2.6)
Other                               620,080    631,541   (11,461)     (1.8)
                                 ---------- ----------  --------    ------
Total Non-Interest Expenses      $1,569,366 $2,996,124   447,180      14.9%
                                 ========== ==========  ========    ======

                                        18

<PAGE>



                   Security Federal Corporation and Subsidiaries
   Item 2. Management's Discussion and Analysis of Financial Condition and
                              Results of Operations

Salary and employee benefits increased $364,000 to $2.1 million for the three
months ended June 30, 2006 from $1.8 million for the same period one year ago.
The majority of the increase is the result of hiring additional staff to
handle the Company's growth and increased regulatory reporting requirements.
Advertising expense increased $49,000 to $74,000 for the three months ended
June 30, 2006 from $25,000 for the same period one year ago.  The increase is
attributable to the Company using more print media advertising to attract
deposits and consumer loans.

Provision For Income Taxes - Provision for income taxes increased $24,000 or
4.6% to $547,000 for the three months ended June 30, 2006 from $523,000 for
the same period one year ago.  Income before income taxes was $1.6 million for
the three months ended June 30, 2006 compared to $1.5 million for the three
months ended June 30, 2005.  The Company's combined federal and state
effective income tax rate for the current quarter was 34.9% compared to 36.0%
for the same quarter one year ago.

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

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

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

During the three ended June 30, 2006 loan disbursements exceeded loan
repayments resulting in a $22.7 million or 6.1% increase in total net loans
receivable.  During the three months ended June 30, 2006, d posits increased
$1.4 million and FHLB advances increase  $10.1 million.  The Bank had $57.4
million in additional borrowing capacity at the FHLB at the end of the period.
At June 30, 2006, the Bank had $179.8 million of certificates of deposit
maturing within one year.  Based on previous experience, the Bank anticipates
a significant portion of these certificates will be renewed.

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

The following table sets forth the length of time until maturity for unused
commitments to extend credit and standby letters of credit at June 30, 2006.





                                      After
                          After One   Three                Greater
                 Within    Through    Through               Than
(Dollars           One      Three     Twelve     Within     One
in thousands)     Month    Months     Months    One Year    Year     Total
                 ------    ------     ------    --------    ----     -----
Unused lines
 of credit      $ 1,709   $ 3,029    $ 38,199    42,937   $36,204  $79,141
Standby letters
 of credit           13         2         810       825       100      925
                -------   -------    --------   -------   -------  -------
Total           $ 1,722   $ 3,031    $ 39,009   $43,762   $36,304  $80,066
                =======   =======    ========   =======   =======  =======

                                        19

<PAGE>



                 Security Federal Corporation and Subsidiaries
   Item 2. Management's Discussion and Analysis of Financial Condition and
                       Results of Operations

Capital - Consistent with our objective to operate a sound and profitable
financial institution, the Company has maintained and will continue to focus
on maintaining a "well capitalized" rating from our regulatory authorities.
In addition, the Company is subject to certain capital requirements set by our
regulatory agencies.  At June 30, 2006, the Company exceeded all regulatory
capital requirements.

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

                                      June 30, 2006           March 31, 2006
                                             (Dollars in Thousands)
                                      --------------------------------------
Bank's Stockholder's Equity                $ 37,605              $  37,387
Unrealized Loss (Gain) On
 Available For Sale Of Securities,
 Net Of Tax                                   2,891                  2,086
Reduction For Goodwill And Other
 Intangibles                                      -                      -
Tangible Capital                             40,496                 39,473
Qualifying Core Deposits And
 Intangible Assets                                -                      -
 Core Capital                                40,496                 39,473
Supplemental Capital                          5,317                  5,104
Assets Required To Be Deducted                  (22)                    (9)
                                           --------               --------
Risk-Based Capital                         $ 45,791               $ 44,568
                                           ========               ========

The following table compares the Bank's capital levels relative to the
applicable regulatory requirements at June 30, 2006:

                                      (Dollars in Thousands)
                    ---------------------------------------------------------
                      Amt.       %      Actual     Actual    Excess    Excess
                    Required  Required    Amt.        %       Amt.        %
                    ---------------------------------------------------------

Tangible Capital    $ 13,466    2.0%    $ 40,496     5.99%   $ 27,030   3.99%
Tier 1 Leverage
 (Core) Capital       27,047    4.0%      40,496     5.99%     13,449   1.99%
Tier 1 Risk-Based
 (Core) Capital       17,014    4.0%      40,496     9.52%     23,482   5.52%
Total Risk-Based
 Capital              34,028    8.0%      45,791    10.77%     11,763   2.77%


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, which 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 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
inflation.  See "Item 3. Quantitative and Qualitative Disclosures About Market
Risk" for additional discussion of changes in interest rates.

                                          20

<PAGE>



                Security Federal Corporation and Subsidiaries
  Management's Discussion and Analysis of Financial Condition and Results of
                              Operations

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

The Company's profitability is affected by fluctuations in the market interest
rate.  Management's goal is to maintain a reasonable balance between exposure
to interest rate fluctuations and earnings.  A sudden and substantial increase
or decrease in interest rates may adversely impact the Company's earnings to
the extent that the interest rates on interest-earning assets and
interest-bearing liabilities do not change at the same rate, to the same
extent or on the same basis.  The Company monitors the impact of changes in
interest rates on its net interest income using a test that measures the
impact on net interest income and net portfolio value of an immediate change
in interest rates in 100 basis point increments and by measuring the Bank's
interest sensitivity gap ("Gap").  Net portfolio value is defined as the net
present value of assets, liabilities, and off-balance sheet contracts.  Gap is
the amount of interest sensitive assets repricing or maturing over the next
twelve months compared to the amount of interest sensitive liabilities
maturing or repricing in the same time period.  Recent net portfolio value
reports furnished by the OTS indicate that the Bank's interest rate risk
sensitivity has increased slightly over the past year.  The Bank has rated
favorably compared to thrift peers concerning interest rate sensitivity.

For the three month period ended June 30, 2006, the Bank's interest rate
spread, defined as the average yield on interest bearing assets less the
average rate paid on interest bearing liabilities was 2.51%.  As of the year
ended March 31, 2006, the interest rate spread was 2.48%. The interest rate
spread increased due to the growth of loan receivables.   Loan receivables
earn a higher yield than investment securities.  However, if interest rates
were to increase suddenly and significantly, the Bank's net interest income
and net interest spread would be compressed.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures:  An evaluation of the
Company's disclosure controls and procedures (as defined in Rule 13a - 15(e)
of the Securities Exchange Act of 1934 ("Act")) was carried out under the
supervision and with the participation of the Company's Chief Executive
Officer, Chief Financial Officer and several other members of the Company's
senior management as of the end of the period covered by this quarterly
report.  The Company's Chief Executive Officer and Chief Financial Officer
concluded that at June 30, 2006 the Company's disclosure controls and
procedures were effective in ensuring that the information required to be
disclosed by the Company in the reports it files or submits under the Act is
(i) accumulated and communicated to the Company's management (including the
Chief Executive Officer and Chief Financial Officer) in a timely manner, and
(ii) recorded, processed, summarized and reported within the time period
specified in the Securities and Exchange Commission's rules and forms.

(b) Changes in Internal Controls: In the quarter ended June 30, 2006, the
Company did not make any significant changes in, nor take any corrective
actions regarding, its internal controls or other factors that could
significantly affect these controls.

                                         21

<PAGE>



             Security Federal Corporation and Subsidiaries

Part II: Other Information

Item 1   Legal Proceedings
         -----------------
         The Company is not engaged in any legal proceedings of a material
         nature at the present time.  From time to time, the Company is a
         party to legal proceedings in the ordinary course of business wherein
         it enforces its security interest in mortgage loans it has made.

Item 1A  Risk Factors
         ------------
         There have been no material changes in the risk factors previously
         disclosed in the Company's Annual Report on Form 10-K for the year
         ended March 31, 2006.

Item 2   Unregistered sales of Equity Securities and Use Of Proceeds
         -----------------------------------------------------------
         None.  On May 17, 2005, the Company's Board of Directors authorized a
         5% repurchase plan, or 126,000 shares of the Company's outstanding
         common stock.  As of June 30, 2006, 1,635 shares have been
         repurchased under this program.  The Company did not repurchase any
         shares of its outstanding Common Stock during the three months ended
         June 30, 2006.

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

Item 4   Submission Of Matters To A Vote Of Security Holders
         ---------------------------------------------------
         None

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

Item 6   Exhibits
         --------
         3.1  Articles Of Incorporation, as amended (1)
         3.2  Bylaws (2)
         4    Instruments defining the rights of security holders, including
              indentures (3)
        10.1  Executive Compensation Plans and Arrangements
        10.2  1993 Salary Continuation Agreements (4)
        10.3  Amendment One to 1993 Salary Continuation Agreement (5)
        10.4  Form of 2006 Salary Continuation Agreement(6)
        10.4  1999 Stock Option Plan (2)
        10.5  1987 Stock Option Plan (4)
        10.6  2002 Stock Option Plan (7)
        10.7  2004 Employee Stock Purchase Plan (8)
        10.8  Incentive Compensation Plan (4)
        10.9  Form of Security Federal Bank Salary Continuation Agreement (9)
        10.10 Form of Security Federal Split Dollar Agreement (9)
        14    Code of Ethics (10)
        31.1  Certification of the Chief Executive Officer Pursuant to Section
              302 of the Sarbanes-Oxley Act.
        31.2  Certification of the Chief Financial Officer Pursuant to Section
              302 of the Sarbanes-Oxley Act.
        32    Certifications Pursuant to Section 906 of the Sarbanes-Oxley
              Act.

 (1)    Filed on June 26, 1998, as an exhibit to the Company's Proxy Statement
        and incorporated herein by reference.
 (2)    Filed on March 2, 2000, as an exhibit to the Company's Registration
        Statement on Form S-8 and incorporated herein by reference.
 (3)    Filed on August 12, 1987, as an exhibit to the Company's Registration
        Statement on Form 8-A and incorporated herein by reference.
 (4)    Filed on June 28, 1993, as an exhibit to the Company's Annual Report
        on Form 10-KSB and incorporated herein by reference.
 (5)    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.

                                       22

<PAGE>



                  Security Federal Corporation and Subsidiaries

 Exhibits, Continued


 (6)  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.
 (7)  Filed on June 19, 2002, as an exhibit to the Company's Proxy Statement
      and incorporated herein by reference.
 (8)  Filed on June 18, 2004, as an exhibit to the Company's Proxy Statement
      and incorporated herein by reference.
 (9)  Filed on May 24, 2006 as an exhibit to the Current Report on Form 8-K
      and incorporated herein by reference.
 (10) Filed on June 29, 2006 as an exhibit to the Company's Annual Report on
      Form 10-K and incorporated herein by reference.





Signatures

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


                                      SECURITY FEDERAL CORPORATION

Date: August 14, 2006                 By:/s/Timothy W. Simmons
      ---------------                    --------------------------
                                         Timothy W. Simmons
                                         President
                                         Duly Authorized Representative



Date: August 14, 2006                 By:/s/Roy G. Lindburg
      ---------------                    --------------------------
                                         Roy G. Lindburg
                                         Treasurer/CFO
                                         Duly Authorized Representative


                                     23

<PAGE>



                                 EXHIBIT 31.1

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

                                     24

<PAGE>



                                 Certification

I, Timothy W. Simmons, certify that:

   1.   I have reviewed this Quarterly Report on Form 10-Q of Security Federal
        Corporation;

   2.   Based on my knowledge, this report does not contain any untrue
        statement of a material fact or omit to state a material fact
        necessary to make the statements made, in light of the circumstances
        under which such statements were made, not misleading with respect to
        the period covered by this report;

   3.   Based on my knowledge, the financial statements, and other financial
        information included in this report, fairly present in all material
        respects the financial condition, results of operations and cash flows
        of the registrant as of, and for, the periods presented in this
        report;

   4.   The registrant's other certifying officer(s) and I are responsible for
        establishing and maintaining disclosure controls and procedures (as
        defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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)  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

        (c)  Disclosed in this report any change in the registrant's internal
             control over financial reporting that occurred during the
             registrant's most recent fiscal quarter (the registrant's fourth
             fiscal quarter in the case of an annual report) that has
             materially affected, or is reasonably likely to materially
             affect, the registrant's internal control over financial
             reporting; and

   5.   The registrant's other certifying officer(s) and I have disclosed,
        based on our most recent evaluation of internal control over financial
        reporting, to the registrant's auditors and the audit committee of
        registrant's board of directors (or persons performing the equivalent
        functions):

        (a)  All significant deficiencies and material weaknesses in the
             design or operation of internal control over financial reporting
             which are reasonably likely to adversely affect the registrant's
             ability to record, process, summarize and report financial
             information; and

        (b)  Any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
             internal control over financial reporting.

Date: August 14, 2006
                                     /s/Timothy W. Simmons
                                     -------------------------------------
                                     Timothy W. Simmons
                                     President and Chief Executive Officer

                                        25
<PAGE>



                                 EXHIBIT 31.2

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

                                      26

<PAGE>



                               Certification

I, Roy G. Lindburg, certify that:

   1.   I have reviewed this Quarterly Report on Form 10-Q of Security Federal
        Corporation;

   2.   Based on my knowledge, this report does not contain any untrue
        statement of a material fact or omit to state a material fact
        necessary to make the statements made, in light of the circumstances
        under which such statements were made, not misleading with respect to
        the period covered by this report;

   3.   Based on my knowledge, the financial statements, and other financial
        information included in this report, fairly present in all material
        respects the financial condition, results of operations and cash flows
        of the registrant as of, and for, the periods presented in this
        report;

   4.   The registrant's other certifying officer(s) and I are responsible for
        establishing and maintaining disclosure controls and procedures (as
        defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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)  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

        (c)  Disclosed in this report any change in the registrant's internal
             control over financial reporting that occurred during the
             registrant's most recent fiscal quarter (the registrant's fourth
             fiscal quarter in the case of an annual report) that has
             materially affected, or is reasonably likely to materially
             affect, the registrant's internal control over financial
             reporting; and

   5.   The registrant's other certifying officer(s) and I have disclosed,
        based on our most recent evaluation of internal control over financial
        reporting, to the registrant's auditors and the audit committee of
        registrant's board of directors (or persons performing the equivalent
        functions):

        (a)  All significant deficiencies and material weaknesses in the
             design or operation of internal control over financial reporting
             which are reasonably likely to adversely affect the registrant's
             ability to record, process, summarize and report financial
             information; and

        (b)  Any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
             internal control over financial reporting.

Date: August 14, 2006
                              /s/Roy G. Lindburg
                              -------------------------------------
                              Roy G. Lindburg
                              Treasurer and Chief Financial Officer

                                      27

<PAGE>



                                    EXHIBIT 32

          Certification Pursuant to Section 906 of the Sarbanes-oxley Act

                                        28

<PAGE>





     CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
                      OF SECURITY FEDERAL CORPORATION
         PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and in connection with this Quarterly Report on Form 10-Q, that:

         1.    the report fully complies with the requirements of Sections
               13(a) and 15(d) of the Securities Exchange Act of 1934, as
               amended, and

         2.    the information contained in the report fairly presents, in all
               material respects, the financial condition and results of
               operations of Security Federal Corporation.


/s/Timothy W. Simmons                    /s/Roy G. Lindburg
------------------------------------     ------------------------------------
Timothy W. Simmons                       Roy G. Lindburg
President and Chief Executive Officer    Treasurer and Chief Financial Officer

Dated: August 14, 2006


                                       29

<PAGE>