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, 2007

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

          1705 WHISKEY ROAD, 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 filer [  ] 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, 2007               2,606,792
    value $0.01 per share

<PAGE>


                                     INDEX
-------------------------------------------------------------------------------
PART I.   FINANCIAL INFORMATION (UNAUDITED)                            PAGE NO.

Item 1.   Financial Statements (Unaudited):

            Consolidated Balance Sheets at June 30, 2007 and
              March 31, 2007                                                1

            Consolidated Statements of Income for the Three Months
              Ended June 30, 2007 and 2006                                  2

            Consolidated Statements of Shareholders' Equity and
              Comprehensive Income at June 30, 2007 and 2006                3

            Consolidated Statements of Cash Flows for the Three
              Months Ended June 30, 2007 and 2006                           4

            Notes to Consolidated Financial Statements                      6

Item 2.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations                          13

Item 3.     Quantitative and Qualitative Disclosures about Market Risk     21

Item 4.     Controls and Procedures                                        21

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

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                                22

Item 1A.  Risk Factors                                                     22

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      22

Item 3.   Defaults Upon Senior Securities                                  22

Item 4.   Submission of Matters to a Vote of Security Holders              22

Item 5    Other Information                                                22

Item 6.   Exhibits                                                         23

          Signatures                                                       24

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

                               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, 2007 March 31, 2007
                                                   ------------- --------------
Assets:                                             (Unaudited)    (Audited)
  Cash And Cash Equivalents                          $13,176,161    $13,438,129
  Investment And Mortgage-Backed Securities:
    Available For Sale: (Amortized cost of
    $194,408,107 at June 30, 2007 and $186,970,867
    at March 31, 2007)                               191,701,990    185,766,296

    Held To Maturity:(Fair value of $55,023,821
    at June 30, 2007 and  $63,441,641 at March
    31, 2007)                                         56,141,118     64,138,589
                                                    ------------   ------------
  Total Investment And Mortgage-Backed Securities    247,843,108    249,904,885
  Loans Receivable, Net:                            ------------   ------------
    Held For Sale                                      1,053,978      1,529,748
    Held For Investment:(Net of allowance of
    $7,430,692 at June 30, 2007 and $7,296,791 at
    March 31, 2007)                                  461,293,096    434,508,612
                                                    ------------   ------------
  Total Loans Receivable, Net                        462,347,074    436,038,360
  Accrued Interest Receivable:                      ------------   ------------
    Loans                                              1,529,525      1,459,193
    Mortgage-Backed Securities                           540,289        550,682
    Investments                                        1,225,383      1,181,639
  Premises And Equipment, Net                         17,515,120     15,895,192
  Federal Home Loan Bank Stock ("FHLB"), At Cost       8,605,000      8,209,200
  Bank Owned Life Insurance                            8,045,657      5,783,620
  Repossessed Assets Acquired In Settlement Of Loans      78,276         24,909
  Intangible Assets, Net                                 510,000        532,500
  Goodwill                                             1,197,954      1,197,954
  Other Assets                                         4,845,797      3,893,928
                                                    ------------   ------------
Total Assets                                        $767,459,344   $738,110,191
                                                    ============   ============
Liabilities And Shareholders' Equity
Liabilities:
  Deposit Accounts                                  $536,960,001   $523,737,592
  Advances From FHLB                                 168,745,485    153,049,272
  Other Borrowed Money                                 8,324,229      8,088,194
  Advance Payments By Borrowers For Taxes And
    Insurance                                            653,068        486,101
  Mandatorily Redeemable Financial Instrument          1,417,312      1,417,312
  Junior Subordinated Debentures                       5,155,000      5,155,000
  Other Liabilities                                    3,578,301      3,483,512
                                                    ------------   ------------
Total Liabilities                                   $724,833,396   $695,416,983
                                                    ------------   ------------
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 ( 2,639,220 And Outstanding
    Shares - 2,607,232 At June 30, 2007 And 2,637,942
    And 2,609,116 At March 31, 2007                       25,827         25,814
  Additional Paid-In Capital                           4,878,267      4,850,029
  Treasury Stock, (At Cost, 31,988 and 28,826 Shares
    at June 30 and March 31, 2007, Respectively)        (728,540)      (651,220)
  Indirect Guarantee Of Employee Stock Ownership
    Trust Debt                                                 -              -
  Accumulated Other Comprehensive Loss                (1,678,875)      (747,316)
  Retained Earnings, Substantially Restricted         40,129,269     39,215,901
                                                    ------------   ------------
Total Shareholders' Equity                          $ 42,625,948   $ 42,693,208
                                                    ------------   ------------
Total Liabilities And Shareholders' Equity          $767,459,344   $738,110,191
                                                    ============   ============
           See accompanying notes to consolidated financial statements.
<PAGE>


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

                                                    Three Months Ended June 30,
                                                    ---------------------------
                                                      2007               2006
Interest Income:                                    --------           --------
  Loans                                          $ 8,791,579        $ 7,020,675
  Mortgage-Backed Securities                       1,541,710          1,443,350
  Investment Securities                            1,553,520          1,146,342
  Other                                               19,596             14,483
                                                 -----------        -----------
Total Interest Income                             11,906,405          9,624,850
                                                 -----------        -----------
Interest Expense:
  NOW And Money Market Accounts                    1,654,839          1,581,170
  Passbook Accounts                                   41,815             41,876
  Certificate Accounts                             3,242,849          2,155,401
  Advances And Other Borrowed Money                1,898,333          1,435,727
  Junior Subordinated Debentures                      90,824                  -
                                                 -----------        -----------
Total Interest Expense                             6,928,660          5,214,174
                                                 -----------        -----------
Net Interest Income                                4,977,745          4,410,676
  Provision For Loan Losses                          150,000            150,000
  Net Interest Income After Provision For Loan   -----------        -----------
    Losses                                         4,827,745          4,260,676
Other Income:                                    -----------        -----------
  Gain On Sale Of Loans                              176,121            113,255
  Service Fees On Deposit Accounts                   327,322            277,868
  Income From Cash Value Of Life Insurance            62,037             56,508
  Commissions On Insurance                           145,673                  -
  Other Agency Income                                 29,258                  -
  Trust Income                                        98,775             96,000
  Other                                              221,412            208,363
                                                 -----------        -----------
Total Other Income                                 1,060,598            751,994
                                                 -----------        -----------
General And Administrative Expenses:
  Salaries And Employee Benefits                   2,570,279          2,125,369
  Occupancy                                          422,511            317,595
  Advertising                                        102,273             74,649
  Depreciation And Maintenance Of Equipment          319,525            291,469
  Federal Deposit Insurance Corporation Insurance
    Premiums                                          15,327             14,142
  Amortization of Intangibles                         22,500                  -
  Other                                              799,030            620,080
                                                 -----------        -----------
Total General And Administrative Expenses          4,251,445          3,443,304
                                                 -----------        -----------
  Income Before Income Taxes                       1,636,898          1,569,366
  Provision For Income Taxes                         540,867            546,994
                                                 -----------        -----------
Net Income                                       $ 1,096,031        $ 1,022,372
                                                 ===========        ===========
Basic Net Income Per Common Share                $      0.42               0.40
                                                 ===========        ===========
Diluted Net Income Per Common Share              $      0.42               0.40
                                                 ===========        ===========
Cash Dividend Per Share On Common Stock          $      0.07               0.06
                                                 ===========        ===========
Basic Weighted Average Shares Outstanding          2,609,409          2,538,951
                                                 ===========        ===========
Diluted Weighted Average Shares Outstanding        2,618,889          2,564,893
                                                 ===========        ===========

         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
                                      Additional               Indirect       Other
                             Common   Paid - In    Treasury    Guarantee of   Comprehensive   Retained
                             Stock    Capital        Stock     ESOP Debt      Income (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 Employee Stock Ownership
  ("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
                             ======   ==========   ========    ============   =============  ==========   ==========
                                                                              Accumulated
                                      Additional               Indirect       Other
                             Common   Paid - In    Treasury    Guarantee of   Comprehensive   Retained
                             Stock    Capital        Stock     ESOP Debt      Income (Loss)    Earnings     Total
                             ------   ----------   --------    ------------   -------------   ---------   ----------
Balance At March 31, 2007  $ 25,814   $4,850,029  $(651,220)    $         -   $   (747,316) $39,215,901  $42,693,208

Net Income                        -            -          -               -              -    1,096,031    1,096,031

Other Comprehensive Income,
   Net Of Tax:
   Unrealized Holding Losses
    On Securities Available
    For Sale                      -            -          -               -       (931,559)           -     (931,559)
                                                                                                            --------
Comprehensive Income              -            -          -               -              -            -      164,472

Purchase Of Treasury Stock
   At Cost, 3,162 shares          -            -    (77,320)              -              -            -      (77,320)

Employee Stock Purchase Plan     13       25,356          -               -              -            -       25,369

Stock Compensation Expense        -        2,882          -               -              -            -        2,882


Cash Dividends                    -            -          -               -              -     (182,663)    (182,663)
                             ------   ----------   --------    ------------   -------------   ---------   ----------
Balance At June 30, 2007   $ 25,827   $4,878,267  $(728,540)      $       -    $(1,678,875) $40,129,269  $42,625,948
                             ======   ==========   ========    ============   =============  ==========   ==========

              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,
                                                    ---------------------------
                                                      2007               2006
Cash Flows From Operating Activities:               --------           --------
Net Income                                        $1,096,031         $1,022,372
Adjustments To Reconcile Net Income To Net
Cash Provided (Used) By Operating Activities:
  Depreciation And Amortization Expense              264,573            232,989
  Amortization Of Intangible Assets                   22,500                  -
  Stock Option Compensation Expense                    2,882                  -
  Discount Accretion And Premium Amortization         68,173            122,918
  Provisions For Losses On Loans And Real Estate     150,000            150,000
  Gain On Sale Of Loans                             (176,121)          (113,255)
  Gain On Sale Of Real Estate                        (13,391)           (48,678)
  Amortization Of Deferred Fees On Loans             (29,030)           (63,989)
  Proceeds From Sale Of Loans Held For Sale       11,324,649          6,154,987
  Origination Of Loans For Sale                  (10,672,758)        (7,197,156)
  (Increase) Decrease In Accrued Interest
    Receivable:
       Loans                                         (70,332)          (142,658)
       Mortgage-Backed Securities                     10,393              8,770
       Investments                                   (43,744)            52,710
  Increase In Advance Payments By Borrowers          166,967            172,300
  Other, Net                                        (287,360)          (390,544)
                                                  ----------         ----------
Net Cash Provided (Used) By Operating Activities   1,813,432            (39,234)
                                                  ----------         ----------
Cash Flows From Investing Activities:
  Principal Repayments On Mortgage-Backed
    Securities  Available For Sale                 9,730,754          9,666,628
  Purchase Of Investment Securities Available
    For Sale                                     (15,579,736)        (2,976,845)
  Purchase Of Mortgage-Backed Securities
    Available For Sale                            (4,982,301)        (4,614,465)
  Maturities Of Investment Securities Available
    For Sale                                       3,323,609          1,218,707
  Maturities of Investment Securities Held To
    Maturity                                       8,000,000          3,000,000
  Purchase Of FHLB Stock                          (2,355,600)        (1,813,100)
  Redemption Of FHLB Stock                         1,959,800          1,199,000
  Increase In Loans To Customers                 (26,994,431)       (21,656,962)
  Proceeds From Sale Of Repossessed Assets            49,000            119,700
  Purchase And Improvement Of Premises And
    Equipment                                     (1,884,501)          (842,095)
  Purchase Of Bank Owned Life Insurance           (2,262,037)          (597,508)
                                                  ----------         ----------
Net Cash Used By Investing Activities            (30,995,443)       (17,296,940)
                                                  ----------         ----------
Cash Flows From Financing Activities:
  Increase In Deposit Accounts                    13,222,409          1,418,191
  Proceeds From FHLB Advances                     81,300,000         77,845,000
  Repayment Of FHLB Advances                     (65,603,787)       (64,622,477)
  Net (Repayments) Proceeds Of Other Borrowings      236,035           (424,924)
  Dividends To Shareholders                         (182,663)          (152,815)
  Purchase Of Treasury Stock                         (77,320)                 -
  Proceeds From Employee Stock Purchases              25,369                  -
                                                  ----------         ----------
Net Cash Provided By Financing Activities         28,920,043         14,062,975
                                                  ----------         ----------
                                                                     (Continued)
         See accompanying notes to consolidated financial statements.

                                       4
<PAGE>


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

                                                    Three Months Ended June 30,
                                                    ---------------------------
                                                      2007               2006
                                                    --------           --------
Decrease In Cash And Cash Equivalents               (261,968)        (3,273,199)
Cash And Cash Equivalents At Beginning Of Period  13,438,129         14,351,208
                                                  ----------         ----------
Cash And Cash Equivalents At End Of Period       $13,176,161        $11,078,009
                                                  ==========         ==========



Supplemental Disclosure Of Cash Flows Information:

Cash Paid During The Period For Interest          $6,987,289        $ 5,109,698
Cash Paid During The Period For Income Taxes      $   30,000        $         -
Additions To Repossessed Acquired Through
  Foreclosure                                     $   88,976        $         -
Decrease(Increase) In Unrealized Net Loss On
  Securities Available For Sale, Net Of Taxes     $ (931,559)       $  (804,892)
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")
2007 Annual Report to Shareholders when reviewing interim financial statements.
The results of operations for the three month period ended June 30, 2007 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 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 the year ended March 31,
2002 and began operation during the December 2001 quarter.  SFINS is an
insurance agency offering business, health, home, auto 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, 2007 included in our 2007 Annual Report to Stockholders,
which was filed as an exhibit to our Annual Report on Form 10-K for the year
ended March 31, 2007.  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.

The Company believes the allowance for loan losses is a critical accounting
policy that requires the most significant judgments and estimates used in
preparation of the consolidated financial statements.  The Company provides for
loan losses using the allowance method.  Accordingly, all loan losses are
charged to the related allowance and all recoveries are credited to the
allowance for loan losses.  Additions to the allowance for loan losses are
provided by charges to operations based on various factors, which, in
management's judgment, deserve current recognition in estimating possible
losses.  Such factors considered by management include the fair value of the
underlying collateral; stated guarantees by the 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)

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.  Acquisition

On June 30, 2006, the Company completed the acquisition of the insurance and
premium finance businesses of Collier-Jennings Financial Corporation and its
subsidiaries Collier-Jennings, Inc., The Auto Insurance Store, Inc., and
Collier-Jennings Premium Pay Plans, Inc (the "Collier-Jennings Companies").  The
purpose of the acquisition was to expand the Company's insurance services and
increase non-interest income.  The shareholder of the Collier-Jennings Companies
received $180,000 in cash and 54,512 shares of the Company's common stock valued
at $26 per share for an approximate purchase price of $1,597,312.  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.  A summary of the
purchase price of the transaction is as follows:

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at June 30, 2006, the date of acquisition, including
subsequent adjustments to the allocation of the purchase price.

         Cash And Cash Equivalents      $    43,192
         Accounts Receivable                784,247
         Premises And Equipment              41,696
         Other Assets                        56,289
         Intangible Assets                  600,000
         Goodwill                         1,197,954
                                        -----------
            Total Assets Acquired         2,723,378
                                        -----------
         Notes Payable                      386,185
         Other Liabilities                  739,881
                                        -----------
            Total Liabilities Assumed     1,126,066
                                        -----------
         Net Assets Acquired            $ 1,597,312
                                        ===========

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, 2007
                    ----------------------------------------------------------
                    Income (Numerator) Amount  Shares (Denominator)  Per Share
                    -------------------------  --------------------  ---------
  Basic EPS          $              1,096,031             2,609,409  $    0.42
  Effect of Diluted
    Securities:
      Stock Options                         -                 9,480          -
                    -------------------------  --------------------  ---------
  Diluted EPS        $              1,096,031             2,618,889  $    0.42
                    =========================  ====================  =========

                                     For the Quarter Ended
                    ----------------------------------------------------------
                                         June 30, 2006
                    ----------------------------------------------------------
                    Income (Numerator) Amount  Shares (Denominator)  Per Share
                    -------------------------  --------------------  ---------
  Basic EPS         $               1,022,372             2,538,951  $    0.40
  Effect of Diluted
    Securities:
      Stock Options                         -                17,971          -
      ESOP                                  -                 7,971          -
                    -------------------------  --------------------  ---------
  Diluted EPS       $               1,022,372             2,564,893  $    0.40
                    =========================  ====================  =========

6.  Stock-Based Compensation

Certain officers of the Company participate in an incentive stock option plan.
Options are granted at exercise prices not less than the fair value of the
Company's common stock on the date of the grant. The following is a summary of
the activity under the Company's incentive stock option plan for the quarter
ended June 30, 2007:
                                    -----------------------
                                                  Weighted
                                                  Average
                                                  Exercise
                                      Shares      Price
                                    -----------------------
Balance, Beginning of Period           99,600       $ 20.55
  Options granted                           -             -
  Options exercised                         -             -
  Options forfeited                      (500)        20.55
                                    ---------
Balance, June 30                       99,100       $ 20.55
                                    =========
Options Exercisable                    85,100       $ 20.14
                                    =========
Options Available For Grant            87,488
                                    =========




                                        8

<PAGE>


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

6.  Stock-Based Compensation, Continued

At June 30, 2007, the Company had the following options outstanding:

                    Outstanding                        Expiration
    Grant Date        Options       Option Price          Date
    ----------      -----------     ------------     ------------------
     10/19/99          30,600         $16.67         9/30/05 to 9/30/09

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

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

      1/01/04           7,000         $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          20,500         $20.55            12/31/14

       1/1/06           6,000         $23.91            12/31/16

      8/24/06          14,000         $23.03             8/24/16


7.  Accounting and Reporting Changes

The following is a summary of recent authoritative pronouncements that could
impact the accounting, reporting, and / or disclosure of financial information
by the Company.

In September 2006, the FASB issued SFAS No. 157 which provides enhanced guidance
for using fair value to measure assets and liabilities.  The standard also
requires expanded disclosures about the extent to which companies measure assets
and liabilities at fair value, the information used to measure fair value, and
the effect of fair value measurements on earnings.  SFAS No. 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years and is not expected to have
a significant impact on the Company's financial statements.

 In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans" ("SFAS 158"), which
amends SFAS 87 and SFAS 106 to require recognition of the overfunded or
underfunded status of pension and other postretirement benefit plans on the
balance sheet. Under SFAS 158, gains and losses, prior service costs and
credits, and any remaining transition amounts under SFAS 87 and SFAS 106 that
have not yet been recognized through net periodic benefit cost will be
recognized in accumulated other comprehensive income, net of tax effects, until
they are amortized as a component of net periodic cost. The measurement date -
the date at which the benefit obligation and plan assets are measured - is
required to be the company's fiscal year end. SFAS 158 is effective for publicly
held companies for fiscal years ending after December 15, 2006, except for the
measurement date provisions, which are effective for fiscal years ending after
December 15, 2008. The Company does not have a defined benefit pension plan.
Therefore, SFAS 158 will not impact  o the Company's financial conditions or
results of operations.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115." This statement permits, but does not require, entities to
measure many financial instruments at fair value. The objective is to provide
entities with an opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. Entities electing this option will apply it
when the entity first recognizes an eligible instrument and will report
unrealized gains and losses on such instruments in current earnings.   This
statement 1) applies to all entities, 2) specifies certain election dates, 3)
can be applied on an instrument-by-instrument basis with some exceptions, 4) is
irrevocable and 5) applies only to entire instruments. One

                                       9

<PAGE>


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

exception is demand deposit liabilities, which are explicitly excluded as
qualifying for fair value. With respect to SFAS 115, available-for-sale and
held-to-maturity securities at the effective date are eligible for the fair
value option at that date.

7.  Accounting and Reporting Changes, Continued

If the fair value option is elected for those securities at the effective date,
cumulative unrealized gains and losses at that date shall be included in the
cumulative-effect adjustment and thereafter, such securities will be accounted
for as trading securities.

SFAS 159 is effective for the Company on January 1, 2008. Earlier adoption is
permitted in 2007 if the Company also elects to apply the provisions of SFAS
157. The Company did not early adopt SFAS No. 159 and believes that it is
unlikely that it will expand its use of fair value accounting upon the January
1, 2008 effective date.

In September 2006, The FASB ratified the consensuses reached by the FASB's
Emerging Issues Task Force ("EITF") relating to EITF 06-4 "Accounting for the
Deferred Compensation and Postretirement Benefit Aspects of Endorsement
Split-Dollar Life Insurance Arrangements".  EITF 06-4 addresses employer
accounting for endorsement split-dollar life insurance arrangements that provide
a benefit to an employee that extends to postretirement periods should recognize
a liability for future benefits in accordance with SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", or Accounting
Principles Board ("APB") Opinion No. 12, "Omnibus Opinion-1967".  EITF 06-4 is
effective for fiscal years beginning after December 15, 2007. Entities should
recognize the effects of applying this Issue through either (a) a change in
accounting principle through a cumulative-effect adjustment to retained earnings
or to other components of equity or net assets in the statement of financial
position as of the beginning of the year of adoption or (b) a change in
accounting principle through retrospective application to all prior periods.
The Company's split dollar life insurance arrangements do not provide a benefit
that extends into postretirement periods. Therefore EITF 06-4 will not have an
impact on the Company's consolidated financial statements.

In September 2006, the FASB ratified the consensus reached related to EITF 06-5,
"Accounting for Purchases of Life Insurance-Determining the Amount That Could Be
Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for
Purchases of Life Insurance."  EITF 06-5 states that a policyholder should
consider any additional amounts included in the contractual terms of the
insurance policy other than the cash surrender value in determining the amount
that could be realized under the insurance contract.

EITF 06-5 also states that a policyholder should determine the amount that could
be realized under the life insurance contract assuming the surrender of an
individual-life-by-individual-life policy (or certificate by certificate in a
group policy). EITF 06-5 is effective for fiscal years beginning after December
15, 2007.  Although the Company does not believe the adoption of EITF 06-5 will
have a material impact on the Company's consolidated financial statements,
management is currently analyzing the impact of adoption.

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.

                                     10
<PAGE>

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

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, 2007                    Amortized  Unrealized  Unrealized
-------------                       Cost    Gains       Losses       Fair Value
                                 ---------  ----------  ----------   ----------
FHLB Securities                $49,851,322  $        -  $  727,502  $49,123,820
Federal Farm Credit Securities  10,189,315           -     167,300   10,022,015
FNMA Bonds                       2,906,666           -      62,246    2,844,420
FHLMC Bonds                         33,982           -          34       33,948
Mortgage-Backed Securities     131,323,884     202,618   1,952,215  129,574,287
Equity Securities                  102,938         562           -      103,500
                               -----------  ----------  ----------  -----------
Total                         $194,408,107  $  203,180  $2,909,297 $191,701,990
                               ===========  ==========  ==========  ===========

                                            Gross       Gross
March 31, 2007                   Amortized  Unrealized  Unrealized
--------------                      Cost    Gains       Losses       Fair Value
                                 ---------  ----------  ----------   ----------
FHLB Securities               $ 38,487,381      17,627     131,886   38,373,122
Federal Farm Credit Securities   9,217,205       8,580      11,504    9,214,281
FNMA Bonds                       2,942,530           -      12,141    2,930,389
FHLMC Bonds                         64,071           -          94       63,977
Mortgage-Backed Securities     136,156,742     276,292   1,352,007  135,081,027
Equity Securities                  102,938         562           -      103,500
                                 ---------  ----------  ----------   ----------
Total                         $186,970,867     303,061   1,507,632  185,766,296
                               ===========  ==========  ==========  ===========

FHLB securities, Federal Farm Credit securities, FNMA bonds, FHLMC bonds and
FNMA and FHLMC mortgage- backed securities are issued by government-sponsored
enterprises ("GSE's"). GSE's are not backed by the full faith and credit of the
United States government. Included in the tables above in mortgage-backed
securities are GNMA mortgage-backed securities, which are backed by the full
faith and credit of the United States government. At June 30, 2007, the bank
held an amortized cost and fair value of $46.6 million in GNMA mortgage-backed
securities included in mortgage-backed securities listed above.


                                      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, 2007                    Amortized  Unrealized  Unrealized
-------------                       Cost    Gains       Losses       Fair Value
                                 ---------  ----------  ----------   ----------
FHLB Securities                $47,996,533  $        -  $  895,842  $47,100,691
Federal Farm Credit Securities   7,989,585           -     221,455    7,768,130
Equity Securities                  155,000           -           -      155,000
Total                          $56,141,118  $        -  $1,117,297  $55,023,821

                                            Gross       Gross
March 31, 2007                   Amortized  Unrealized  Unrealized
--------------                      Cost    Gains       Losses       Fair Value
                                 ---------  ----------  ----------   ----------
FHLB Securities                $55,994,852  $   21,560  $  573,841  $55,442,571
Federal Farm Credit Securities   7,988,737           -     144,667    7,844,070
Equity Securities                  155,000           -           -      155,000
Total                          $64,138,589  $   21,560  $  718,508  $63,441,641

FHLB securities and Federal Farm Credit securities are issued by GSE's. These
enterprises are not backed by the full faith and credit of the United States
government.

9.  Loans Receivable, Net

Loans receivable, net, at June 30, 2007 and March 31, 2007 consisted of the
following:

                                              June 30, 2007     March 31, 2007
                                              -------------     --------------
     Residential Real Estate                  $ 125,030,666     $  125,512,411
     Consumer                                    65,188,311         63,809,478
     Commercial Business And Real Estate        284,617,315        259,207,877
     Loans Held For Sale                          1,053,978          1,529,748
                                              -------------     --------------
                                                475,890,270        450,059,514
                                              -------------     --------------
  Less:
     Allowance For Possible Loan Loss             7,430,692          7,296,791
     Loans In Process                             5,839,261          6,443,372
     Deferred Loan Fees                             273,243            280,991
                                              -------------     --------------
                                                 13,543,196         14,021,154
                                              -------------     --------------
                                              $ 462,347,074     $  436,038,360
                                              =============     ==============


                                       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, 2007 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 SEC, including the Annual Report on Form
10-K for the year ended March 31, 2007.  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, 2007 and March 31, 2007

General - Total assets increased $29.4 million or 4.0% to $767.5 million at June
30, 2007 from $738.1 million at March 31, 2007.  The primary reason for the
growth in total assets was a $26.3 million or 6.0% increase in net loans
receivable to $462.3 million.  For the quarter ended June 30, 2007, the demand
for loans was funded with decreased cash and cash equivalents of $262,000 or
2.0%, maturities of investment and mortgage- backed securities- held to maturity
of $8.0 million or 12.5%, increased deposits of $13.3 million or 2.5% and
advances from the FHLB of $15.7 million or 10.3%.

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

                                                            Increase (Decrease)
                                                            -------------------
                                   June 30,     March 31,
                                    2007         2007        Amount    Percent
                                   --------     --------    --------  ---------
Cash And Cash Equivalents       $13,176,161  $13,438,129   $(261,968)    (2.0)%
Investment And Mortgage-
  Backed Securities -
  Available For Sale            191,701,990  185,766,296   5,935,694      3.2
Investment And Mortgage-
  Backed Securities -
  Held To Maturity               56,141,118   64,138,589  (7,997,471)   (12.5)
Loan Receivable, Net            462,347,074  436,038,360  26,308,714      6.0
Premises And Equipment, Net      17,515,120   15,895,192   1,619,928     10.2
FHLB Stock, At Cost               8,605,000    8,209,200     395,800      4.8
Bank Owned Life Insurance         8,045,657    5,783,620   2,262,037     39.1
Other Assets                      4,845,797    3,893,928     951,869     24.4

Investments and mortgage-backed securities available for sale increased $5.9
million or 3.2% to $191.7 million at June 30, 2007 from $185.8 million at March
31, 2007.  The increase in investments and mortgage-backed securities is
attributable to additional purchases slightly offset by paydowns on
mortgage-backed securities and calls and maturities on investments.

                                      13
<PAGE>


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

Loans receivable, net increased $26.3 million or 6.0% to $462.3 million at June
30, 2007 from $436.0 million at March 31, 2007.  Residential real estate loans
decreased $482,000 to $125.0 million at June 30, 2007 from $125.5 million at
March 31, 2007.  Consumer loans increased $1.4 million to $65.2 million at June
30, 2007 from $63.8 million at March 31, 2007.  The increase in consumer loans
is attributable to a special rate promotion that was being advertised in print
media.  Commercial business and real estate loans increased $25.4 million to
$284.6 million at June 30, 2007 from $259.2 million at March 31, 2007.  The
increase in commercial loans was attributable to the Company's continued focus
on originating this type of lending.  Loans held for sale decreased $476,000 to
$1.1 million at June 30, 2007 from $1.5 million at March 31, 2007.

Premises and equipment, net increased $1.6 million to $17.5 million at June 30,
2007 from $15.9 million at March 31, 2007.  The majority of the increase is for
furniture and equipment for our Whiskey Road branch office in Aiken, South
Carolina, and for the ongoing construction of future office sites in downtown
Columbia, South Carolina and Evans, Georgia.

FHLB stock, at cost, increased $396,000 to $8.6 million at June 30, 2007 from
$8.2 million at March 31, 2007.  The increase is attributable to a FHLB
requirement that the Company maintain stock equal to 0.20% of total assets at
June 30, 2007 plus a transaction component, which equals 4.5% of outstanding
advances (borrowings) from the FHLB of Atlanta.

Bank owned life insurance increased $2.3 million to $8.0 million at June 30,
2007 from $5.8 million at March 31, 2007.  The Company purchased additional life
insurance to provide key man life insurance for additional executive officers
and the cash surrender value continues to increase.

Other assets increased $952,000 to $4.8 million at June 30, 2007 from $3.9
million at March 31, 2007.  The majority of this increase is the result of an
increase in the deferred tax asset attributable to a change in the market value
of available for sale securities.

Liabilities

Deposit Acounts
                                                                  Balance
                                                              -----------------
                        June 30, 2007       March 31, 2007    Increase(Decrease)
                       ----------------     ----------------  -----------------
                               Weighted             Weighted
                       Balance   Rate       Balance   Rate      Amount Percent
                       ------- --------     ------- --------    ------ -------
Demand Accounts:
Checking          $105,646,235   0.68% $105,515,095   0.63%  $ 131,140     .1%
Money Market       145,735,053   4.14   145,491,774   4.14     243,279     .2
Regular Savings     16,586,507   0.98    17,458,680   0.98    (872,173)  (5.0)
                   -----------  -----   -----------  -----   ---------  -----
Total              267,967,795   2.58   268,465,549   2.55    (497,754)   (.2)
                   -----------  -----   -----------  -----   ---------  -----

Certificate Accounts
0.00 - 1.99%                 -                    -                  -      -
2.00 - 2.99%         2,217,332            2,971,616           (754,284) (25.3)
3.00 - 3.99%        35,503,678           36,044,826           (541,148)  (1.5)
4.00 - 4.99%        27,743,803           35,617,605         (7,873,802) (22.1)
5.00 - 5.99%       203,527,393          180,637,996         22,889,397   12.7
                   -----------  -----   -----------  -----  ----------  -----
Total              268,992,206   5.04   255,272,043   4.99  13,720,163    5.4
                   -----------  -----   -----------  -----  ----------  -----
Total Deposits    $536,960,001   3.81% $523,737,592   3.74%$13,222,409    2.5%
                   ===========  =====   ===========  =====  ==========  =====
                                       14
<PAGE>


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

Advances From FHLB - FHLB advances are summarized by year of maturity and
weighted average interest rate in the table below:

                                                                  Balance
                                                              -----------------
                        June 30, 2007       March 31, 2007    Increase(Decrease)
                       ----------------     ----------------  -----------------
Fiscal Year Due:       Balance   Rate       Balance   Rate     Balance  Percent
                       ------- --------     ------- --------   -------  -------

2008               $12,800,000   4.64%  $10,000,000   4.25% $2,800,000    28.0%
2009                25,000,000   4.75    25,000,000   4.75           -       -
2010                 5,000,000   3.09     5,000,000   3.09           -       -
2011                10,000,000   4.76    10,000,000   4.76           -       -
2012                19,700,000   4.77    19,700,000   4.77           -       -
Thereafter          96,245,485   4.32    83,349,272   4.20  12,896,213    15.5
                   -----------          -----------         ----------
Total Advances    $168,745,485   4.45% $153,049,272   4.36%$15,696,213    10.3%
                   ===========          ===========         ==========

These advances are secured by a blanket collateral agreement with the FHLB by
pledging the Bank's portfolio of residential first mortgage loans and investment
securities with approximate amortized cost and fair value of $101.8 million and
$99.9 million, respectively at June 30, 2007.  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.

                             As of June 30, 2007
-------------------------------------------------------------------------
Borrow Date  Maturity Date   Amount   Int. Rate     Type       Call Dates
-----------  -------------   ------   ---------   ---------    ----------
11/07/02      11/07/12    $5,000,000   3.354%    1 Time Call   11/07/07
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
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      03/25/13     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   5.160     1 Time Call   06/02/11
07/11/06      07/11/08     5,000,000   4.800      Multi-Call   07/11/08 and
                                                           quarterly thereafter
10/25/06      12/25/11     5,000,000   4.830     1 Time Call   10/27/08
11/29/06      11/29/16     5,000,000   4.025      Multi-Call   11/29/07 and
                                                           quarterly thereafter
01/19/07      07/21/14     5,000,000   4.885     1 Time Call   07/21/11
03/09/07      03/09/12     4,700,000   4.286      Multi-Call   06/11/07 and
                                                           quarterly thereafter
05/24/07      05/24/17     7,900,000   4.375      Multi-Call   05/27/08 and
                                                           quarterly thereafter
06/29/07      06/29/12     5,000,000   4.945     1 Time Call   06/29/09

                                       15
<PAGE>

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

                            As of March 31, 2007
-------------------------------------------------------------------------
Borrow Date  Maturity Date   Amount   Int. Rate     Type       Call Dates
-----------  -------------   ------   ---------   ---------    ----------
11/07/02      11/07/12    $5,000,000   3.354%     1 Time Call  11/07/07
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
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  06/26/07 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   4.53%       Multi-Call  06/26/07 and
                                                           quarterly thereafter
06/02/06      06/02/16     5,000,000   5.16%      1 Time Call  06/02/11
07/11/06      07/11/16     5,000,000   4.80%       Multi-Call  07/11/08 and
                                                           quarterly thereafter
10/25/06      10/25/11     5,000,000   4.83%      1 Time Call  10/27/08
11/29/06      11/29/16     5,000,000   4.025%      Multi-Call  11/29/07 and
                                                           quarterly thereafter
01/19/07      07/21/14     5,000,000   4.885%     1 Time Call  07/21/11
03/09/07      03/09/12     4,700,000   4.286%      Multi-Call  06/11/07 and
                                                           quarterly thereafter

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 the Collier-Jennings Companies received cash
and was issued stock in the Company to settle the acquisition.  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
the 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.

Junior Subordinated Debentures - On September 21, 2006, Security Federal
Statutory Trust (the "Trust"), a wholly-owned subsidiary of the Company, issued
and sold fixed and floating rate capital securities of the Trust (the "Capital
Securities"), which are reported on the consolidated balance sheet as junior
subordinated debentures, generating proceeds of $5.0 million. The Trust loaned
these proceeds to the Company to use for general corporate purposes, primarily
to provide capital to the Bank. The debentures qualify as Tier 1 capital under
Federal Reserve Board guidelines.

The Capital Securities accrue and pay distributions annually at a rate per annum
equal to a blended rate of 6.97% at June 30, 2007.  One-half of the Capital
Securities issued in the transaction has a fixed rate of 6.88% and the remaining
half has a floating rate of three-month LIBOR plus 170 basis points, which was
7.06% at June 30, 2007. The distribution rate payable on the Capital Securities
is cumulative and payable quarterly in arrears. The Company has the right,
subject to events of default, to defer payments of interest on the Capital
Securities for a period not to exceed 20 consecutive quarterly periods, provided
that no extension period may extend beyond the maturity date of December 15,
2036. The Company has no current intention to exercise its right to defer
payments of interest on the Capital Securities.

The Capital Securities mature or are mandatorily redeemable upon maturity on
December 15, 2036, and or upon earlier optional redemption as provided in the
indenture. The Company has the right to redeem the Capital Securities in whole
or in part, on or after September 15, 2011. The Company may also redeem the
capital securities prior to such dates upon occurrence of specified conditions
and the payment of a redemption premium.

Equity - Shareholders' equity decreased $67,000 or 0.2% to $42.6 million at June
30, 2007 from $42.7 million at March 31, 2007. Accumulated Other Comprehensive
Loss, net of tax, increased $932,000 to $1.7 million during the three months
ended June 30, 2007.  The Company's net income for the three-month period was
$1.1 million.  The Board of Directors of the Company declared the 66th
consecutive quarterly dividend, which was $.07 per share, in March 2007, and
totaled $183,000.  Book value per share was $16.35 at June 30, 2007 and March
31, 2007.

                                       16
<PAGE>

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

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30,
2007 AND 2006
---------------------------------------------------------------------------
Net Income - Net income increased $73,659 or 7.2% to $1.1 million for the three
months ended June 30, 2007 compared to $1.0 million for the three months ended
June 30, 2006.  The primary reason for the increased earnings was increases in
net interest income and non-interest income offset partially by an increase in
non-interest expenses.

Net Interest Income - Net interest income increased $567,000 or 12.9% to $5.0
million during the three months ended June 30, 2007, compared to $4.4 million
for the same period in 2006, as a result of an increase in interest income
offset in part by an increase in interest expense.  During the three months
ended June 30, 2007, average interest earning assets increased $74.8 million to
$710.2 million while average interest-bearing liabilities increased $75.6
million to $662.9 million.  The interest rate spread increased 2 basis points to
2.53% during the three months ended June 30, 2007 compared to the same period in
2006.

The Company's net interest margin was 2.80% and 2.78% for the quarters ended
June 30, 2007 and 2006, respectively.

Interest Income - Total interest income increased $2.3 million or 23.7% to $11.9
million during the three months ended June 30, 2007 from $9.6 million for the
same period in 2006.  Total interest income on loans increased $1.8 million or
25.2% to $8.8 million during the three months ended June 30, 2007 as a result of
the average loan portfolio balance increasing $61.8 million and the yield in the
loan portfolio increasing 58 basis points.  Interest income from mortgage-backed
securities increased $98,000 or 6.8% as a result of an increase in yield offset
partially by a $2.3 million decrease in the average balance of the portfolio.
Interest income from investment securities increased $407,000 or 35.5% as a
result of an increase in the yield and average balance of the investment
securities portfolio.

The following table compares detailed average balances, associated yields, and
the resulting changes in interest income for the three months ended June 30,
2007 and 2006:
                                          Three Months Ended June 30,
                               -----------------------------------------------
                                     2007                2006     Increase
                               --------------      -------------- (Decrease) In
                                                                  Interest And
                               Average             Average       Dividend Income
                               Balance  Yield      Balance  Yield  From 2006
                               -------  -----      -------  -----  -----------
Loans Receivable, Net      $446,807,518  7.87% $384,991,473  7.29% $1,770,904
Mortgage-Backed Securities  134,517,110  4.58   136,802,790  4.22      98,360
Investment Securities       127,450,266  4.88   112,271,060  4.08     404,448
Other                         1,403,243  5.59     1,302,992  4.45       5,113
Total Interest-Earning      -----------  ----   -----------  ----   ---------
  Assets                   $710,178,137  6.71% $635,368,315  6.06% $2,281,555
                            ===========  ====   ===========  ====   =========

Interest Expense - Total interest expense increased $1.7 million or 32.9% to
$6.9 million during the three months ended June 30, 2007 compared to $5.2
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 $1.2 million or 30.7% during the period as average interest bearing
deposits grew $43.7 million compared to the average balance in the three months
ended June 30, 2006 while the cost of deposits increased 63 basis points.
Interest expense on advances and other borrowings increased $463,000 or 32.2% as
the cost of debt outstanding increased 46 basis points during the 2007 period
compared to 2006 while average total borrowings outstanding increased
approximately $26.7 million.  Interest expense on junior subordinated debentures
was $91,000 for the three months ended June 30, 2007 compared to zero for the
same period one year ago.  The junior subordinated debentures are the result of
the Company's $5.0 million trust preferred securities offering.

                                      17
<PAGE>

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

The following table compares detailed average balances, cost of funds, and the
resulting changes in interest expense for the three months ended June 30, 2007
and 2006:

                                          Three Months Ended June 30,
                               -----------------------------------------------
                                     2007                2006      Increase
                               --------------      -------------- (Decrease) In
                                                                   Interest
                               Average             Average         Expense
                               Balance  Yield      Balance  Yield  From 2006
                               -------  -----      -------  -----  -----------
Now And Money Market
  Accounts                 $207,334,992 3.19%  $214,426,429 2.95%  $   73,669
Passbook Accounts            17,117,174 0.98     17,132,517 0.98          (61)
Certificate Accounts        261,200,638 4.97    210,361,963 4.10    1,087,448
FHLB Advances And Other
  Borrowed Money            172,121,258 4.41    145,409,127 3.95      462,606
Junior Subordinated
  Debentures                  5,155,000 7.05              -    -       90,824
Total Interest-Bearing      ----------- ----    ----------- ----    ---------
   Liabilities             $662,929,062 4.18%  $587,330,036 3.55%  $1,714,486
                            =========== ====    =========== ====    =========

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, 2007 and 2006, respectively. The following table details selected
activity associated with the allowance for loan losses for the three months
ended June 30, 2007 and 2006.

                                             June 30, 2007      June 30, 2006
                                            ---------------    ---------------
Beginning Balance                           $    7,296,791     $    6,704,734
  Provision                                        150,000            150,000
  Charge-offs                                      (29,120)           (29,619)
  Recoveries                                        13,021             28,793
                                            ---------------    ---------------
Ending Balance                              $    7,430,692     $    6,853,908
                                            ===============    ===============

Allowance For Loan Losses As A Percentage
  Of Gross Loans Receivable And Loans Held
  For Sale At The End Of The Period                  1.58%              1.69%
Allowance For Loan Losses As A Percentage Of
  Impaired Loans At The End Of The Period          721.79%            508.93%
Impaired Loans                                   1,029,475          1,346,727
Nonaccrual Loans And 90 Days Or More Past
  Due Loans As A Percentage Of Gross Loans
  Receivable And Loans Held For Sale At The
  End Of The Period                                  0.39%              0.27%
Loans Receivable, Net                       $  462,347,074     $  397,835,451



                                      18
<PAGE>


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

Non-Interest Income - Non-interest income increased $309,000 or 41.0% to $1.1
million for the three months ended June 30, 2007 from $752,000 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 Ended June 30,  Increase (Decrease)
                              --------------------------   ------------------
                                     2007        2006      Amounts    Percent
                                    ------      ------     -------    -------
Gain On Sale Of Loans             $176,121    $113,255     $62,866      55.5%
Service Fees On Deposit Accounts   327,322     277,868      49,454      17.8
Income From Cash Value Of Life
  Insurance                         62,037      56,508       5,529       9.8
Commissions On Insurance           145,673           -     145,673     100.0
Other Agency Income                 29,258           -      29,258     100.0
Trust Income                        98,775      96,000       2,775       2.9
Other                              221,412     208,363      13,049       6.3
                                 ---------    --------    --------     -----
Total non-interest income       $1,060,598   $ 751,994   $ 308,604      41.0%
                                 =========    ========    ========     =====

Gain on sale of loans increased $63,000 to $176,000 during the three months
ended June 30, 2007 when compared to the same period one year ago due to an
increase in the origination and sale of fixed rate residential mortgage loans.
Commissions on insurance and other agency income increased $175,000 as a result
of the Collier-Jennings Companies acquisition.  Service fees on deposit accounts
increased $49,000 to $327,000 for the quarter ended June 30, 2007 compared to
the same quarter in 2006. Other miscellaneous income including credit life
insurance commissions, safe deposit rental income, annuity and stock brokerage
commissions, trust fees, and other miscellaneous fees, increased $13,000 to
$221,000 during the three months ended June 30, 2007 compared to the same period
one year ago.

Non-Interest Expense - Non-interest expense increased $808,000 or 23.5% to $4.3
million for the three months ended June 30, 2007 from $3.4 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 Ended June 30,  Increase (Decrease)
                              --------------------------   ------------------
                                     2007        2006      Amounts    Percent
                                    ------      ------     -------    -------
Salaries And Employee Benefits  $2,570,279  $2,125,369   $ 444,910     20.9%
Occupancy                          422,511     317,595     104,916     33.0
Advertising                        102,273      74,649      27,624     37.0
Depreciation And Maintenance
  Of Equipment                     319,525     291,469      28,056      9.6
FDIC Insurance Premiums             15,327      14,142       1,185      8.4
Amortization of Intangibles         22,500           -      22,500    100.0
Other                              799,030     620,080     178,950     28.9
                                 ---------   ---------    --------    -----
Total Non-Interest Expenses     $4,251,445  $3,443,304   $ 808,141     23.5%
                                 =========   =========    ========    =====

Salary and employee benefits increased $445,000 to $2.6 million for the three
months ended June 30, 2007 from $2.1 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 and
integrating the Collier-Jennings Companies' employees.  Without the acquisition
of the Collier- Jennings Companies, salary and employee benefits would have
increased approximately $270,000 or 12.7%. Occupancy also increased due to the
acquisition of the Collier- Jennings Companies and additional facilities.
Occupancy increased to 33% to 423,000 for the three months ended June 30, 2006
from $318,000 for the same period one year ago. Advertising expense increased
$28,000 to $102,000 for the three months ended June 30, 2007 from $75,000 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.

Overall, non-interest expenses increased $808,000 or 23.5% for the three months
ended June 30, 2007 when compared to the same period one year ago. The
acquisition of the Collier- Jennings Companies accounted for $345,000 or 42.7%
of this increase. Without the acquisition of the Collier- Jennings Companies
this increase would have been approximately $463,000 or 13.4%.

                                      19
<PAGE>


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

Provision For Income Taxes - Provision for income taxes decreased $6,000 or 1.1%
to $541,000 for the three months ended June 30, 2007 from $547,000 for the same
period one year ago.  Income before income taxes was $1.6 million for the three
months ended June 30, 2007 and 2006, respectively.  The Company's combined
federal and state effective income tax rate for the current quarter was 33.0%
compared to 34.9% 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 months ended June 30, 2007 loan disbursements exceeded loan
repayments resulting in a $26.3 million or 6.0% increase in total net loans
receivable.  During the three months ended June 30, 2007, deposits increased
$13.2 million and FHLB advances increased $15.7 million.  The Bank had $61.3
million in additional borrowing capacity at the FHLB at the end of the period.
At June 30, 2007, the Bank had $252.4 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.

The Company has plans to expand its branch network, which could cause earnings
to level off or decline for a period of time.  The leveling off or decline in
earnings will be attributed the lag that exists from the time a branch is built
to when it becomes profitable.  In the next twelve months, we anticipate
investing $5.0 to $6.0 million in land, buildings, and equipment.  In the next
twenty-four months, we anticipate investing $8.0 to $10.0 million in land,
buildings, and equipment.  The anticipated costs could be affected by increased
construction costs, weather delays, and/or other uncertainties.

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, 2007.

                                    After    After
                                    One      Three            Greater
                           Within   Through  Through  Within   Than
                            One     Three    Twelve    One     One
(Dollars in thousands)      Month   Months   Months    Year    Year     Total
                           ------   ------   ------   ------  -------   -------
Unused lines of credit    $ 5,065  $ 1,959  $48,694  $55,718  $45,583  $101,301
Standby letters of credit       -      142      743      885      147     1,032
                           ------   ------   ------   ------   ------   -------
Total                     $ 5,065  $ 2,101  $49,437  $56,603  $45,730  $102,333
                           ======   ======   ======   ======   ======   =======



                                      20
<PAGE>


                  Security Federal Corporation and Subsidiaries

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

The Company'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 months ended June 30, 2007, 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 2.53%.  For the year ended March 31,
2007, the interest rate spread was 2.51%.  The interest rate spread increased
due to the growth in loans outpacing the growth in investments. 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, 2007 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, 2007, 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, 2007.

Item 2    Unregistered sales of Equity Securities and Use Of Proceeds
          -----------------------------------------------------------


                     (a)Total             (c)Total Number of  (d)Maximum Number
                     Number of (b)Average Shares Purchased as of Shares that May
                     Shares    Price Paid Part of Publicly    Yet Be Purchased
Period               Purchased per Share  Announced Program   Under the Program

April 1-April 30, 2007      -          -                 -              97,174
May 1-May 31, 2007        920     $24.29               920              96,254
June 1-June 30, 2007    2,242      24.55             2,242              94,012
                      ---------------------------------------------------------
Total                   3,162     $24.48             3,162              94,012
                      =========================================================

          In May 2004, 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, 2007, 31,988 shares have been
          repurchased under this program.  The Company repurchased 3,162 shares
          of its outstanding Common Stock during the three months ended June
          30, 2007.

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

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

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









                                        22

<PAGE>



                   Security Federal Corporation and Subsidiaries

Part II:  Other Information, Continued

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  1993 Salary Continuation Agreements (4)
         10.2  Amendment One to 1993 Salary Continuation Agreement (5)
         10.3  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.
(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 27, 2007 as an exhibit to the Company's Annual Report on
         Form 10-K and incorporated herein by reference.



                                     23
<PAGE>



                   Security Federal Corporation and Subsidiaries

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 13, 2007                 By: /s/Timothy W. Simmons
      -------------------                 ----------------------------------
                                              Timothy W. Simmons
                                              President
                                              Duly Authorized Representative

Date:  August 13, 2007                 By: /s/Roy G. Lindburg
      -------------------                 ----------------------------------
                                              Roy G. Lindburg
                                              Treasurer/CFO
                                              Duly Authorized Representative







                                       24

<PAGE>









                                 EXHIBIT 31.1

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





                                       25

<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 period 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 the registrant's board
    of directors (or persons performing the equivalent functions):

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

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

Date: August 13, 2007
                                          /s/Timothy W. Simmons
                                          -------------------------------------
                                          Timothy W. Simmons
                                          President and Chief Executive Officer


                                        26
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                                  EXHIBIT 31.2

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




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                                 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 period 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 the registrant's board
    of directors (or persons performing the equivalent functions):

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

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


Date: August 13, 2007

                                         /s/Roy G. Lindburg
                                         ----------------------------------
                                         Roy G. Lindburg
                                         Chief Financial Officer



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                                  EXHIBIT 32

         Certification Pursuant to Section 906 of the Sarbanes Oxley Act



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



Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section
1350), each of the undersigned hereby certifies in his capacity as an officer of
Security Federal Corporation (the "Company") and in connection with the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2007 that:


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

     2. the information contained in the Report fairly presents, in all material
        respects, the Company's financial condition and results of operations as
        of the dates and for the periods presented in the financial statements
        included in the Report.




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


 Dated: August 13, 2007








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