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, 2005

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

     FOR THE TRANSITION PERIOD: FROM_____________TO_____________


                       COMMISSION FILE NUMBER:  0-16120

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

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


                  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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

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

APPLICABLE ONLY TO CORPORATE ISSUERS:  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,             July 31, 2005               2,535,626
         par 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, 2005
           and March 31, 2005                                          1

           Consolidated Statements of Income for the Three
           Months Ended June 30, 2005 and 2004                         2

           Consolidated Statements of Shareholders' Equity
           and Comprehension Income at June 30, 2004 and 2005          3

           Consolidated Statements of Cash Flows for the Three
           Months Ended June 30, 2005 and 2004                         4

           Notes to Consolidated Financial Statements                  6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                           11

Item 3.  Quantitative and Qualitative Disclosures About Market Risk    17

Item 4.  Controls and Procedures                                       17

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

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                             18


Item 2.  Unregistered Sales of Equity Securities and Use
         of Proceeds                                                   18

Item 3.  Defaults Upon Senior Securities                               18

Item 4.  Submission of matters to a Vote of Security Holders           18

Item 5.  Other Information                                             18

Item 6.  Exhibits                                                      18

Signatures                                                             19

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

                               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 (Unaudited)

                  Security Federal Corporation and Subsidiaries

                           Consolidated Balance Sheets

                                              June 30, 2005    March 31, 2005
                                              ------------     --------------
Assets:                                         (Unaudited)       (Audited)
  Cash And Cash Equivalents                    $ 9,372,461       $7,916,488
  Investment And Mortgage-Backed Securities:
   Available For Sale: (Amortized cost of
                       $164,142,202 at June
                       30, 2005 and
                       $166,364,642 at March
                       31, 2005)               163,260,979      164,814,819
   Held To Maturity:   (Fair value of
                       $75,664,241 at June
                       30, 2005 and
                       $74,770,902 at
                       March 31, 2005)          76,254,861       76,260,904
                                              ------------     ------------
  Total Investment And Mortgage-Backed
  Securities                                   239,515,840      241,075,723
                                              ------------     ------------
  Loans Receivable, Net:
   Held For Sale                                   749,166        2,277,762
   Held For Investment:(Net of allowance of
                       $6,428,900 at June
                       30, 2005 and
                       $6,284,055 at March
                       31, 2005)               332,969,214      314,611,373
                                              ------------     ------------
  Total Loans Receivable, Net                  333,718,380      316,889,135
                                              ------------     ------------
  Accrued Interest Receivable:
   Loans                                           910,356          901,872
   Mortgage-Backed Securities                      535,425          555,933
   Investments                                     631,367          721,744
  Premises And Equipment, Net                    8,008,532        7,914,043
  Federal Home Loan Bank Stock, At Cost          6,360,500        6,234,500
  Repossessed Assets Acquired In Settlement
   Of Loans                                         77,000           53,000
  Other Assets                                   3,322,505        3,716,035
                                              ------------     ------------
Total Assets                                  $602,452,366     $585,978,473
                                              ============     ============
Liabilities And Shareholders' Equity
Liabilities:
  Deposit Accounts                            $441,205,337     $430,287,391
  Advances From Federal Home Loan Bank         114,963,000      112,038,000
  Other Borrowed Money                           6,486,243        5,594,157
  Advance Payments By Borrowers For Taxes
   And Insurance                                   597,606          417,410
  Other Liabilities                              2,801,614        2,530,450
                                              ------------     ------------
Total Liabilities                             $566,053,800     $550,867,408
                                              ------------     ------------


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 - 2,544,438
   And Outstanding Shares - 2,525,617 At
   June 30, 2005 And 2,543,838 And
   2,522,127 At March 31, 2005                      25,444          25,438
  Additional Paid-In Capital                     4,191,800       4,181,804
  Treasury Stock, (At Cost, 9,277
   and 8,077 shares, respectively)                (190,889)       (165,089)
  Indirect Guarantee Of Employee Stock
   Ownership Trust Debt                           (215,503)       (276,217)
  Accumulated Other Comprehensive Income
   (Loss)                                         (546,712)       (961,504)
  Retained Earnings, Substantially Restricted   33,134,426      32,306,633
                                              ------------    ------------
Total Shareholders' Equity                    $ 36,398,566    $ 35,111,065
                                              ------------    ------------
Total Liabilities And Shareholders' Equity    $602,452,366    $585,978,473
                                              ============    ============

See accompanying notes to consolidated financial statements.

                                        1

<PAGE>




                 Security Federal Corporation and Subsidiaries

                 Consolidated Statements of Income (Unaudited)

                                                 Three Months Ended June 30,
                                                ----------------------------
                                                    2005             2004
                                                -----------      -----------
Interest Income:
 Loans                                          $ 5,185,122      $ 3,835,261
 Mortgage-Backed Securities                       1,393,287          878,361
 Investment Securities                              819,557        1,323,278
 Other                                               14,227            6,600
                                                -----------      -----------
Total Interest Income                             7,412,193        6,043,500
                                                -----------      -----------
Interest Expense:
 NOW And Money Market Accounts                    1,253,183          894,613
 Passbook Accounts                                   44,199           43,399
 Certificate Accounts                             1,212,583          770,868
 Advances And Other Borrowed Money                  979,237          886,770
                                                -----------      -----------
Total Interest Expense                            3,489,202        2,595,650
                                                -----------      -----------
Net Interest Income                               3,922,991        3,447,850
 Provision For Loan Losses                          165,000          195,000
                                                -----------      -----------
 Net Interest Income After Provision
  For Loan Losses                                 3,757,991        3,252,850
                                                -----------      -----------
Other Income:
 Net Gain On Sale Of Investments                     17,540                -
 Gain On Sale Of Loans                              135,310          122,425
 Loan Servicing Fees                                 48,568           43,637
 Service Fees On Deposit Accounts                   283,197          313,680
 Other                                              205,760          179,213
                                                -----------      -----------
Total Other Income                                  690,375          658,955
                                                -----------      -----------
General And Administrative Expenses:
 Salaries And Employee Benefits                   1,760,947        1,598,825
 Occupancy                                          311,847          254,535
 Advertising                                         25,469           31,622
 Depreciation And Maintenance Of Equipment          251,801          275,924
 FDIC Insurance Premiums                             14,519           14,705
 Other                                              631,541          518,167
                                                -----------      -----------
Total General And Administrative Expenses         2,996,124        2,693,778
                                                -----------      -----------

 Income Before Income Taxes                       1,452,242        1,218,027
 Provision For Income Taxes                         523,000          416,000
                                                -----------      -----------
Net Income                                      $   929,242      $   802,027
                                                ===========      ===========

Basic Net Income Per Common Share               $      0.37      $      0.32
                                                ===========      ===========
Diluted Net Income Per Common Share             $      0.36      $      0.31
                                                ===========      ===========
Cash Dividend Per Share On Common Stock         $      0.04      $      0.02
                                                ===========      ===========
Basic Weighted Average Shares Outstanding         2,530,389        2,522,600
                                                ===========      ===========
Diluted Weighted Average Shares Outstanding       2,556,205        2,562,892
                                                ===========      ===========

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,
 2004                     $ 25,333 $4,013,674 $      -  $(336,972)  $   689,755     $29,080,125  $33,471,915
Net Income                       -          -        -          -             -         802,027      802,027
Other Comprehensive Income,
 Net Of Tax:
 Unrealized Holding Losses
   On Securities Available
   For Sale                      -          -        -          -    (2,222,875)             -   (2,222,875)
                                                                                                -----------
 Comprehensive Income            -          -        -          -             -              -   (1,420,848)
 Decrease in Indirect
   Guarantee Of ESOP Debt        -          -        -     60,755             -              -       60,755
 Cash Dividends                  -          -        -          -             -        (50,666)     (50,666)
                          -------- ----------  ------- ----------   -----------    -----------  -----------
Balance At June 30, 2004  $ 25,333 $4,013,674  $     - $ (276,217)  $(1,533,120)   $29,831,486  $32,061,156
                          ======== ==========  ======= ==========   ===========    ===========  ===========

</TABLE>

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

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,
                                                -----------------------------
                                                    2005              2004
                                                -----------       -----------
Cash Flows From Operating Activities:
Net Income                                        $ 929,242         $ 802,027
Adjustments To Reconcile Net Income To
Net Cash Provided By Operating Activities:
  Depreciation Expense                              241,003           215,846
  Discount Accretion And Premium
   Amortization                                     259,436           313,403
  Provisions For Losses On Loans And
   Real Estate                                      165,000           195,000
  Gain On Sale Of Loans                            (135,310)         (122,425)
  Gain On Sale Of Mortgage Backed
   Securities Available For Sale                    (17,540)                -
  Loss On Sale Of Real Estate                        14,230                 -
  Amortization Of Deferred Fees On Loans            (48,034)          (52,233)
  Proceeds From Sale Of Loans Held For Sale       8,285,951         7,477,620
  Origination Of Loans For Sale                  (6,622,045)       (6,966,458)
  (Increase) Decrease In Accrued Interest
   Receivable:
   Loans                                             (8,484)           29,824
   Mortgage-Backed Securities                        20,508           (42,644)
   Investments                                       90,377           (15,865)
   Increase In Advance Payments By Borrowers        180,196           166,727
   (Gain) on Disposition of Premises and
     Equipment                                            -            (3,325)
   Other, Net                                       471,610          (191,730)
                                                -----------       -----------
Net Cash Provided By Operating Activities         3,826,140         1,805,767
                                                -----------       -----------
Cash Flows From Investing Activities:
  Principal Repayments On Mortgage-Backed
   Securities Available For Sale                 12,417,076        14,162,776
  Principal Repayments On Mortgage-Backed
   Securities Held To Maturity                        5,230             8,284
  Purchase Of Investment Securities
   Available For Sale                            (8,998,000)                -
  Purchase Of Investment Securities Held
   To Maturity                                            -       (11,991,800)
  Purchase Of Mortgage-Backed Securities
   Available For Sale                            (5,596,261)      (30,243,147)
  Proceeds From Sale Of Mortgage-Backed
   Securities Available For Sale                  1,968,194                 -
  Maturities Of Investment Securities
   Available For Sale                             2,190,338         4,000,000
  Maturities of Investment Securities Held
   To Maturity                                            -         4,000,000
  Purchase Of FHLB Stock                         (1,575,000)       (1,320,000)
  Redemption Of FHLB Stock                        1,449,000           560,200
  (Increase) Decrease In Loans To Customers     (18,529,421)       (5,205,349)
  Proceeds From Sale Of Repossessed Assets           16,384            52,066
  Purchase And Improvement Of Premises And
   Equipment                                       (335,492)       (1,114,286)
  Proceeds from Sale of Premises And
   Equipment                                              -             3,325
                                                -----------       -----------
Net Cash Used By Investing Activities           (16,987,952)      (27,087,931)
                                                -----------       -----------
Cash Flows From Financing Activities:
  Increase In Deposit Accounts                   10,917,946        12,562,407
  Proceeds From FHLB Advances                    48,195,000        40,863,000
  Repayment Of FHLB Advances                    (45,270,000)      (27,368,000)
  Net Proceeds Of Other Borrowings                  892,086           135,685

  Dividends To Shareholders                        (101,449)          (50,666)
  Purchase Of Treasury Stock                        (25,800)                -
  Proceeds From Exercise of Stock Options            10,002                 -
                                                -----------       -----------
Net Cash Provided By Financing Activities        14,617,785        26,142,426
                                                -----------       -----------

                                                                   (Continued)

                                        4


<PAGE>




            Security Federal Corporation and Subsidiaries

      Consolidated Statements of Cash Flows (Unaudited) Continued

                                                 Three Months Ended June 30,
                                                -----------------------------
                                                    2005              2004
                                                -----------       -----------
Net Increase In Cash And Cash Equivalents         1,455,973           860,261
Cash And Cash Equivalents At Beginning
 Of Period                                        7,916,488         6,749,211
                                                -----------       -----------
Cash And Cash Equivalents At End Of Period      $ 9,372,461       $ 7,609,472
                                                ===========       ===========
Supplemental Disclosure Of Cash Flows
 Information:
Cash Paid During The Period For Interest        $ 3,442,441       $ 2,775,454
Cash Paid During The Period For Income Taxes    $    51,195       $   338,532
Additions To Repossessed Assets Acquired
 Through Foreclosure                            $    54,614       $   156,197
(Increase) Decrease In Accumulated Other
 Comprehensive Loss, Net Of Taxes               $   414,792       $(2,222,875)

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 our March 31, 2005 Annual Report to
Shareholders when reviewing interim financial statements.  The results of
operations for the three-month period ended June 30, 2005 are not necessarily
indicative of the results that may be expected for the fiscal year ending
March 31, 2006.  This Quarterly Report on Form 10-Q contains certain
forward-looking statements with respect to the financial condition, results of
operations, and business of Security Federal Corporation.  These
forward-looking statements involve certain risks and uncertainties.  Factors
that may cause actual results to differ materially from those anticipated by
such forward-looking statements include, but are not limited to, changes in
interest rates, the demand for loans, the regulatory environment, general
economic conditions and inflation, and the securities markets.  Management
cautions readers of this Form 10-Q not to place undue reliance on the
forward-looking statements contained herein.

2. Principles of Consolidation

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

3. Loans Receivable, Net

Loans receivable, net, at June 30, 2005 and March 31, 2005 consisted of the
following:

                                          June 30, 2005       March 31, 2005
Loans Held For Investment:                -------------       -------------
 Residential Real Estate                  $ 124,263,179       $ 122,622,347
 Consumer                                    52,882,799          50,844,192
 Commercial Business & Real Estate          175,775,823         162,217,200
                                          -------------       -------------
                                            352,921,801         335,683,739
                                          -------------       -------------
Less:
 Allowance For Possible Loan Loss             6,428,900           6,284,055
 Loans In Process                            13,362,785          14,626,913
 Deferred Loan Fees                             160,902             161,398
                                          -------------       -------------
                                             19,952,587          21,072,366
                                          -------------       -------------
                                          $ 332,969,214       $ 314,611,373
                                          =============       =============

Loans held for sale were $749,166 and $2,277,762 at June 30, 2005 and March
31, 2005, respectively.

The following is a reconciliation of the allowance for loan losses for the
three months ending:

                                          June 30, 2005       June 30, 2004
                                          -------------       -------------
Beginning Balance                         $   6,284,055       $   5,763,935
Provision                                       165,000             195,000
Charge-offs                                     (29,904)           (119,198)
Recoveries                                        9,749              81,812
                                          -------------       -------------
Ending Balance                            $   6,428,900       $   5,921,549
                                          =============       =============

                                         6

<PAGE>



            Security Federal Corporation and Subsidiaries

   Notes to Consolidated Financial Statements (Unaudited), Continued

4. Securities

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, 2005             Amortized   Unrealized    Unrealized
-------------               Cost         Gains        Losses      Fair Value
                         -----------   ----------   ----------   -----------
US Government and
 Agency Obligations      $76,000,034    $ 3,704     $ 609,268    $75,394,470
Mortgage-Backed
 Securities                  254,827     14,944             -        269,771
                         -----------    -------     ---------    -----------
Total                    $76,254,861    $18,648     $ 609,268    $75,664,241
                         ===========    =======     =========    ===========

March 31, 2005
--------------

US Government and Agency
 Obligations             $76,000,847    $     -     $1,504,761   $74,496,086
Mortgage-Backed
 Securities                  260,057      4,759              -       274,816
                         -----------    -------     ----------   -----------
Total                    $76,260,904    $14,759     $1,504,761   $74,770,902
                         ===========    =======     ==========   ===========

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, 2005             Amortized   Unrealized  Unrealized
-------------               Cost         Gains      Losses       Fair Value
                        ------------   --------   ----------    ------------
US Government and
 Agency Obligations     $ 12,276,772   $  8,750   $   26,790    $ 12,258,732
Mortgage-Backed
 Securities              151,865,430    482,303    1,345,486     151,002,247
                        ------------   --------   ----------    ------------
Total                   $164,142,202   $491,053   $1,372,276    $163,260,979
                        ============   ========   ==========    ============

March 31, 2005
--------------

US Government and
 Agency Obligations     $  5,469,678   $  4,648   $   19,063    $  5,455,263
Mortgage-Backed
 Securities              160,894,954    457,081    1,992,479     159,359,556
                        ------------   --------   ----------    ------------
Total                   $166,364,632   $461,729   $2,011,542    $164,814,819
                        ============   ========   ==========    ============

                                       7
<PAGE>


            Security Federal Corporation and Subsidiaries

   Notes to Consolidated Financial Statements (Unaudited), Continued

5. Deposit Accounts

A summary of deposit accounts by type with weighted average rates is as
follows:

                                     June 30, 2005       March 31, 2005
                                --------------------  -------------------
Demand Accounts:                    Balance   Rate      Balance     Rate
                                --------------------  -------------------

  Checking                      $ 91,936,911   0.93%  $ 88,169,885   0.65%
  Money Market                   166,861,358   2.78%   164,088,081   2.57%
  Regular Savings                 18,665,607   0.98%    17,743,659   0.98%
                                ------------          ------------
Total Demand Accounts            277,463,876   1.95%   270,001,625   1.84%
                                ------------          ------------


Certificate Accounts:

  0-4.99%                        153,925,347           150,486,280
  5.00-6.99%                       9,816,114             9,799,486
                                ------------          ------------
Total Certificate Accounts       163,741,461   3.10%   160,285,766   2.92%
                                ------------          ------------
Total Deposit Accounts          $441,205,337   2.38%  $430,287,391   2.24%
                                ============          ============

6. Advances From Federal Home Loan Bank

Federal Home Loan Bank ("FHLB") advances are summarized by year of maturity
and weighted average interest rate in the table below:


                                     June 30, 2005       March 31, 2005
                                  ------------------   --------------------
Fiscal Year Due:                    Balance     Rate     Balance      Rate
                                  ------------------   --------------------
2006                             $ 33,600,000   4.39%  $ 40,675,000   4.09%
2007                               18,000,000   2.83%    18,000,000   2.83%
2008                               10,000,000   2.96%    10,000,000   2.96%
2009                               25,000,000   3.05%    25,000,000   3.05%
2010                                5,000,000   3.09%     5,000,000   3.09%
Thereafter                         23,363,000   3.21%    13,363,000   3.21%
Total Advances                   $114,963,000   3.44%  $112,038,000   3.41%

These advances are secured by a blanket collateral agreement with the FHLB by
pledging the Bank's portfolio of residential first mortgage loans and
approximately $47.7 million in investment securities at June 30, 2005.
Advances are subject to prepayment penalties.

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


<PAGE>
<TABLE>

                                       As of June 30, 2005
-----------------------------------------------------------------------------------------------------------
Borrow Date    Maturity Date      Amount      Int. Rate       Type             Call Dates
-----------    -------------    ----------    ---------    -----------    ---------------------------------
 
             <c>            <c>             <c>        <c>            <c>
11/10/00        11/10/05        $5,000,000     5.85%       Multi-Call     08/10/05 and quarterly thereafter
09/04/02        09/04/07         5,000,000     2.82%       1 Time Call    09/06/05
11/07/02        11/07/12         5,000,000     3.354%      1 Time Call    11/07/07
10/24/03        10/24/08        10,000,000     2.705%      Multi-call     10/24/06 and quarterly thereafter
12/10/03        12/12/05         5,000,000     2.16%       Multi-call     12/12/05 and quarterly thereafter
02/20/04        02/20/14         5,000,000     3.225%      1 Time Call    02/20/09
04/16/04        04/16/14         3,000,000     3.33%       1 Time Call    04/16/08
09/16/04        09/16/09         5,000,000     3.09%       1 Time Call    09/16/07
06/24/05        06/24/15         5,000,000     3.71%       1 Time Call    06/24/10
06/24/05        06/24/10         5,000,000     2.8144%     1 Time Call    06/26/06


</TABLE>

                                                    8

<PAGE>


<TABLE>
                       Security Federal Corporation and Subsidiaries

                Notes to Consolidated Financial Statements (Unaudited), Continued



                                      As of March 31, 2005
-----------------------------------------------------------------------------------------------------------
Borrow Date    Maturity Date      Amount      Int. Rate       Type             Call Dates
-----------    -------------    ----------    ---------    -----------    ---------------------------------
 
             <c>            <c>             <c>        <c>            <c>
11/10/00       11/10/05         5,000,000      5.85%       Multi-Call     05/10/05 and quarterly thereafter
09/04/02       09/04/07         5,000,000      2.82%       1 Time Call    09/06/05
11/07/02       11/07/12         5,000,000      3.35%       1 Time Call    11/07/07
10/24/03       10/24/08        10,000,000      2.705%      Multi-Call     10/24/06 and quarterly thereafter
12/10/03       12/10/08         5,000,000      2.16%       Multi-Call     12/12/05 and quarterly thereafter
02/20/04       02/20/14         5,000,000      2.14%       1 Time Call    02/20/09
04/16/04       04/16/14         3,000,000      3.33%       1 Time Call    04/16/08
09/16/04       09/16/09         5,000,000      3.09%       1 Time Call    09/17/07


</TABLE>




























7.  Regulatory Matters

The following table reconciles the Bank's shareholders' equity to its various
regulatory capital positions:
                                          June 30, 2005    March 31, 2005
                                              (Dollars in Thousands)
                                         ----------------------------------
Bank's Shareholders' Equity                     $36,035           $34,690
Unrealized Loss (Gain) On Available
 For Sale Of Securities, Net Of Tax                 546               962
Reduction For Goodwill And Other
 Intangibles                                          -                 -
                                               --------          --------
 Tangible Capital                                36,581            35,652
Qualifying Core Deposits And
 Intangible Assets                                    -                 -
                                               --------          --------
 Core Capital                                    36,581            35,652
Supplemental Capital                              4,421             4,236
Assets Required To Be Deducted                      (23)              (30)
                                                =======          ========
 Risk-Based Capital                             $40,979          $ 39,858
                                                =======          ========

The following table compares the Bank's capital levels relative to the
applicable regulatory requirements at June 30, 2005:


<PAGE>
<TABLE>

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

                         <c>             <c>          <c>           <c>          <c>           <c>
Tangible Capital          $  12,073         2.0%        $  36,581      6.06%     $  24,508        4.06%
Tier 1 Leverage (Core)
 Capital                     24,146         4.0%           36,581      6.06%        12,435        2.06%
Total Risk-Based Capital     28,286         8.0%           40,979     11.59%        12,693        3.59%
Tier 1 Risk-Based (Core)
 Capital                     14,151         4.0%           36,581     10.34%        22,430        6.34%

</TABLE>


8.  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.

                                        9

<PAGE>




              Security Federal Corporation and Subsidiaries
     Notes to Consolidated Financial Statements (Unaudited), 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, 2005
                     --------------------------------------------------------
                           Income
                     (Numerator) Amount    Shares (Denominator)    Per Share
                     ------------------    --------------------   -----------
Basic EPS               $  929,242               2,530,389          $ 0.370
Effect of Diluted
 Securities:
 Stock Options                   -                  20,227           (0.008)
 ESOP                            -                   5,589           (0.002)
                        ----------             -----------          -------
Diluted EPS             $  929,242               2,556,205          $ 0.360
                        ==========             ===========          =======

                                    For the Quarter Ended
                     --------------------------------------------------------
                                         June 30, 2004
                     --------------------------------------------------------
                           Income
                     (Numerator) Amount    Shares (Denominator)    Per Share
                     ------------------    --------------------   -----------
Basic EPS               $  802,027              2,522,600           $ 0.320
Effect of Diluted
 Securities:
 Stock Options                   -                 29,601            (0.007)
 ESOP                            -                 10,691            (0.003)
                        ----------            -----------           -------
Diluted EPS             $  802,027              2,562,892           $ 0.310
                        ==========            ===========           =======

9.  Stock-Based Compensation

The Company has a stock-based employee compensation plan which is accounted
for under the recognition and measurement principles of Accounting Principles
Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations.  No stock-based employee compensation cost is
reflected in net income, as all stock options granted under these plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant.  The following table illustrates the effect on net income and
earnings per share as if we had applied the fair value recognition provisions
of  SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based
employee compensation for the three months ended June 30, 2004 and 2003.

                                                  Three Months Ended
                                                      June 30,
                                                   2005      2004
                                                --------   ---------
Net income, as reported                        $ 929,242   $ 802,027
Deduct: Total stock-based employee
 compensation expense determined under
 fair value based method for all awards,
 net of related tax effect                     $ (30,570)  $ (57,124)
Net Income, Pro Forma                          $ 898,672   $ 744,903
Basic earnings share:
 As Reported                                   $    0.37   $    0.32
 Pro Forma                                     $    0.36   $    0.30
Diluted earnings share:
 As reported                                   $    0.36   $    0.31
 Pro forma                                     $    0.35   $    0.29

                                        10

<PAGE>



              Security Federal Corporation and Subsidiaries

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

Changes in Financial Condition

Total assets of the Company increased $16.5 million or 2.8% during the three
months ended June 30, 2005 primarily as a result of an increase of $16.8
million or 5.3% in net loans receivable and a $1.5 million increase in cash
and cash equivalents, offset partially by a $1.6 million decrease in total
investment and mortgage-backed securities.

Residential real estate loans, net of loans in process, increased $2.9 million
or 2.7% during the three months ended June 30, 2005, commercial loans
increased $13.6 million or 8.4%, and consumer loans increased $2.0 million or
4.0%.  Loans held for sale decreased $1.5 million to $749,000 during the same
period.

Repossessed assets increased $24,000 to $77,000 during the three months ended
June 30, 2005.

Non-accrual loans totaled $1.6 million at June 30, 2005 compared to $2.4
million at March 31, 2005.  The Bank classifies all loans as non-accrual when
they become 90 days or more delinquent.  At June 30, 2005, the Bank held
$870,000 in impaired loans compared to $1.2 million at March 31, 2005.  The
Bank includes troubled debt restructuring ("TDR") within the meaning of SFAS
No. 114 in impaired loans. At June 30, 2005, the Bank had six loans totaling
$429,000 in TDRs compared to six loans totaling $434,000 at March 31, 2005.
One $13,000 consumer loan TDR secured by a second mortgage on a residential
dwelling, was 60 days delinquent. The other five TDRs, three consumer loans
totaling $342,000 secured by residential dwellings, a $19,000 unsecured
commercial loan, and a $55,000 commercial loan secured by two rental
properties, were current as of June 30, 2005.

Deposits increased $10.9 million or 2.5% during the three months ended June
30, 2005 as a result of competitive rates offered by the Bank.  FHLB advances
increased $2.9 million or 2.6% to $115.0 million during the same period due to
an effort to lock in some longer term advances before interest rate increase
further.  Other borrowings, consisting of commercial repurchase sweep
accounts, increased $892,000 or 16.0% to $6.5 million during the three-month
period.

The Board of Directors of the Company declared the 58th consecutive quarterly
dividend, which was $.04 per share, in April 2005, which totaled $101,000.
The employee stock ownership trust of the Company paid $61,000 of principal on
the employee stock ownership plan loan during the three-month period.
Accumulated Other Comprehensive Loss, net of tax, decreased $415,000 during
the three months ended June 30, 2005.  The Company's net income for the
three-month period was $929,000.  These items, in total, increased
shareholders' equity by $1.3 million or 3.7% during the three months ended
June 30, 2005.  Book value per share was $14.41 at June 30, 2005 compared to
$13.92 at March 31, 2005.

Liquidity and Capital Resources

In accordance with Office of Thrift Supervision ("OTS") regulations, the
Company is required to maintain sufficient liquidity to operate in a safe and
sound manner.  The Company's current liquidity level is deemed adequate to
meet the requirements of normal operations, potential deposit outflows, and
loan demand while still allowing for optimal investment of funds and return on
assets.

Loan repayments and maturities of investments are a significant source of
funds, whereas loan disbursements and the purchase of investments are a
primary use of the Company's funds.  During the three months ended June 30,
2005, loan disbursements exceeded loan repayments resulting in a $16.8 million
or 5.3% increase in total net loans receivable.

Deposits and other borrowings are also an important source of funds for the
Company.  During the three months ended June 30, 2005, deposits increased
$10.9 million and FHLB advances increased $2.9 million.  The Bank had $65.6
million in additional borrowing capacity at the FHLB at the end of the period.
At June 30, 2005, the Bank had $108.6 million of certificates of deposit
maturing within one year.  Based on previous experience, the Bank anticipates
a major portion of these certificates will be renewed.


                                       11

<PAGE>





           Security Federal Corporation and Subsidiaries

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

Liquidity and Capital Resources, Continued

Through its operations, the Bank has made contractual commitments to extend
credit in the ordinary course of its business activities.  These commitments
are legally binding agreements to lend money to customers at predetermined
interest rates for a specified period of time.  At June 30, 2005, the Bank had
$28.9 million in unused consumer lines of credit, including home equity lines
and unsecured lines.  The Bank also had $30.6 million in unused commercial
lines of credit and $1.1 million in letters of credit committed to customers.
The majority of the $60.6 million will not be drawn at the same time.  The
Bank evaluates each customer's credit worthiness on a case-by-case basis.  The
amount of collateral obtained, if deemed necessary, by the Bank upon extension
of credit, is based on a credit evaluation of the borrower.  Collateral varies
but may include accounts receivable, inventory, property, plant and equipment,
commercial and residential real estate.  The Bank manages the credit risk on
these commitments by subjecting them to normal underwriting and risk
management processes.

In recent quarters, the components of the Company's cash flow, operating
activities, investing activities, and financing activities, have been
relatively stable.  Management believes that the Company's liquidity will
continue to be supported by the Company's deposit base, borrowing capacity,
and cash flow and maturities of investments during the next year.

Critical Accounting Policies

We have 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, 2005 as filed on our Annual Report on Form 10-K.
Certain accounting policies involve significant judgements and assumptions by
management which have a material impact on the carrying value of certain
assets and liabilities.  We consider these accounting policies to be critical
accounting policies.  The judgments and assumptions we use are based on
historical experience and other factors, which we believe to be reasonable
under the circumstances.  Because of the nature of the judgments and
assumptions we make, actual results could differ from these judgments and
estimates which could have a material impact on our carrying values of assets
and liabilities and our results of operations.

We believe the allowance for loan losses is a critical accounting policy that
requires the most significant judgements and estimates used in preparation of
our consolidated financial statements.  The Company provides for loan losses
using the allowance method.  Accordingly, all loan losses are charged to the
related allowance and all recoveries are credited to the allowance for loan
losses.  Additions to the allowance for loan losses are provided by charges to
operations based on various factors, which, in management's judgment, deserve
current recognition in estimating possible losses.  Such factors considered by
management include the fair value of the underlying collateral; stated
guarantees by the borrow, if applicable, the borrower's ability to repay from
other economic resources, growth and composition of the loan portfolios, the
relationship of the allowance for loan losses to the outstanding loans, loss
experience, delinquency trends, and general economic conditions.  Management
evaluates the carrying value of the loans periodically and the allowance is
adjusted accordingly.  While management uses the best information available to
make evaluations, future adjustments may be necessary if economic conditions
differ substantially from the assumptions used in making these evaluations.
Allowance for loan losses are subject to periodic evaluations by various
authorities and may be subject to adjustments based upon the information that
is available at the time of their examination.

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.


                                        12

<PAGE>





               Security Federal Corporation and Subsidiaries

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

Accounting and Reporting Changes

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

In April 2005, the Securities and Exchange Commission's ("SEC") Office of the
Chief Accountant and its Division of Corporation Finance has released Staff
Accounting Bulletin ("SAB") No. 107 to provide guidance regarding the
application of Financial Accounting Standards Board ("FASB") Statement No. 123
(revised 2004), "Share-Based Payment."  Statement No. 123(R) covers a wide
range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights,
and employee share purchase plans.  SAB 107 provides interpretive guidance
related to the interaction between Statement No. 123(R) and certain SEC rules
and regulations, as well as the staff's views regarding the valuation of
share- based payment arrangements for public companies.  SAB 107 also reminds
public companies of the importance of including disclosures within filings
made with the SEC relating to the accounting for share-based payment
transactions, particularly during the transition to Statement No. 123(R).

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions."  The amendments made by SFAS No. 153 are based on the principle
that exchanges of nonmonetary assets should be measured based on the fair
value of the assets exchanged.  Further, the amendments eliminate the narrow
exception for nonmonetary exchanges of similar productive assets and replace
it with a broader exception for exchanges of nonmonetary assets that do not
have commercial substance.  Previously, APB Opinion No. 29 required that the
accounting for an exchange of a productive asset for a similar productive
asset or an equivalent interest in the same or similar productive asset should
be based on the recorded amount of the asset relinquished.  APB Opinion No. 29
provided an exception to its basic measurement principle (fair value) for
exchanges of similar productive assets.  SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005.  Earlier application is permitted for nonmonetary asset exchanges
occurring in fiscal periods beginning after the date of issuance.  The
provisions of this Statement shall be applied prospectively.  The adoption of
this Statement is not expected to have a material impact on the financial
condition or operating results of the Company.

In December 2004, the FASB issued SFAS No, 123 (revised 2004), "Share-Based
Payments" ("SFAS No. 123(R)").  SFAS No. 123(R) will require companies to
measure all employee stock-based compensation awards using a fair value method
and record such expense in their financial statements.  In addition, the
adoption of SFAS No. 123(R) requires additional accounting and disclosure
related to the income tax and cash flow effects resulting from share-based
payments arrangements.  SFAS No. 123(R) is effective beginning as of the first
interim or annual reporting period beginning after June 15, 2005.  The Company
is currently evaluating the impact that the adoption of SFAS No. 123(R) will
have on its financial position, results of operations and cash flow.

In March 2004, the SEC issued SAB No. 105, "Application of Accounting
Principles to Loan Commitments," to inform registrants of the staff's view
that the fair value of the recorded loan commitments should not consider the
expected future cash flows related to the associated servicing of the future
loan.  The provisions of SAB No. 105 must be applied to the loan commitments
accounted for as derivatives that are entered into after March 31, 2004.  The
Staff will not object to the application of existing accounting practices to
loan commitments accounted for as derivatives that are entered into on or
before March 31, 2004, with appropriate disclosures.  The Company adopted the
provisions of SAB No. 105 on April 1, 2004.  The adoption of SAB No. 105 did
not have a material impact on the Company's financial condition or results of
operations.

In December 2003, the FASB issued FIN No. 46 (revised),  "Consolidation of
Variable Interest Entities" ("FIN No. 46(R)"), which addresses consolidation
by business enterprises of variable interest entities.  FIN No. 46(R) requires
a variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual returns,
or both.  FIN No. 46(R) also requires disclosure about variable interest
entities that a company is not required to consolidate, but in which it has a
significant variable interest.  FIN No. 46(R) provides guidance for
determining whether an entity qualifies as a variable interest entity by
considering, among other considerations, whether the entity lacks sufficient
equity holders lack adequate decision-making ability.  The consolidation
requirements of FIN No. 46(R) applied immediately to variable interest created
after January 31, 2003.  The consolidation requirements applied to the
Company's existing variable entities in the first reporting ending after March
15, 2004.  Certain of the disclosure requirements applied to all financial
statements issued after December 31, 2003, regardless of when the variable
interest entity was established.  The adoption of FIN No. 46(R) did not have
any impact on the Company's financial position or results of operations.

                                       13

<PAGE>


             Security Federal Corporation and Subsidiaries

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

Accounting and Reporting Changes, Continued

In November 2003, the Emerging Issues Task Force ("EITF") reached a consensus
that certain quantitative and qualitative disclosures should be required for
debt and marketable equity securities classified as available-for-sale or
held-to-maturity under SFAS No. 115 and SFAS No. 124 that are impaired at the
balance sheet data but for which other-than-temporary impairments has not been
recognized.  Accordingly the EITF issued EITF No. 03-1, "The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments."
This issue addresses the meaning of other-than-temporary impairments and its
application to investments classified as either available-for-sale or
held-to-maturity under SFAS No. 115 and provides guidance on quantitative and
qualitative disclosures.  The disclosure requirements of EITF No. 03-1 are
effective for financial statements for fiscal years ending after June 15,
2004.  The effective date for the measurement and recognition guidance of EITF
No. 03-1 has been delayed.  The FASB staff has issued a proposed
Board-directed FASB Staff Position ("FSP"), FSP EITF 03-1-a, "Implementation
Guidance for the Application of Paragraph 16 of Issue No. 03-1."  The proposed
FSP would provide implementation guidance with respect to debt securities that
are impaired due to interest rates and/or sector spreads and analyzed for
other-than-temporary impairments under the measurement and recognition
requirements of EITF No. 03-1.  The delay of the effective date for the
measurement and recognition requirements of EITF No. 03-1 will be superseded
concurrent with the final issuance of FSP EITF 03-1-a.  Adopting the
disclosure provisions of EITF No. 03-1 did not have any impact on the
Company's financial position or results of operations.

Impact of Inflation and Changing Prices

The consolidated financial statements, related notes, and other financial
information presented herein have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering changes in relative purchasing power over time due to inflation.
Unlike industrial companies, substantially all of the assets and liabilities
of a financial institution are monetary in nature.  As a result, interest
rates generally have a more significant impact on a financial institution's
performance than does inflation.  See "Item 3. Quantitative and Qualitative
Disclosures About Market Risk" for additional discussion of changes in
interest rates.


                                        14

<PAGE>




             Security Federal Corporation and Subsidiaries

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

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

Net Income

Net income was $929,000 for the three months ended June 30, 2005, representing
an increase in earnings of $127,000 or 15.9% from $802,000 for the same period
in 2004.  The primary reason for the increased earnings was an increase in net
interest income offset partially by an increase in general and administrative
expenses.

Net Interest Income

Net interest income increased $475,000 or 13.8% to $3.9 million during the
three months ended June 30, 2005, compared to the same period in 2004, as a
result of an increase in interest income offset in part by an increase in
interest expense.  Average interest earning assets increased $51.2 million
while average interest-bearing liabilities increased $44.3 million.  The
interest rate spread increased 4 basis points to 2.50% during the three months
ended June 30, 2005 compared to the same period in 2004.

Interest income on loans increased $1.3 million or 35.2% to $5.2 million
during the three months ended June 30, 2005 as a result of the average loan
portfolio balance increasing $64.8 million and the yield in the loan portfolio
increasing 49 basis points.  Interest income from investment, mortgage-backed,
and other securities increased $19,000 or 0.9% due to an increase in the yield
in the investment portfolio of 19 basis points despite a decrease in the
average balance of the portfolio of $13.5 million.  Total interest income
increased $1.4 million or 22.7% to $7.4 million for the three months ended
June 30, 2005 from $6.0 million for the same period in 2004.

Total interest expense increased $894,000 or 34.4% to $3.5 million during the
three months ended June 30, 2005 compared to $2.6 million for the same period
one-year earlier.  Interest expense on deposits increased $801,000 or 46.9%
during the period as average interest bearing deposits grew $36.9 million
compared to the average balance in the three months ended June 30, 2004 while
the cost of deposits increased 50 basis points.  Interest expense on advances
and other borrowings increased $92,000 or 10.4% as the cost of debt
outstanding increased 11 basis points during the 2005 period compared to 2004
while average total borrowings outstanding increased approximately $1.8
million.

Provision for Loan Losses

The Bank's provision for loan losses was $165,000 during the three months
ended June 30, 2005 compared to $195,000 for the quarter ended June 30, 2004.
The amount of the provision is determined by management's on-going monthly
analysis of the loan portfolio.  Non-accrual loans, which are loans delinquent
90 days or more, were $1.6 million at June 30, 2005 compared to $2.4 million
at March 31, 2005 and $2.3 million at June 30, 2004.  The ratio of allowance
for loan losses to the Company's total loans was 1.89% at June 30, 2005
compared to 1.94% at March 31, 2005.  Net charge-offs were $21,000 during the
three months ended June 30, 2005 compared to $37,000 during the same period in
2004.

Other Income

Total other income increased $31,000 or 4.8% to $690,000 during the three
months ended June 30, 2005 compared to the same period a year ago.  Net gain
on sale of investments was $18,000 during the quarter ended June 30, 2005,
while there were no gains for the same period in 2004.   Gain on sale of loans
increased $13,000 or 10.5% to $135,000, loan servicing fees increased $5,000
to $49,000, and service fees on deposit accounts decreased $30,000 or 9.7% to
$283,000 as a result of an increase in the average rate used to offset
commercial analysis charges on business demand accounts.  Other miscellaneous
income including credit life insurance commissions, net gain on sale of
repossessed assets, safe deposit rental income, annuity and stock brokerage
commissions, trust fees, and other miscellaneous fees increased $27,000 or
14.8% to $206,000 during the three months ended June 30, 2005, compared to the
same period last year.

                                       15

<PAGE>




             Security Federal Corporation and Subsidiaries

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

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005, CONTINUED
-------------------------------------------------------------------------

General and Administrative Expenses

General and administrative expenses increased $302,000 or 11.2% to $3.0
million during the three months ended June 30, 2005 compared to the same
period in 2004 due primarily to an increase in salaries and employee benefits
expense.  Salaries and employee benefits expense increased $162,000 or 10.1%
due to the hiring of additional lending officers and lending personnel in
addition to normal annual increases.  Occupancy expense increased $57,000 or
22.5% due primarily to the renovation of some branch offices.  Advertising
expense decreased $6,000 to $26,000, depreciation and maintenance of equipment
expense decreased $24,000 or 8.7%, and FDIC insurance premiums remained
constant at $15,000 for both periods.  Other miscellaneous expense, consisting
of legal, professional, and consulting expenses, stationery and office
supplies, and other sundry expenses, increased $113,000 or 21.9% to $632,000
due to increased legal and consulting expense for the preparation of complying
with the Sarbanes-Oxley Act for the three months ended June 30, 2005 compared
to the three months ended June 30, 2004.

                                        16

<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 month period ended June 30, 2005, 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 2.50%.  As of the year
ended March 31, 2005, the interest rate spread was 2.45%. The interest rate
spread increased due to the growth of loan receivables.   Loan receivables
earn a higher yield than investment securities.  However, if interest rates
were to increase suddenly and significantly, the Bank's net interest income
and net interest spread would be compressed.

Item 4. Controls and Procedures

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

(b) Changes in Internal Controls: In the quarter ended June 30, 2005, 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.





                                        17

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

                                                  (c)Total No.
                                                  of Shares
                                                  Purchased as  (d)Maximum No.
                          (a)Total                Part of       of Shares
                          No. of      (b)Average  Publicly      that May Yet
                          Shares      Price Paid  Announced     Be Purchased
Period                    Purchased   per Share   Plan(1)       Under the Plan
---------------           ---------   ---------   ----------    --------------

April 1-April 30, 2005         -            -           -          117,923 (1)

May 1-May 31, 2005             -            -           -          117,923

June 1-June 30, 2005       1,200       $21.50       1,200          116,723

Total                      1,200       $21.50       1,200          116,723

(1) On May 17, 2005, the Company's Board of Directors authorized a 5%
repurchase plan, or 126,000 shares of the Company's outstanding common stock.
As of June 30, 2005, 9,277 shares have been repurchased under this program.

Item 3    Defaults Upon Senior Securities
          -------------------------------

          None

Item 4    Submission Of Matters To A Vote Of Security Holders
          ---------------------------------------------------

          None

Item 5    Other Information
          -----------------

          None

Item 6    Exhibits
          --------

            3.1  Articles Of Incorporation (1)

            3.3  Bylaws (2)

            10   Executive Compensation Plans And Arrangements:

                 Salary Continuation Agreements (3)

                 Amendment One To Salary Continuation Agreements (4)

                 Stock Option Plan (3)

                 1999 Stock Option Plan (5)

                 2002 Stock Option Plan (6)

                 Incentive Compensation Plan (3)

            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.

                                         18

<PAGE>



             Security Federal Corporation and Subsidiaries

 Exhibits, Continued

 (1)  Filed as Exhibit B to the Company's June 23, 1998 proxy statement and
      incorporated herein by reference.

 (2)  Filed as Exhibit 3.2 to the Company's Form 8-K filed September 1, 1998
      and incorporated herein by reference.

 (3)  Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
      the year ended March 31, 1993 and incorporated herein by reference.

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

 (5)  Filed as an exhibit to the Company's Registration Statement on Form S-8
      filed March 2, 2002 and incorporated herein by reference.

 (6)  Filed as an exhibit to the Company's June 19, 2002 proxy statement and
      incorporated herein by reference.


Signatures

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


                                          SECURITY FEDERAL CORPORATION



Date: August 12, 2005                     By:/s/Timothy W. Simmons
      ---------------------                  --------------------------------
                                             Timothy W. Simmons
                                             President
                                             Duly Authorized Representative





Date: August 12, 2005                     By:/s/Roy G. Lindburg
      ---------------------                  --------------------------------
                                             Roy G. Lindburg
                                             Treasurer/CFO
                                             Duly Authorized Representative


                                        19

<PAGE>



                              EXHIBIT 31.1

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

                                   20

<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 12, 2005
                                    /s/Timothy W. Simmons
                                    ---------------------------------------
                                    Timothy W. Simmons
                                    President and Chief Executive Officer

                                        21
<PAGE>




                               EXHIBIT 31.2

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

                                     22

<PAGE>



                             Certification

I, Roy G. Lindburg, certify that:

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

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

 3. Based on my knowledge, the financial statements, and other financial
    information included in this report, fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the 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 12, 2005
                                         /s/Roy G. Lindburg
                                         -----------------------------------
                                         Roy G. Lindburg
                                         Chief Financial Officer

                                       23
<PAGE>



                                EXHIBIT 32

      Certification Pursuant to Section 906 of the Sarbanes Oxley Act


<PAGE>



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

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

      1.  the report fully complies with the requirements of 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 financial condition and results of operations
          of Security Federal Corporation.


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


Dated: August 12, 2005

<PAGE>