<PAGE>
<PAGE>
                               FORM 10-QSB


                   SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549


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

       For the quarterly period ended September 30, 1997

                               OR

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


Commission File Number:  0-25728 
                         -------

                   Security Federal Bancorp, Inc.
-----------------------------------------------------------
     (Exact name of registrant as specified in its charter)

           Delaware                             63-1134627 
-------------------------------             -------------------
(State or other jurisdiction of             (I.R.S. Employer 
 incorporation or organization)             Identification No.)

2301 University Boulevard, Tuscaloosa, Alabama      35401   
----------------------------------------------    ----------
(Address of principal executive offices)           (Zip Code)

Registrant's telephone number, 
including area code:             (205) 345-8800
                                 --------------

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 ninety days.  Yes  X   No 
                                            ----     ------
 
       Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.    671,469  
       -----------<PAGE>
<PAGE>
         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY

                       Tuscaloosa, Alabama

                        September 30, 1997
-----------------------------------------------------------------


                            CONTENTS
                            --------

                                                          Page
                                                          ----

INDEPENDENT ACCOUNTANTS REPORT                              1

FINANCIAL INFORMATION:

       Consolidated Statements of Financial Condition      2-3

       Consolidated Statements of Income                   4-5

       Consolidated Statements of Cash Flows               6-7
     
       Notes to Consolidated Financial Statements          8-9    
  

  Item 2.  Management's Discussion and Analysis of 
           Financial Condition and Results of 
           Operations                                     10-14



See Independent Accountant's Report.<PAGE>
<PAGE>       
                                                               1
       [LETTERHEAD OF JAMISON, MONEY, FARMER & CO., P.C.]


November 4, 1997
              
              
              
              
              
Board of Directors
Security Federal Bancorp, Inc., and Subsidiary
Tuscaloosa, Alabama
              
              
              INDEPENDENT ACCOUNTANT'S REPORT
              -------------------------------
                                             
     We have reviewed the accompanying condensed consolidated
statement of financial condition of Security Federal Bancorp,
Inc., and Subsidiary, as of September 30, 1997, and December 31,
1996, and the related condensed statements of income for the
three and nine month periods and statement of cash flows for the
nine months ended September 30, 1997 and 1996.  These financial
statements are the responsibility of the Company's management. 
              
     We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants.  A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons  responsible for financial and
accounting matters.  It is substantially less in scope than an
audit conducted in accordance with generally  accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
              
     Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements referred to above, in order for
them to be in conformity with  generally accepted accounting
principles.

                         /s/ Jamison, Money, Farmer & Co., P.C.   
     

                        Certified Public Accountants
              
Tuscaloosa, Alabama
              
              <PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        2
                       Tuscaloosa, Alabama

         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
            September 30, 1997, and December 31, 1996
-----------------------------------------------------------------

                             ASSETS
                             ------
<TABLE>
<CAPTION>                                              (Unaudited)
                                            September 30,       December 31,
                                               1 9 9 7            1 9 9 6  
                                            -------------       ------------

<S>                                         <C>                 <C>
Cash and Cash Equivalents                   $  1,535,835        $    740,553

Federal Home Loan Bank - 
  Interest-Bearing Deposits                    1,951,946             256,079

Investment Securities: Securities
  available-for-sale, at fair value            3,069,148           3,052,813

Loans Held for Sale, Net of Deferred Fees      1,826,000           1,247,000

Loans Receivable - Net                        66,294,421          66,442,284

Real Estate Owned                                128,000                   - 

Office Properties and Equipment -
  Net of Depreciation                          1,145,893           1,139,355

Federal Home Loan Bank Stock - at Cost           620,300             539,000

Accrued Interest and Dividends Receivable        424,714             331,476

Deferred Tax Asset                                     -                 629

Other Assets                                     707,403             549,636
                                            ------------        ------------

      TOTAL ASSETS                          $ 77,703,660        $ 74,298,825
                                            ============        ============
</TABLE>


See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.         <PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        3
                       Tuscaloosa, Alabama

         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
            September 30, 1997, and December 31, 1996
---------------------------------------------------------------- 
                                                                 
               LIABILITIES AND STOCKHOLDERS' EQUITY
               ------------------------------------
                                                              
<TABLE>
<CAPTION>                                              (Unaudited)
                                            September 30,       December 31,
                                               1 9 9 7            1 9 9 6  
                                            -------------       ------------

<S>                                         <C>                 <C>
Deposits                                    $  65,813,437      $  62,728,807
Advances from Federal Home Loan Bank              585,000          1,585,000
Advances from Borrowers for Taxes
  and Insurance                                   554,237            327,923
Income and Excise Tax Payable - Current           174,177            208,485
Unremitted Collections on Mortgage Loans
  Serviced                                      1,024,917            203,226
Mortgage Note Payable                              36,934             38,951
Accrued Expenses and Other Liabilities            351,648            327,512
Deferred Income Tax Liability                      24,782                  -
                                            -------------      -------------

     Total Liabilities                         68,565,132         65,419,904
                                            =============      =============



Stockholders' Equity:
  Common stock, $.01 par value, 1,900,000
     shares authorized, 671,469 shares 
     issued and outstanding                         6,714              6,714
  Additional paid-in capital                    3,453,993          6,144,956
  Net unrealized (loss) on equity
    securities available-for-sale,
    net of deferred tax                            (5,028)           (15,551)
  Retained earnings, substantially
    restricted                                  5,682,849          2,742,802
                                            -------------      -------------

     Total Stockholders' Equity                 9,138,528          8,878,921
                                            -------------      -------------

         TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY              $  77,703,660      $  74,298,825
                                            =============      =============
</TABLE>


See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.        <PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        4
                       Tuscaloosa, Alabama

                 CONSOLIDATED STATEMENTS OF INCOME
 For the Nine and Three Months Ended September 30, 1997 and 1996
---------------------------------------------------------------- 

<TABLE>
<CAPTION>                              (Unaudited)                 (Unaudited)
                                    Nine Months Ended          Three Months Ended
                                      September  30,             September  30,
                                  1 9 9 7       1 9 9 6      1 9 9 7        1 9 9 6 
                                 ---------     ---------    ---------      ---------
Interest Income
---------------
<S>                             <C>          <C>           <C>           <C>
Loans:
  Mortgage loans                $ 4,408,907  $ 4,193,179   $ 1,488,070   $ 1,429,040
  Consumer and other loans           25,596       31,887         9,307        10,513
Investment Securities, Mortgage 
  Backed Securities and Federal 
  Home Loan Bank Deposits           242,839      337,737        89,724       101,788
                                -----------  -----------   -----------   -----------

     Total Interest Income        4,677,342    4,562,803     1,587,101     1,541,341
                                -----------  -----------   -----------   -----------

Interest Expense
----------------

Deposits - savings                  108,572      101,967        36,970        33,875
Deposits - certificates           2,631,931    2,558,662       893,777       888,068
Demand deposits                       2,824            -         2,082             -
Mortgage note payable                 2,284        2,438           748           800
Borrowed funds                       46,259       68,725        10,583        31,854
                                -----------  -----------   -----------   -----------

     Total Interest Expense       2,791,870    2,731,792       944,160       954,597
                                -----------  -----------   -----------   -----------

     Net Interest Income          1,885,472    1,831,011       642,941       586,744


Provision for Losses on Loans             -            -             -             -
                                -----------  -----------   -----------   -----------

Net Interest Income After
  Provision for Losses
  on Loans                        1,885,472    1,831,011       642,941       586,744
                                -----------  -----------   -----------   -----------
</TABLE>

                     (continued)


See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        5
                       Tuscaloosa, Alabama

                CONSOLIDATED STATEMENTS OF INCOME (Continued)
 For the Nine and Three Months Ended September 30, 1997 and 1996
---------------------------------------------------------------- 


<TABLE>
<CAPTION>                              (Unaudited)                 (Unaudited)
                                    Nine Months Ended          Three Months Ended
                                      September  30,             September  30,
                                  1 9 9 7       1 9 9 6      1 9 9 7        1 9 9 6 
                                 ---------     ---------    ---------      ---------
Non-Interest Income
-------------------
<S>                             <C>           <C>          <C>           <C>
Servicing fees                  $   144,557   $   161,123  $    50,162   $    32,075
Income from late charges             29,104        24,115        9,290         7,869
Other operating revenue               3,026         5,894        1,739           314
Gain on sale of real estate owned     5,927           848            -             -
Gain (loss) on sales of loans        63,381       (79,667)      20,470       (26,528)
Gain on sales of other assets            54         4,375            -         4,375
                                -----------   -----------  -----------   -----------

     Total Non-Interest Income      246,049       116,688       81,661        18,105
                                -----------   -----------  -----------   -----------

Non-Interest Expenses
---------------------

Salaries and employee benefits      582,912       588,412      202,777       183,444
Net occupancy expenses               73,303        74,816       25,349        25,663
Equipment expenses                   78,713        69,873       29,950        23,528
OTS/FDIC premiums                    66,340       503,596       16,504       422,390
Net expenses of real estate owned     5,839         7,903        2,454          (514)
Other operating expenses            309,689       305,295      109,971       114,302
                                -----------   -----------  -----------   -----------

   Total Non-Interest Expenses    1,116,796     1,549,895      387,005       768,813
                                -----------   -----------  -----------   -----------

Income (Loss) Before Income
   Taxes                          1,014,725       397,804      337,597      (163,964)

Income Tax Expense (Benefit)        362,759       131,604      125,115       (61,805)
                                -----------   -----------  -----------   -----------

Net Income (Loss)               $   651,966   $   266,200  $   212,482   $  (102,159)
                                ===========   ===========  ===========   ===========

Net Income (Loss) Per Share            0.97          0.40         0.32         (0.15)
                                ===========   ===========  ===========   ===========
</TABLE>


See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        6
                       Tuscaloosa, Alabama

               CONSOLIDATED STATEMENTS OF CASH FLOWS
       For the Nine Months Ended September 30, 1997 and 1996
---------------------------------------------------------------- 


         INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
         ------------------------------------------------

<TABLE>
<CAPTION>                                              (Unaudited)
                                               1 9 9 7             1 9 9 6  
                                            -------------       -------------

<S>                                         <C>                 <C>
Cash Flows from Operating Activities:
  Net income                                $     651,966       $     257,062
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
    (Gain) loss on sale of assets                 (69,362)             75,292
    Depreciation expense                           51,461              50,023
    Amortization of premiums/discounts
     on investments                                   289               2,328
    (Increase) in accrued interest and
     dividends receivable                         (93,238)           ( 69,031)
    (Increase) decrease in deferred tax asset         629            (192,891)
    (Increase) decrease in other assets            15,154            (411,193)
    (Increase) in loans held for sale            (579,000)         (1,339,050)
    Increase in accounts payable and other
     liabilities                                   24,136             572,492
    Increase in deferred loan fees                  9,061             116,928
    Increase (decrease) in income tax payable     (34,308)            281,412
    Increase in deferred tax liability             18,681                   - 
                                            -------------       -------------

    Net Cash (Used in) Operating Activities        (4,531)           (656,628)
                                            -------------       -------------

Cash Flows from Investing Activities:
  Sales of U. S. Government treasuries
    and agencies                                        -           1,980,016
  Proceeds from sales of real estate owned        205,004              79,829
  Purchases of Federal Home Loan Bank
    Overnight Deposits                         (1,695,867)           (380,834)
  Loan originations, net of repayments        (14,304,558)        (19,000,705)
  Purchases of property, plant and equipment      (58,443)             (6,136)
  Proceeds from sales of loans                 14,007,015          10,320,782
  Purchases of Federal Home Loan Bank stock       (81,300)            (31,100)
  Proceeds from sale of other assets                  225                   -
  Maturities/redemptions of treasuries
    and agencies                                        -           1,000,000
                                            -------------       -------------

  Net Cash (Used in) Investing Activities      (1,927,924)         (6,038,148)
                                            -------------       -------------
</TABLE>

                     (continued)


See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        7
                       Tuscaloosa, Alabama

               CONSOLIDATED STATEMENTS OF CASH FLOWS
       For the Nine Months Ended September 30, 1997 and 1996
---------------------------------------------------------------- 


    INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Continued)
    ------------------------------------------------

<TABLE>
<CAPTION>                                              (Unaudited)
                                               1 9 9 7             1 9 9 6  
                                            -------------       -------------

<S>                                         <C>                 <C>
Cash Flows from Financing Activities:
  Net increase (decrease) in advances
   from Federal Home Loan Bank              $ (1,000,000)       $  2,250,000
  Cash dividends and return of capital paid     (402,881)           (402,881)
  Net increase in advances from borrowers
   for taxes and insurance                       226,314             224,914
  Increase in bank overdraft                           -             174,177
  Repayments of mortgage notes payable            (2,017)             (1,862)
  Net increase from unremitted collections
   on mortgage loans serviced                    821,691             119,772
  Net increase in savings accounts                16,267             143,468
  Net increase in certificates of deposit      2,646,271           4,168,306
  Net increase in demand deposits                422,092                   - 
                                            ------------        ------------

  Net Cash Provided by Financing Activities    2,727,737           6,675,894
                                            ------------        ------------

Net Increase (Decrease) in Cash and Cash
  Equivalents                                    795,282             (18,882)

Cash and Cash Equivalents, Beginning of
  Period                                         740,553             630,458
                                            ------------        ------------

Cash and Cash Equivalents, End of Period    $  1,535,835        $    611,576
                                            ============        ============


         SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
         -------------------------------------------------

<CAPTION>
                                                1 9 9 7             1 9 9 6
                                                -------             -------
       <S>                                   <C>                 <C>
       Interest paid                         $  2,805,609        $  2,740,277
       Income taxes paid                          391,957              30,277
       Additions to real estate owned 
          through foreclosure                     128,000                   -
</TABLE>


See Independent Accountant's Report.
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        8
                       Tuscaloosa, Alabama

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        September 30, 1997
----------------------------------------------------------------
     
1.   Organization
     ------------
      
     Security Federal Bancorp, Inc. (the "Company"), a Delaware
corporation, was incorporated in June, 1994, for the purpose of
acting as a savings and loan holding company with the Bank as
its sole subsidiary.  On March 31, 1995, the Company acquired
all of the common stock of the Bank upon its conversion from
mutual to stock form.  The Company's principal business is the
business of the Bank. The Bank is a federally chartered stock
savings bank and a member of the Federal Home Loan Bank System.

2.   Basis of Presentation
     ---------------------

     The accompanying unaudited consolidated financial
statements were prepared in accordance with instructions for
Form 10QSB and, therefore, do not include information or notes
necessary for a complete presentation of financial position,
results of operations, retained earnings, and cash flows in
conformity with generally accepted accounting principles.  These
financial statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in
the Company's annual report on Form 10-K for the year ended
September 30, 1996.  The accounting policies shown in Note 1 to
the Consolidated Financial Statements for September 30, 1996,
have been consistently followed.  It is management's opinion
that all adjustments necessary for a fair presentation of the
consolidated financial statements presented have been recorded. 
Such adjustments were of a normal recurring nature.  The results
of operations for the interim period are not necessarily
indicative of the results that may be expected for the full
fiscal year.

3.   Principles of Consolidation
     ---------------------------

     The accompanying unaudited consolidated financial
statements include the accounts of Security Federal Bancorp,
Inc., and Security Bank.  All significant intercompany items
have been eliminated.

4.   Retained Earnings
     -----------------

     The Bank is required to maintain certain levels of
regulatory capital.  At September 30, 1997, the Bank was in
compliance with all regulatory capital requirements.  In
addition to these requirements, the Bank must maintain
sufficient capital for the "liquidation account" for the benefit
of eligible account holders.  In the event of a complete
liquidation of the Bank, eligible depositors would have an
interest in the account.


                    (continued)


See Independent Accountant's Report.<PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY        9
                       Tuscaloosa, Alabama

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        September 30, 1997
----------------------------------------------------------------
    
5.   Change of Fiscal Year-End
     -------------------------
    
     During the quarter ending September 30, 1997, the Company  
changed its fiscal year-end from September 30 to December 31. 
Thus, the Company's next audit will be as of December 31, 1997.
    
     The Company filed a current report on Form 8-K dated
September 15, 1997, to report this change.
  
      
See Independent Accountant's Report.                  <PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY       10
                       Tuscaloosa, Alabama

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                   AND RESULTS OF OPERATIONS
                       September 30, 1997
----------------------------------------------------------------

Financial Condition
-------------------

     The company's total assets increased by $3.4 million, or
4.6%, to $77.7 million at September 30, 1997, from $74.3 million
at December 31, 1996.  This increase was primarily a result of
an increase in Federal Home Loan Bank overnight deposits of 
$1.69 million, from $256,000 at December 31, 1996 to $1.95
million at September 30, 1997.  The increase in these deposits
was generated from the sale of loans receivable in the third
quarter of 1997.  In addition, cash and cash equivalents
increased by $800,000, or 108%, from $.74 million at December
31, 1996 to $1.54 million at September 30, 1997, due to an
increase in the amount of unremitted collections on mortgage
loans serviced.  Loans receivable and loans held for sale
increased by $430,000, or 1.1%, from $67.7 million at December
31, 1996, to $68.1 million at September 30, 1997.  

     The company's deposits increased by $3.1 million, or 4.9%,
from $62.7 million at December 31, 1996, to $65.8 million at
September 30, 1997, primarily from increases in short-term
certificates of deposit.  In addition, demand deposits increased
by $420,000, or 100% from the prior year, after the Bank began
offering full service checking accounts to its customers in the
second quarter of 1997.  Unremitted collections on mortgage
loans serviced increased by $800,000, or 400%, from $200,000 at
December 31, 1997, to $1 million at September 30, 1997.  This
increase was caused by an increase in the number of loans
serviced and the timing of the remittance of these collections. 
The increase in deposits and unremitted collections was
partially offset by a decrease in short-term advances from the
Federal Home Loan Bank of $1 million, or 63.1%, from $1.59
million at December 31, 1996, to $585,000 at September 30, 1997.

     Stockholder's equity increased approximately 2.9% to $9.14
million at September 30, 1997, compared with $8.88 million at
December 31, 1996. 

Results of Operations
---------------------

     The earnings of the company depend primarily on its level
of net interest income, which is the difference between interest
earned on the company's interest-earning assets, consisting
primarily of mortgage loans, consumer loans, and investment
securities, and the interest paid on interest-bearing
liabilities.  Net interest income totaled $1.88 million and
$640,000 for the nine and three month periods ended September
30, 1997, which is an increase of $54,000 and $56,000 over the
respective nine and three month periods ended September 30,
1996.


See Independent Accountant's Report.<PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY       11
                       Tuscaloosa, Alabama

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS  (CONTINUED)
                       September 30, 1997
----------------------------------------------------------------

Net Interest Income
-------------------

     The increase in net interest income for nine months ended
September 30, 1997, was primarily caused by an increase in
interest earning assets in comparison to the nine months ended
September 30, 1996.  Total interest income for the third quarter
of 1997 increased by $46,000, or 3.0%, as compared to the third
quarter of 1996.  Total interest income for the first nine
months of 1997 increased by $114,000, or 2.6%, to $4.68 million
from $4.56 million from the same period in the prior year. 

     Total interest expense decreased by $10,000, or 1.05%, from
$955,000 for the three month period ended September 30, 1996, to
$944,000 for the three month period ended September 30, 1997. 
This is primarily due to a decrease in interest on borrowed
funds of $21,000 for the three months ended September 30, 1997
as compared with the three months ended September 30, 1996
caused by the decreased use of borrowed funds.  This was
partially offset by an increase in interest expense on deposits
of $9,000 for the three months ended September 30, 1997. For the
first nine months of 1997, interest expense increased by
$60,000, or 2.2%, to $2.79 million as compared with $2.73
million for the first nine months of 1996.  This is due to an
increase in interest on deposits of $80,000, or 3.0%, and a
decrease in interest on borrowed funds of $22,000,  or 31.8%,
when compared to the first nine months of 1996.  

Provision for Losses
--------------------

     There were no additions made to the provision for loan
losses for the three months or nine month periods ended
September 30, 1997.  Management periodically reviews the need to
increase the provision for loan losses based upon their
evaluation of known and inherent risk characteristics of the
loan portfolio.  Total non-performing assets were $212,000 and
$694,000 at September 30, 1997 and 1996, which represents .27%
and .90% of total assets as of these dates.  Management believes
that the existing provision for loan losses is adequate based on
their evaluation of known and inherent risk characteristics of
the loan portfolio.

Non-Interest Income
-------------------

   Non-interest income for the third quarter of 1997 increased
by $64,000, or 351.0%, compared to the third quarter of 1996. 
Non-interest income for the first nine months of 1997 increased
by $129,000, or 110.9%, from the first nine months of 1996. 
These increases are the result of increases in gains on sale of
loans of $47,000 for the third quarter of 1997 and $143,000 for
the first nine months of 1997 when compared to the same periods
in the previous year.  The increase was principally caused by
the adoption of Statement of Financial Accounting Standards #122
which requires that the Company capitalizes the rights to
service all mortgage loans.


See Independent Accountant's Report.<PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY       12
                       Tuscaloosa, Alabama

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS  (CONTINUED)
                       September 30, 1997
----------------------------------------------------------------
                                                                 
Non-Interest Expense
--------------------

     Non-interest expense decreased by $430,000 or 27.9%, to
$1.1 million for the nine month period ended September 30, 1997,
from $1.55 million for the nine month period ended September 30,
1996.  This was caused by a decrease in the deposit insurance
liability due to the one-time assessment to recapitalize the
Savings Association Insurance Fund.  The assessment resulted in
a pre-tax charge of  $381,000 in the  third quarter of 1996. 
Due to this assessment, non-interest expense for the third
quarter of 1997 decreased $380,000, or 49.7%, from the third
quarter of 1996.

Income Taxes
------------

     Income tax provisions for three and nine month periods
ended September 30, 1997 and 1996, are generally reflective of
the amounts of the company's pre-tax income and the effective
income tax rate then in effect.

Liquidity and Capital Resources
-------------------------------

     The Bank is required to maintain minimum levels of liquid
assets as defined by OTS regulations. This requirement, which
varies from time to time depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and
short-term borrowings.  The required ratio currently is 5.0%.
The Bank's liquidity ratio averaged 8.58% for the  period ended
September 30, 1997.  The Bank adjusts its liquidity levels in
order to meet funding needs of deposit outflows, payment of real
estate taxes on mortgage loans and repayment of borrowings and
loan commitments.  The Bank also adjusts liquidity as
appropriate to meet its asset and liability management
objectives.

     The Bank's primary sources of funds are deposits, sale of
mortgage loans, amortization and prepayment of loans, maturities
of investment securities and other investments, borrowings
through advances from the FHLB, and earnings and funds provided
from operations.  While scheduled principal repayments on loans
are a relatively predictable source of funds, deposit flows and
loan prepayments are greatly influenced by interest rates,
economic conditions, and competition.  The Bank manages the
pricing of its deposits to maintain a desired deposit balance. 
In addition, the Bank invests in short-term interest-earning
assets, which provide liquidity to meet lending requirements. 
The Bank periodically uses advances from the FHLB of Atlanta for
liquidity purposes.

     During the nine months ended September 30, 1997, the
company's cash and cash equivalents (cash and short-term
investments with maturities less than 90 days) increased by
$795,000.  Cash was provided from the net proceeds from sales of
loans of $14.0 million, net increases in deposit accounts of
$3.08 million, and increases in unremitted collections of
mortgage loans serviced of $820,000.  These were offset by an
increase in loan originations, net of repayments of $14.3
million, a decrease in advances from FHLB of $1.0 million, and
purchases of overnight deposits of $1.69 million.


See Independent Accountant's Report.                           <PAGE>
<PAGE>

         SECURITY FEDERAL BANCORP, INC., AND SUBSIDIARY       13
                       Tuscaloosa, Alabama

   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS  (CONTINUED)
                       September 30, 1997
----------------------------------------------------------------
                                                                 

Liquidity and Capital Resources (Continued)
-------------------------------

     Management monitors projected liquidity needs and
determines the level desirable based in part on commitments to
make loans and management's assessments of their ability to
generate funds.  Loan commitments at September 30, 1997,
including loans-in-process, were $2.8 million.  These
commitments are expected to be funded from liquid assets, cash
flow from loan repayments, and, if needed, advances from FHLB of
Atlanta.

     Under the regulatory capital requirements of the OTS, the
Bank is required to maintain minimal capital requirements by
satisfying three capital standards:  a tangible capital
requirement, a leverage ratio requirement, and a risk-based
capital requirement.  Under the tangible capital requirement,
the Bank's tangible capital (the amount of capital computed
under generally accepted accounting principles) must be equal to
1.5% of adjusted total assets.  Under the leverage ratio
requirement, the Bank's core capital must be equal to 3.0% of
adjusted total assets.  In addition, under the risk-based
capital requirement, the Bank must maintain core and
supplemental capital (core capital plus any general loss
reserves) equal to 8% of risk-weighted assets (total assets,
plus off-balance-sheet items multiplied by the appropriate risk
weight).

     The following table presents the Bank's capital position
based on the September 30, 1997, financial statements:

<TABLE>
<CAPTION>                      Percent                   Percent                  Percent
                   Actual        of         Required       of         Excess        of
                   Amount      Assets        Amount      Assets       Amount      Assets
                -----------    -------    -----------    -------   -----------    -------

<S>             <C>            <C>        <C>            <C>       <C>            <C>
Tangible        $ 8,763,000     11.28     $ 1,165,000     1.50     $ 7,598,000      9.78
Core              8,763,000     11.28       2,331,000     3.00       6,432,000      8.28
Risk-weighted     9,092,000     22.03       3,301,000     8.00       5,791,000     14.03

</TABLE>


See Independent Accountant's Report.<PAGE>
<PAGE>
                                                           14
                           SIGNATURES
                           ----------

     In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.


                           Security Federal Bancorp, Inc.
                           Registrant



Date: November 14, 1997    /s/ Marlin D. Moore, Jr.
      -----------------    ------------------------------------
                           Marlin D. Moore, Jr.
                           Chairman and Chief Executive Officer
                           (The Duly Authorized Representative)




Date: November 14, 1997    /s/ John F. Harvard
      -----------------    -------------------------------------
                           John F. Harvard
                           President and Chief Financial Officer