Security Federal Corporation Announces Increase in First Quarter Earnings.

AIKEN, S.C. -- Security Federal Corporation (OTCBB:SFDL.OB), the holding company of Security Federal Bank, today announced earnings for the first quarter of its fiscal year ending March 31, 2007. The Company reported net income of $1.0 million or $0.40 per share (basic) for the three months ending June 30, 2006, a 10.02% increase from net income of $929,000 or $0.37 per share (basic) for the three months ending June 30, 2005.

The increase in net income is the result of an increase in net interest income and non-interest income during the current quarter. Net interest income increased $488,000 to $4.4 million for the three months ended June 30, 2006, compared to $3.9 million for the comparable quarter in 2005. Non-interest income for the current quarter increased $61,000 to $751,000, compared to $690,000 for the three months ended June 30, 2005. These increases were offset partially by a $447,000 increase in non-interest expense to $3.4 million for the three months ending June 30, 2006, compared to $3.0 million for the three months ending June 30, 2005.

Total assets at June 30, 2006 were $675.6 million compared to $658.7 million at March 31, 2006, an increase of $16.9 million or 2.60% for the three-month period. Net loans receivable increased $22.7 million or 6.10% to $397.8 million at June 30, 2006 from $375.1 million at March 31, 2006. Total deposits increased $1.4 million or 0.30% to $480.7 million at June 30, 2006 compared to $479.3 million at March 31, 2006. Federal Home Loan Bank advances and other borrowings increased $12.8 million or 9.20% to $151.5 million at June 30, 2006 from $138.7 million at March 31, 2006.

During the three months ended June 30, 2006, the Company completed the acquisition of the insurance and premium finance businesses of Collier- Jennings Financial Corporation and its subsidiaries Collier-Jennings, Inc., The Auto Insurance Store, Inc., and Collier-Jennings Premium Pay Plans, Inc. (the "Collier-Jennings Companies"). The Collier-Jennings Companies operate in Aiken and North Augusta, South Carolina and Augusta, Georgia. This acquisition is expected to have a positive impact on the Company's non-interest income.

Security Federal Bank has eleven full service branch locations in Aiken, Clearwater, Graniteville, Langley, Lexington, North Augusta, Wagener, and West Columbia, South Carolina. Additional financial services are provided by three of the Bank's wholly owned subsidiaries, Security Federal Insurance, Inc., Security Federal Investments, Inc., and Security Federal Trust, Inc.

For additional information contact Roy Lindburg, Chief Financial Officer, at [phone].

Forward-looking statements:

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Company's mission and vision. These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties. The Company's actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to, interest rate fluctuations; economic conditions in the Company's primary market area; demand for residential, commercial business and commercial real estate, consumer, and other types of loans; success of new products; competitive conditions between banks and non-bank financial service providers; regulatory and accounting changes; technology factors affecting operations; pricing of products and services; and other risks detailed in the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ending March 31, 2006. Accordingly, these factors should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. The Company undertakes no responsibility to update or revise any forward-looking statement.

SECURITY FEDERAL CORPORATION
                               UNAUDITED CONSOLIDATED
                                FINANCIAL HIGHLIGHTS

                          INCOME STATEMENT HIGHLIGHTS

                   (In Thousands, except for Earnings per Share)

                                     Quarter Ended
                                        June 30,
                                   2006         2005      % change
                               ------------------------------------

Total interest income            $9,625       $7,412         29.86%
Total interest expense            5,214        3,489         49.44%
                               ------------------------------------
Net interest income               4,411        3,923         12.44%
Provision for loan losses           150          165         -9.09%
                               ------------------------------------
Net interest income after
 provision for loan losses        4,261        3,758         13.38%
Non-interest income                 751          690          8.84%
Non-interest expense              3,443        2,996         14.92%
                               ------------------------------------
Income before income taxes        1,569        1,452          8.06%
Provision for income taxes          547          523          4.59%
                               ------------------------------------
Net income                       $1,022         $929         10.01%
                               ====================================
Earnings per share                $0.40        $0.37          8.11%
                               ====================================


                         BALANCE SHEET HIGHLIGHTS
                 (In Thousands, except for Book Value per Share)


                               June 30,            March 31,
                                 2006                2006
                               ------------------------------

Total assets                   $675,623            $658,678
Cash and cash equivalents        11,078              14,351
Total loans receivable, net     397,835             375,109
Investment and mortgage-
 backed securities              230,719             238,433
Deposits                        480,648             479,229
Borrowings                      151,451             138,653
Shareholders' equity             37,882              37,602
Book value per share             $14.56              $14.82