As filed with the Securities and Exchange Commission on August 22, 2006

                                         REGISTRATION STATEMENT NO. 333-_____


                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                  FORM S-8

                           REGISTRATION STATEMENT
                      UNDER THE SECURITIES ACT OF 1933


                        SECURITY FEDERAL CORPORATION
-----------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)


           South Carolina                                         57-08580504
-----------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

                          238 Richland Avenue West
                        Aiken, South Carolina  29801
                               (803) 641-3000
------------------------------------------------------------------------------
                  (Address of principal executive offices)

            Security Federal Corporation 2006 Stock Option Plan
------------------------------------------------------------------------------
                          (Full title of the plan)

Timothy W. Simmons                                John F. Breyer, Jr., Esquire
President and Chief Executive Officer                  Breyer & Associates PC
Security Federal Corporation                            8180 Greensboro Drive
238 Richland Avenue West                                            Suite 785
Aiken, South Carolina  29801                                McLean, VA  22102
(803) 641-3000                                                 (703) 883-1100
------------------------------------------------------------------------------
              (Name, address and telephone number of agent for service)

                        Calculation of Registration Fee
------------------------------------------------------------------------------
Title of
Securities      Amount      Proposed Maximum    Proposed Maximum    Amount of
to be           to be        Offering Price        Aggregate     Registration
Registered    Registered(1)    Per Share         Offering Price        Fee
------------------------------------------------------------------------------
Common Stock,
$0.01 par value   50,000         $23.00(2)         $1,150,000        $124.00

------------------------------------------------------------------------------
(1)  Together with an indeterminate number of additional shares which may be
     necessary to adjust the number of shares reserved for issuance pursuant
     to the Security Federal Corporation 2006 Stock Option Plan as a result of
     a stock split, stock dividend or similar adjustment of the outstanding
     common stock of the registrant.

(2)  Estimated in accordance with Rule 457(h), calculated on the basis of
     $23.00 per share, which was last trading price of Security Federal
     Corporation's common stock.

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

<PAGE>



                                    PART I

              INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

     The document(s) containing the information specified in Part I of Form
S-8 will be sent or given to participants in the Security Federal Corporation
2006 Stock Option Plan as specified by Rule 428(b)(1) promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933.

     Such document(s) are not being filed with the Commission, but constitute
(along with the documents incorporated by reference into the Registration
Statement pursuant to Item 3 of Part II hereof) a prospectus that meets the
requirements of Section 10(a) of the Securities Act of 1933.

                                        I-1

<PAGE>



                                  PART II

            INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference
-------

     The following documents previously filed by Security Federal Corporation
(the "Registrant") with the Commission are hereby incorporated by reference in
this Registration Statement:

     (a)  The Registrant's Annual Report on Form 10-K for the fiscal year
          ended March 31, 2006 (File No. 0-16120) filed pursuant to the
          Securities Exchange Act of 1934;

     (b)  all other reports filed pursuant to Section 13(a) or 15(d) of the
          Securities Exchange Act of 1934 since the end of the fiscal year
          covered by the Annual Report on Form 10-K referred to in Item 3(a)
          above; and

     (c)  the description of the Registrant's common stock, par value $0.01
          per share, set forth in the Registrant's Registration Statement on
          Form 8-A, registering the Registrant's common stock, pursuant to
          Section 12(g) of the Securities Exchange Act of 1934, filed on
          August 12, 1987 and all amendments thereto or reports filed for the
          purpose of updating such description.

     All documents subsequently filed by the Registrant with the Commission
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934, prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed incorporated by reference
into this Registration Statement to be a part hereof from the date of the
filing of such documents.  Any statement contained in the documents
incorporated, or deemed to be incorporated, by reference herein shall be
deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement.  Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.

     All information appearing in this Registration Statement is qualified in
its entirety by the detailed information, including financial statements,
appearing in the documents incorporated herein by reference.

Item 4.  Description of Securities
-------

     Not Applicable

Item 5.  Interests of Named Experts and Counsel
-------

     Not Applicable

Item 6. Indemnification of Directors and Officers
-------

     Article XIV of the Registrant's Articles of Incorporation requires
indemnification of directors, officers, employees, trustees and agents of the
Registrant for expenses actually and reasonably incurred in connection with
the defense or settlement of any threatened, pending or completed action, suit
or proceeding.

     Chapter 8, Article 5 of the South Carolina Business Corporation Act
provides for permissible, mandatory and court-ordered indemnification of
directors, officers, employees and agents in certain circumstances.  Sections
33-8-510, 33-8-520 and 33-8-560 provide as follows:

                                        II-1

<PAGE>



     33-8-510  AUTHORITY TO INDEMNIFY.   (a) Except as provided in subsection
(d), a corporation may indemnify an individual made a party to a proceeding
because he is or was a director against liability incurred in the proceeding
if:

     (1)  he conducted himself in good faith; and
     (2)  he reasonably believed;
     (i)  in the case of conduct in his official capacity with the
corporation, that his conduct was in the best interest; and
     (ii) in all other cases, that his conduct was at least not opposed to its
best interest; and
     (3)  in the case of any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful.
     (b)  A director's conduct with respect to an employee benefit plan for a
purpose he reasonably believed to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a)(2)(ii).
     (c)  The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
     (d)  A corporation may not indemnify a director under this section:
     (1)  in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
     (2)  in connection with any other proceeding charging improper personal
benefit to him, whether or not involving action in his official capacity, in
which he was adjudged liable on the basis that personal benefit was improperly
received by him.
     (e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.

     33-8-520  MANDATORY INDEMNIFICATION.   Unless limited by its articles of
incorporation, a corporation shall indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding.

     33-8-560  INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS.   Unless a
corporation's articles of incorporation provide otherwise:
     (1) an officer of the corporation who is not a director is entitled to
mandatory indemnification under  Section 33-8-520, and is entitled to apply
for court-ordered indemnification under Section 33-8-540, in each case to the
same extent as a director;
     (2) the corporation may indemnify and advance expenses under this
subchapter to an officer, employee, or agent of the corporation who is not a
director to the same extent as to a director; and
     (3) a corporation also may indemnify and advance expenses to an officer,
employee, or agent who is not a director to the extent, consistent with public
policy, that may be provided by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.

     Section 33-8-570 also authorizes a corporation to purchase and maintain
insurance for directors, officers, employees and agents against liability
arising from their positions, whether or not the corporation would have the
power

to indemnify against the same liability under Section 33-8-510 or Section
33-8-520.  The Registrant maintains directors' and officers' liability
insurance for the benefit of its directors and officers.

Item 7. Exemption From Registration Claimed
-------

     Not Applicable
                                        II-2
<PAGE>



Item 8. Exhibits
-------

     The following exhibits are filed with or incorporated by reference into
this Registration Statement on Form S-8:

 Exhibit Number   Description of Document
 --------------   ------------------------------------------------------------

      4.1         Articles of Incorporation of Security Federal Corporation,
                  as amended (1)

      4.2         Bylaws of Security Federal Corporation (2)

      4.3         Form of Certificate of Common Stock for Security Federal
                  Corporation (3)

      5           Opinion of Breyer & Associates PC

      23.1        Consent of Elliott Davis, LLC

      23.2        Consent of Breyer & Associates PC (contained in its opinion
                  filed as Exhibit 5)

      24          Power of attorney (contained in the signature page of the
                  Registration Statement)

      99          Security Federal Corporation 2006 Stock Option Plan

------------
(1)  Filed as an exhibit to the Registrant's 1998 Proxy Statement on June 26,
     1998 and incorporated herein by reference.

(2)  Filed as an exhibit to the Registrant's Registration Statement on Form
     S-8 on March 2, 2000 and incorporated herein by reference.

(3)  Filed as an exhibit to the Registrant's Registration Statement on Form
     8-A on August 12, 1987 and incorporated herein by reference.

Item 9. Undertakings
-------

     (a)  The undersigned Registrant hereby undertakes:

          1.  To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, (ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement,
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change in such information in the Registration Statement, provided,
however, that clauses (i) and (ii) do not apply if the information required to
be included in a post-effective amendment by those clauses is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.

          2.  That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed the initial
bona fide offering thereof.

          3.  To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.


                                      II-3
<PAGE>



     (b)  The undersigned Registrant hereby undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

     (c)  Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.  In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

                                       II-4

<PAGE>



                                 SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Aiken, State of South Carolina, on the 22nd
day of August, 2006.

                                     SECURITY FEDERAL CORPORATION


                                     By: /s/Timothy W. Simmons
                                        --------------------------------------
                                        Timothy W. Simmons
                                        President, Chief Executive Officer and
                                        Director
                                        (Duly Authorized Representative)

                             POWER OF ATTORNEY

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.  Each person whose signature appears
below hereby makes, constitutes and appoints Timothy W. Simmons his true and
lawful attorney, with full power to sign for such person and in such person's
name and capacity indicated below, and with full power of substitution any and
all amendments to this Registration Statement, hereby ratifying and confirming
such person's signature as it may be signed by said attorney to any and all
amendments.

By:/s/Timothy W. Simmons                                   August 22, 2006
   -----------------------------------------------
   Timothy W. Simmons
   President, Chief Executive Officer and Director
   (Principal Executive Officer)

By:/s/Roy G. Lindburg                                      August 22, 2006
   -----------------------------------------------
   Roy G. Lindburg
   Treasurer, Chief Financial Officer and Director
   (Principal Financial and Accounting Officer)

By:/s/T. Clifton Weeks                                     August 22, 2006
   -----------------------------------------------
   T. Clifton Weeks
   Chairman of the Board and Director

By:/s/J. Chris Verenes                                     August 22, 2006
   -----------------------------------------------
   J. Chris Verenes
   Director

By:/s/Gasper L. Toole III                                  August 22, 2006
   -----------------------------------------------
   Gasper L. Toole III
   Director

By:/s/Harry O. Weeks Jr.                                   August 22, 2006
   -----------------------------------------------
   Harry O. Weeks Jr.
   Director

                                          II-5

<PAGE>




By:/s/Robert E. Alexander                                  August 22, 2006
   -----------------------------------------------
   Robert E. Alexander
   Director

By:/s/Thomas L. Moore                                      August 22, 2006
   -----------------------------------------------
   Thomas L. Moore
   Director

By:/s/William Clyburn                                      August 22, 2006
   -----------------------------------------------
   William Clyburn
   Director


                                        II-6

<PAGE>



                        SECURITY FEDERAL CORPORATION

                               EXHIBIT INDEX



 Exhibit Number   Description of Document
 --------------   ------------------------------------------------------------

      4.1         Articles of Incorporation of Security Federal Corporation,
                  as amended (1)

      4.2         Bylaws of Security Federal Corporation (2)

      4.3         Form of Certificate of Common Stock for Security Federal
                  Corporation (3)

      5           Opinion of Breyer & Associates PC

      23.1        Consent of Elliott Davis, LLC

      23.2        Consent of Breyer & Associates PC (contained in its opinion
                  filed as Exhibit 5)

      24          Power of attorney (contained in the signature page of the
                  Registration Statement)

      99          Security Federal Corporation 2006 Stock Option Plan

------------
(1)  Filed as an exhibit to the Registrant's 1998 Proxy Statement on June 26,
     1998 and incorporated herein by reference.

(2)  Filed as an exhibit to the Registrant's Registration Statement on Form
     S-8 on March 2, 2000 and incorporated herein by reference.

(3)  Filed as an exhibit to the Registrant's Registration Statement on Form
     8-A on August 12, 1987 and incorporated herein by reference.

<PAGE>



                                 Exhibit 5

                     Opinion of Breyer & Associates PC

<PAGE>





                        [Letterhead of Breyer & Associates PC]

                                  August 22, 2006



Board of Directors
Security Federal Corporation
238 Richland Avenue West
Aiken, South Carolina  29801

Gentlemen:

     We have acted as special counsel to Security Federal Corporation, a South
Carolina corporation (the "Company"), in connection with the preparation of
the Registration Statement on Form S-8 filed with the Securities and Exchange
Commission ("Registration Statement") under the Securities Act of 1933, as
amended, relating to shares of common stock, par value $0.01 per share (the
"Common Stock") of the Company which may be issued pursuant to the terms of
the Security Federal Corporation 2006 Stock Option Plan (the "Plan"),
pursuant to the grant or exercise of stock options ("Options") or stock
appreciation rights ("Rights"), all as more fully described in the
Registration Statement.  The Registration Statement also registers an
indeterminate number of additional shares which may be necessary to adjust the
number of shares registered thereby for issuance as the result of a stock
split, stock dividend or similar adjustment of the number of issued and
outstanding shares of Common Stock. You have requested the opinion of this
firm with respect to certain legal aspects of the proposed offering.

     We have reviewed the Registration Statement, the Articles of
Incorporation and Bylaws of the Company, the Plan, a specimen stock
certificate evidencing the Common Stock and such other documents and records
as we have deemed necessary for purposes of this opinion.  We are relying upon
the originals, or copies certified or otherwise identified to our
satisfaction, of the corporate records of the Company and such other
instruments, certificates and representations of public officials, officers
and representatives of the Company as we have deemed applicable or relevant as
a basis for the opinions set forth below.  In addition, we have assumed,
without independent verification, the genuineness of all signatures and the
authenticity of all documents furnished to us and the conformance in all
respects of copies to originals.  Furthermore, we have made such factual
inquiries and reviewed such laws as we determined to be relevant for the
purposes of this opinion.

     For purposes of this opinion, we have also assumed that (i) the shares of
Common Stock issuable pursuant to the exercise of Options or Rights will
continue to be validly authorized on the dates the Common Stock is issued
pursuant to the exercise of the Options or Rights, (ii) on the dates the
Options or Rights are exercised, the Options or Rights will constitute valid,
legal and binding obligations of the Company and will be enforceable as to the
Company in accordance with their terms (subject to applicable bankruptcy,
moratorium, insolvency, reorganization and other laws and legal principles
affecting the enforceability of creditors' rights generally), (iii) no change
occurs in applicable law or the pertinent facts, (iv) the Options or Rights
are exercised in accordance with the terms of the Plan and any separate
agreement evidencing the grant of such Options or Rights pursuant to the Plan
and the exercise price due therefor, if any, is paid in accordance with the
terms thereof and (v) the provisions of "blue sky" and other securities laws
as may be applicable have been complied with to the extent required.

<PAGE>




Board of Directors
Security Federal Corporation
August 22, 2006
Page 2


     Based on the foregoing, and subject to the assumptions set forth herein,
we are of the opinion as of the date hereof that the shares of Common Stock to
be issued pursuant to the Plan, upon receipt by the Company of any
consideration required thereby, as applicable, will be legally issued, fully
paid and non-assessable shares of Common Stock.

     We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-8.

                                        Sincerely,

                                        /s/BREYER & ASSOCIATES PC

                                        BREYER & ASSOCIATES PC

<PAGE>




                               Exhibit 23.1

                       Consent of Elliott Davis, LLC

<PAGE>



           CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           --------------------------------------------------------


The Board of Directors
Security Federal Corporation
Aiken, South Carolina

We consent to incorporation by reference in the Registration Statement on Form
S-8 of Security Federal Corporation relating to their 2006 Stock Option Plan,
of our report dated April 20, 2006, relating to the consolidated balance sheet
of Security Federal Corporation and subsidiaries as of March 31, 2006, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended, which report appears in the March 31, 2006 Annual
Report to Stockholders of Security Federal Corporation, which is incorporated
by reference in Security Federal Corporation's Annual Report on Form 10-K for
the year ended March 31, 2006.

/s/ELLIOTT DAVIS, LLC

ELLIOTT DAVIS, LLC

Columbia, South Carolina
August 22, 2006

<PAGE>



                                 Exhibit 99

             Security Federal Corporation 2006 Stock Option Plan

<PAGE>



                        SECURITY FEDERAL CORPORATION

                           2006 STOCK OPTION PLAN

     1.   Plan Purpose.  The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining officers , directors, emeritus directors and
employees of the Corporation and its Affiliates with an equity interest in the
Corporation.  The Plan will assist the Corporation in attracting and retaining
the highest quality of experienced persons as directors, officers and
employees and in aligning the interests of such persons more closely with the
interests of the Corporation's stockholders by encouraging such parties to
maintain an equity interest in the Corporation.

     2.   Definitions.  The following definitions are applicable to the Plan:

     "Affiliate" -- means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.

     "Award" -- means the grant by the Committee of an Incentive Stock Option,
a Non-Qualified Stock Option, a Right, or any combination thereof, as provided
in the Plan.

     "Award Agreement" -- means the agreement evidencing the grant of an Award
made under the Plan.

     "Board" -- means the board of directors of the Corporation.

     "Cause" -- means Termination of Service by reason of personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or gross negligence.

     "Code" -- means the Internal Revenue Code of 1986, as amended.

     "Committee" -- means the committee referred to in Section 3 hereof.

     "Corporation" -- means Security Federal Corporation, a South Carolina
corporation, and any successor thereto.

     "Disability" -- means any physical or mental injury or disease of a
permanent nature which renders a Participant incapable of meeting the
requirements of the employment or service performed by such Participant
immediately prior to the commencement of such disability.  The determination
of whether a Participant is disabled shall be made by the Board in its sole
and absolute discretion.

     "Incentive Stock Option" -- means an option to purchase Shares granted by
the Committee to a Participant which is intended to qualify as an incentive
stock option under Section 422(b) of the Code.  Unless otherwise set forth in
the Award Agreement, any Option which does not qualify as an Incentive Stock
Option for any reason shall be deemed ab initio to be a Non-Qualified Stock
Option.

     "Market Value" -- means the average of the high and low quoted sales
price on the date in question (or, if there is no reported sale on such date,
on the last preceding date on which any reported sale occurred) of a Share on
the Composite Tape for New York Stock Exchange-Listed Stocks, or, if on such
date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any
such exchange, the mean between the closing high bid and low asked quotations
with respect to a Share on such date on the Nasdaq Stock Market, or any
similar system then in use, or, if no such quotations are available, the fair
market value on such date of a Share as the Committee shall determine based on
the weighted average of the past six trades of the Shares.

     "Non-Qualified Stock Option" -- means an option to purchase Shares
granted by the Committee to a Participant which does not qualify, for any
reason, as an Incentive Stock Option.

<PAGE>



     "Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option.

     "Participant" -- means any officer, director, emeritus director or
employee of the Corporation or any Affiliate who is selected by the Committee
to receive an Award.

     "Plan" -- means this Security Federal Corporation 2006 Stock Option Plan.

     "Related" -- means (i) in the case of a Right, a Right which is granted
in connection with, and to the extent exercisable, in whole or in part, in
lieu of, an Option or another Right and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right is exercisable, in
whole or in part, in lieu thereof.

     "Right" -- means a stock appreciation right with respect to Shares
granted by the Committee pursuant to the Plan.

     "Section 409A" -- means Code Section 409A and any guidance issued
thereunder.

     "Shares" -- means the shares of common stock of the Corporation.

     "Termination of Service" -- means cessation of service, for any reason,
whether voluntary or involuntary, so that the affected individual is not
either (i) an employee of the Corporation or any Affiliate for purposes of an
Incentive Stock Option, or (ii) a director, emeritus director or employee of
the Corporation or any Affiliate for purposes of any other Award.

     3.   Administration.  The Plan shall be administered by a Committee
consisting of two or more members of the Board, each of whom (i) shall be an
"outside director," as defined under Section 162(m) of the Code and the
Treasury regulations thereunder, and (ii) shall be a "non-employee director,"
as defined under Rule 16(b) of the Securities Exchange Act of 1934 or any
similar or successor provision.  The members of the Committee shall be
appointed by the Board.  Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion to (i) select Participants and grant Awards;
(ii) determine the number of Shares to be subject to types of Awards
generally, as well as to individual Awards granted under the Plan; (iii)
determine the terms and conditions upon which Awards shall be granted under
the Plan; (iv) prescribe the form and terms of Award Agreements; (v) establish
from time to time regulations for the administration of the Plan; and (vi)
interpret the Plan and make all determinations deemed necessary or advisable
for the administration of the Plan.

     A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.

     The Plan is intended to provide benefits that are not deferred
compensation within the meaning of Code Section 409A or any guidance issued
thereunder and the Plan shall be administered and interpreted accordingly.

     4.   Shares Subject to Plan.

           (a)  Subject to adjustment by the operation of Section 6, the
maximum number of Shares with respect to which Awards may be made under the
Plan is 50,000 plus (i) the number of Shares repurchased by the Corporation in
the open market or otherwise with an aggregate price no greater than the cash
proceeds received by the Corporation from the exercise of Options granted
under the Plan; plus (ii) any Shares surrendered to the Corporation in payment
of the exercise price of Options granted under the Plan.  The Shares with
respect to which Awards may be made under the Plan may be either authorized
and unissued Shares or previously issued Shares reacquired and held as
treasury Shares.  Shares which are subject to Related Rights and Related
Options shall be counted only once in determining whether the maximum number
of Shares with respect to which Awards may be granted under the Plan has been
exceeded.  An Award shall not be considered to have been made under the Plan
with respect to any Option or Right which terminates, and new Awards may be
granted under the Plan with respect to the number of Shares as to which such
termination has occurred.

                                    2

<PAGE>



          (b)  During any calendar year, no Participant may be granted Awards
under the Plan with respect to more than 5,000 Shares, subject to adjustment
as provided in Section 6.

     5.   Awards.

          (a)  Options.  The Committee is hereby authorized to grant Options
to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the
Plan and the requirements of applicable law as the Committee shall determine,
including the granting of Options in tandem with other Awards under the Plan:

               (i)  Exercise Price.  The exercise price per Share for an
Option shall be determined by the Committee; provided, however, that such
exercise price shall not be less than 100% of the Market Value of a Share on
the date of grant of such Option.

               (ii)  Option Term.  The term of each Option shall be fixed by
the Committee, but shall be no greater than 10 years in the case of an
Incentive Stock Option or 15 years in the case of a Non-Qualified Stock
Option.

               (iii)  Time and Method of Exercise.  The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part and the method or methods by which, and the form or forms (including,
without limitation, cash, Shares, other Awards or any combination thereof,
having a fair market value on the exercise date equal to the relevant exercise
price) in which, payment of the exercise price with respect thereto may
be made or deemed to have been made.

               (iv)  Incentive Stock Options.  Incentive Stock Options may be
granted by the Committee only to employees of the Corporation or its
Affiliates.

               (v)  Termination of Service.  Unless otherwise determined by
the Committee and set forth in the Award Agreement evidencing the grant of the
Option, upon Termination of Service of the Participant for any reason other
than for Cause, all Options then currently exercisable shall remain
exercisable until the expiration of the Option by its terms.  Upon Termination
of Service for Cause, all Options not previously exercised shall immediately
be forfeited.

          (b)  Rights.  A Right shall, upon its exercise, entitle the
Participant to whom such Right was granted to receive a number of Shares or
cash or combination thereof, as the Committee in its discretion shall
determine, the aggregate value of which (i.e., the sum of the amount of cash
and/or Market Value of such Shares on date of exercise) shall equal (as nearly
as possible, it being understood that the Corporation shall not issue any
fractional Shares) the amount by which the Market Value per Share on the date
of such exercise shall exceed the exercise price of such Right, multiplied by
the number of Shares with respect to which such Right shall have been
exercised.  A Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine.  In the case of a Related Option, such Related Option shall
cease to be exercisable to the extent of the Shares with respect to which the
Related Right was exercised.  Upon the exercise or termination of a Related
Option, any Related Right shall terminate to the extent of the Shares with
respect to which the Related Option was exercised or terminated.

     6.   Adjustments Upon Changes in Capitalization.  In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan
by reason of any reorganization, recapitalization, stock split, stock
dividend, capital distribution, combination or exchange of shares, merger,
consolidation or any change in the corporate structure or Shares of the
Corporation, the maximum aggregate number and class of shares and exercise
price of the Award, if any, as to which Awards may be granted under the Plan
and the number and class of shares and exercise price of the Award, if any,
with respect to which Awards have been granted under the Plan shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive.  Except as otherwise provided herein, any Award which is adjusted
as a result of this Section 6 shall be subject to the same terms and
conditions as the original Award.

                                   3

<PAGE>



     7.   Effect of Merger on Options or Rights.  In the case of any merger,
consolidation or combination of the Corporation (other than a merger,
consolidation or combination in which the Corporation is the continuing
corporation and which does not result in the outstanding Shares being
converted into or exchanged for different securities, cash or other property,
or any combination thereof), any Participant to whom an Option or Right has
been granted shall have the additional right (subject to the provisions of the
Plan and any limitation applicable to such Option or Right), thereafter and
during the term of each such Option or Right, to receive upon exercise of any
such Option or Right an amount equal to the excess of the fair market value on
the date of such exercise of the securities, cash or other property, or
combination thereof, receivable upon such merger, consolidation or combination
in respect of a Share over the exercise price of such Right or Option,
multiplied by the number of Shares with respect to which such Option or Right
shall have been exercised.  Such amount may be payable fully in cash, fully in
one or more of the kind or kinds of property payable in such merger,
consolidation or combination, or partly in cash and partly in one or more of
such kind or kinds of property, all in the discretion of the Committee.

     8.   Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 8 shall be deemed a
"change in control": (i) any third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of shares of the Corporation with respect to which 25% or
more of the total number of votes for the election of the Board may be cast,
(ii) as a result of, or in connection with, any cash tender offer, merger or
other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the
Corporation shall cease to constitute a majority of the Board, or (iii) the
stockholders of the Corporation shall approve an agreement providing either
for a transaction in which the Corporation will cease to be an independent
publicly-owned corporation or for a sale or other disposition of all or
substantially all the assets of the Corporation. If a tender offer or exchange
offer for Shares (other than such an offer by the Corporation) is commenced,
or if a change in control shall occur, unless the Committee shall have
otherwise provided in the Award Agreement, and except as otherwise provided in
an employment agreement or arrangement between the Corporation or an Affiliate
and the Participant, all Options and Rights granted and not fully exercisable
shall become exercisable in full upon the happening of such event; provided,
however, that no Option or Right which has previously been exercised or
otherwise terminated shall become exercisable.

     9.   Assignments and Transfers.  No Incentive Stock Option granted under
the Plan shall be transferable other than by will or the laws of descent and
distribution.  Any other Award shall be transferable by will, the laws of
descent and distribution, a "domestic relations order," as defined in Section
414(p)(1)(B) of the Code, or a gift to any member of the Participant's
immediate family or to a trust for the benefit of one or more of such
immediate family members.  During the lifetime of an Award recipient, an Award
shall be exercisable only by the Award recipient unless it has been
transferred as permitted hereby, in which case it shall be exercisable only by
such transferee.  For the purpose of this Section 9, a Participant's
"immediate family" shall mean the Participant's spouse, children and
grandchildren.

     10.  Employee Rights Under the Plan.  No person shall have a right to be
selected as a Participant nor, having been so selected, to be selected again
as a Participant, and no employee or other person shall have any claim or
right to be granted an Award under the Plan or under any other incentive or
similar plan of the Corporation or any Affiliate.  Neither the Plan nor any
action taken thereunder shall be construed as giving any employee any right to
be retained in the employ of the Corporation or any Affiliate.

     11.  Delivery and Registration of Stock.  The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests,
be conditioned upon the receipt of a representation as to the investment
intention of the Participant to whom such Shares are to be delivered, in such
form as the Committee shall determine to be necessary or advisable to comply
with the provisions of the Securities Act of 1933 or any other federal, state
or local securities legislation.  It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or
other action eliminating the necessity of such representation under such
Securities Act or other securities legislation.  The Corporation shall not be
required to deliver any Shares under the Plan prior to (i) the admission of
such Shares to listing on any stock exchange on which Shares may then be
listed and (ii) the completion of such registration or other qualification of
such Shares under any state or federal law, rule or regulation, as the
Committee shall determine to be necessary or advisable.

                                    4

<PAGE>



     12.  Withholding Tax.  The Corporation shall have the right to deduct
from all amounts paid in cash with respect to the exercise of a Right under
the Plan any taxes required by law to be withheld with respect to such cash
payments.  Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option or Right pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other
person to pay the Corporation the amount of any taxes which the Corporation is
required to withhold with respect to such Shares, or, in lieu thereof, to
retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld.  All withholding decisions pursuant to
this Section 12 shall be at the sole discretion of the Committee or the
Corporation.

     13.  Amendment or Termination.

          (a)  The Board may amend, alter, suspend, discontinue, or terminate
the Plan without the consent of shareholders or Participants, except that any
such action will be subject to the approval of the Corporation's shareholders
if, when and to the extent such shareholder approval is necessary or required
for purposes of any applicable federal or state law or regulation or the rules
of any stock exchange or automated quotation system on which the Shares may
then be listed or quoted, or if the Board, in its discretion, determines to
seek such shareholder approval.

          (b)  The Committee may waive any conditions of or rights of the
Corporation or modify or amend the terms of any outstanding Award.  The
Committee may not, however, amend, alter, suspend, discontinue or terminate
any outstanding Award without the consent of the Participant or holder
thereof, except as otherwise provided herein.

     14.  Effective Date and Term of Plan.  The Plan shall become effective
upon the later of its adoption by the Board or its approval by the
shareholders of the Corporation.  It shall continue in effect for a term of
ten years thereafter unless sooner terminated under Section 13 hereof.

                                * * * * *

                                    5

<PAGE>



                            FOR INCENTIVE STOCK OPTIONS
                                 PURSUANT TO THE
                           SECURITY FEDERAL CORPORATION
                              2006 STOCK OPTION PLAN

     OPTION for a total of ________________ Shares of common stock, par value
$0.01 per share, of SECURITY FEDERAL CORPORATION (the "Company"), which Option
is intended to qualify as an Incentive Stock Option under Section 422 of the
Internal Revenue Code of 1986, as amended, is hereby granted to ______ (the
"Optionee") at an exercise price determined as provided in, and in all
respects subject to, the terms, definitions and provisions of the 2006 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated by
reference herein, receipt of which is hereby acknowledged.

     1.   Exercise Price.  This Option shall be exercisable at $_______ for
each Share, being no less than 100 percent of the fair market value of the
common stock of the Company as determined pursuant to the Plan.

     2.   Exercise of Option.

          (a)  Vesting.  This Option shall be exercisable as follows:

                    Years of Employment          Percent
                     After Grant Date          Exercisable
                     ----------------          -----------
                            5                       20
                            6                       40
                            7                       60
                            8                       80
                            9                      100

          (b) Method of Exercise.  The notice of exercise of this Option shall
be in the form prescribed by the Committee referred to in Section 3 of the
Plan.  The date of exercise is the date on which such notice is received by
the Company.  Such notice shall be accompanied by payment in full of the
Exercise Price for the Option Shares to be purchased upon such exercise.
Payment shall be made (i) in cash, which may be in the form of a check, money
order, cashier's check or certified check, payable to the Company, or (ii) by
delivering shares of Common Stock already owned by the Optionee having a
Market Value equal to the Exercise Price, or (iii) a combination of cash and
such shares.  Promptly after such payment, subject to any withholding that may
be owed by the Optionee, the Company shall issue and deliver to the Optionee
or other person exercising this Option a certificate or certificates
representing the shares of Common Stock so purchased, registered in the name
of the Optionee (or such other person), or, upon request, in the name of the
Optionee (or such other person) and in the name of another in such form of
joint ownership as requested by the Optionee (or such other person) pursuant
to applicable law.

     3.  Nontransferability of Option.  Except as otherwise provided in the
Plan, this Option may not be transferred in any manner otherwise than by will
or the laws of descent or distribution and may be exercised during the
lifetime of the Optionee only by the Optionee. The terms of this Option shall
be binding upon the executors, administrators, heirs, successors and assigns
of the Optionee.

     4.  Term of Option.  Subject to Section 2(a) of this Agreement, this
Option is exercisable through and including the tenth anniversary of the date
of grant; provided, however, that this Option may be exercised during such
term only in accordance with the Plan and this Agreement.

     5.  Termination of Service or Death of the Optionee.  Except as provided
in this Section 5 and Section 6, notwithstanding any other provision of this
Option to the contrary, this Option shall be exercisable only if the Optionee
has not incurred a Termination of Service at the time of such exercise.

                                     ISO-1
<PAGE>



     If the Optionee incurs a Termination of Service for any reason excluding
death and Termination of Service for Cause, the Optionee may, but only within
the period of three months (or one year in the case of disability, as defined
in Section 22(e)(3) of the Code) immediately succeeding such Termination of
Service and in no event after the Expiration Date, exercise this Option to the
extent the Optionee was entitled to exercise this Option on the date of
Termination of Service.  If the Optionee incurs a Termination of Service for
Cause, all rights under this Option shall expire immediately upon the giving
to the Optionee of notice of such termination.

     In the event of the death of the Optionee prior to the Optionee's
Termination of Service or during the three-month period referred to in the
immediately preceding paragraph, the person or persons to whom the Option has
been transferred by will or by the laws of descent and distribution may, but
only to the extent the Optionee was entitled to exercise this Option on the
date of the Optionee's death, exercise this Option at any time within one year
following the death of the Optionee, but in no event after the Expiration
Date.  Following the death of the Optionee, the Committee may, in its sole
discretion, as an alternative means of settlement of this Option, elect to pay
to the person to whom this Option is transferred by will or by the laws of
descent and distribution, the amount by which the Market Value per share of
Common Stock on the date of exercise of this Option shall exceed the Exercise
Price per Option Share, multiplied by the number of Option Shares with respect
to which this Option is properly exercised.  Any such settlement of this
Option shall be considered an exercise of this Option for all purposes of this
Option and of the Plan.

     6.   Plan and Plan Interpretations as Controlling.  This Option and the
terms and conditions herein set forth are subject in all respects to the terms
and conditions of the Plan, which are controlling. All determinations and
interpretations made in the discretion of the Committee shall be final and
conclusive upon the Optionee or his legal representatives with regard to any
question arising hereunder or under the Plan.

     7.   Optionee Service.  Nothing in this Option shall limit the right of
the Company or any of its Affiliates to terminate the Optionee's service as a
director, emeritus director, or employee, or otherwise impose upon the Company
or any of its Affiliates any obligation to employ or accept the services of
the Optionee.


                              _____________________________   Optionee

                              By: _____________________________
                              For the Board of Directors
_________________
Date of Grant
                              Attest: _____________________(Seal)


                                ISO-2

<PAGE>



                             STOCK OPTION AGREEMENT
                         FOR NON-QUALIFIED STOCK OPTIONS
                                 PURSUANT TO THE
                           SECURITY FEDERAL CORPORATION
                             2006 STOCK OPTION PLAN

     NON-QUALIFIED STOCK OPTION for a total of _____ Shares of common stock,
par value $0.01 per share, of SECURITY FEDERAL CORPORATION (the "Company"), is
hereby granted to _________________ (the "Optionee") at an exercise price
determined as provided in, and in all respects subject to, the terms,
definitions and provisions of the 2006 Stock Option Plan (the "Plan") adopted
by the Company, which is incorporated by reference herein, receipt of which is
hereby acknowledged.

     1.   Exercise Price.  This Non-Qualified Stock Option shall be
exercisable at $____ for each Share, being no less than 100 percent of the
fair market value of the common stock of the Company as determined pursuant to
the Plan.

     2.   Exercise of Option.

          (a)  Vesting.  This Non-Qualified Stock Option shall be exercisable
               as follows:

                    Years of Service             Percent
                    After Grant Date           Exercisable
                    ----------------           -----------
                           5                       20
                           6                       40
                           7                       60
                           8                       80
                           9                      100

         (b)  Method of Exercise.  This Non-Qualified Stock Option shall be
              exercisable by a written notice which shall:

              (i)       State the election to exercise the Non-Qualified Stock
                        Option, the number of Shares with respect to which it
                        is being exercised, the person in whose name the stock
                        certificate or certificates for such Shares is to be
                        registered, his address and Social Security Number (or
                        if more than one, the names, addresses and Social
                        Security Numbers of such persons);

              (ii)      Be signed by the person or persons entitled to
                        exercise the Non-Qualified Stock Option and, if the
                        Non-Qualified Stock Option is being exercised by any
                        person or persons other than the Optionee, be
                        accompanied by proof, satisfactory to counsel for the
                        Company, of the right of such person or persons to
                        exercise the Non-Qualified Stock Option; and

              (iii)     Be in writing and delivered in person or by certified
                        mail to the Treasurer of the Company or any other
                        person designated by the Stock Option Committee of the
                        Company.

              Payment of the purchase price of any Shares with respect to
              which the Non-Qualified Stock Option is being exercised shall be
              by certified or bank cashier's or teller's check or as otherwise
              provided by the Plan.  The certificate or certificates for
              Shares as to which the Non-Qualified Stock Option shall be
              exercised shall be registered in the name of the person or
              persons designated by the Optionee.

                                   NQSO-1
<PAGE>



         (c)  Restrictions on exercise.  This Non-Qualified Stock Option may
              not be exercised if the issuance of the Shares upon such
              exercise would constitute a violation of any applicable federal
              or state securities or other law or valid regulation.  As a
              condition to the Optionee's exercise of this option, the Company
              may require the person exercising this option to make any
              representation and warranty to the Company as may be required by
              any applicable law or regulation.

    3.   Nontransferability of Non-Qualified Stock Option.  Except as
otherwise provided in the Plan, this Non-Qualified Stock Option may not be
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of the Optionee only by
the Optionee.  The terms of this Non-Qualified Stock Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.

    4.   Term of Non-Qualified Stock Option.  Subject  to Section 2(a) of this
Agreement, this Non-Qualified Stock Option is exercisable through and
including the tenth anniversary of the date of grant; provided, however, that
this Non-Qualified Stock Option may be exercised during such term only in
accordance with the Plan and this Agreement.

    5.   Plan and Plan Interpretations as Controlling.  This Non-Qualified
Stock Option and the terms and conditions herein set forth are subject in all
respects to the terms and conditions of the Plan, which are controlling. All
determinations and interpretations made in the discretion of the Committee
shall be final and conclusive upon the Optionee or his legal representatives
with regard to any question arising hereunder or under the Plan.

    6.   Optionee Service.  Nothing in this Non-Qualified Stock Option shall
limit the right of the Company or any of its Affiliates to terminate the
Optionee's service as a director, emeritus director, or employee, or otherwise
impose upon the Company or any of its Affiliates any obligation to employ or
accept the services of the Optionee.


                             ________________________________
                             Optionee

                             By: ____________________________
                                 For the Board of Directors
___________, 200_
Date of Grant

                             Attest: ______________________(Seal)

                                NQSO-2

<PAGE>
[{"type": "S-8", "sequence": "1", "filename": "s806.txt", "description": "SECURITY FEDERAL CORPORATION FORM S-8", "secsgml_size_bytes": 59182}]
{"company-data": {"conformed-name": "SECURITY FEDERAL CORP", "cik": "0000818677", "assigned-sic": "6035", "irs-number": "570858504", "state-of-incorporation": "SC", "fiscal-year-end": "0331"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-136813", "film-number": "061048620"}, "business-address": {"street1": "238 RICHLAND AVENUE WEST", "city": "AIKEN", "state": "SC", "zip": "29801", "phone": "8036413000"}, "mail-address": {"street1": "238 RICHLAND AVENUE WEST", "city": "AIKEN", "state": "SC", "zip": "29801"}, "former-company": {"former-conformed-name": "SECURITY FEDERAL CORPORATION", "date-changed": "19920703"}}
As filed with the Securities and Exchange Commission on August 22, 2006

                                         REGISTRATION STATEMENT NO. 333-_____

                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549

                                  FORM S-8

                           REGISTRATION STATEMENT
                      UNDER THE SECURITIES ACT OF 1933

                        SECURITY FEDERAL CORPORATION
-----------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

           South Carolina                                         57-08580504
-----------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

                          238 Richland Avenue West
                        Aiken, South Carolina  29801
                               (803) 641-3000
------------------------------------------------------------------------------
                  (Address of principal executive offices)

            Security Federal Corporation 2006 Stock Option Plan
------------------------------------------------------------------------------
                          (Full title of the plan)

Timothy W. Simmons                                John F. Breyer, Jr., Esquire
President and Chief Executive Officer                  Breyer & Associates PC
Security Federal Corporation                            8180 Greensboro Drive
238 Richland Avenue West                                            Suite 785
Aiken, South Carolina  29801                                McLean, VA  22102
(803) 641-3000                                                 (703) 883-1100
------------------------------------------------------------------------------
              (Name, address and telephone number of agent for service)

                        Calculation of Registration Fee
------------------------------------------------------------------------------
Title of
Securities      Amount      Proposed Maximum    Proposed Maximum    Amount of
to be           to be        Offering Price        Aggregate     Registration
Registered    Registered(1)    Per Share         Offering Price        Fee
------------------------------------------------------------------------------
Common Stock,
$0.01 par value   50,000         $23.00(2)         $1,150,000        $124.00

------------------------------------------------------------------------------
(1)  Together with an indeterminate number of additional shares which may be
     necessary to adjust the number of shares reserved for issuance pursuant
     to the Security Federal Corporation 2006 Stock Option Plan as a result of
     a stock split, stock dividend or similar adjustment of the outstanding
     common stock of the registrant.

(2)  Estimated in accordance with Rule 457(h), calculated on the basis of
     $23.00 per share, which was last trading price of Security Federal
     Corporation's common stock.

                            -----------------------
PART I

              INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

     The document(s) containing the information specified in Part I of Form
S-8 will be sent or given to participants in the Security Federal Corporation
2006 Stock Option Plan as specified by Rule 428(b)(1) promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933.

     Such document(s) are not being filed with the Commission, but constitute
(along with the documents incorporated by reference into the Registration
Statement pursuant to Item 3 of Part II hereof) a prospectus that meets the
requirements of Section 10(a) of the Securities Act of 1933.

                                        I-1
PART II

            INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference
-------

     The following documents previously filed by Security Federal Corporation
(the "Registrant") with the Commission are hereby incorporated by reference in
this Registration Statement:

     (a)  The Registrant's Annual Report on Form 10-K for the fiscal year
          ended March 31, 2006 (File No. 0-16120) filed pursuant to the
          Securities Exchange Act of 1934;

     (b)  all other reports filed pursuant to Section 13(a) or 15(d) of the
          Securities Exchange Act of 1934 since the end of the fiscal year
          covered by the Annual Report on Form 10-K referred to in Item 3(a)
          above; and

     (c)  the description of the Registrant's common stock, par value $0.01
          per share, set forth in the Registrant's Registration Statement on
          Form 8-A, registering the Registrant's common stock, pursuant to
          Section 12(g) of the Securities Exchange Act of 1934, filed on
          August 12, 1987 and all amendments thereto or reports filed for the
          purpose of updating such description.

     All documents subsequently filed by the Registrant with the Commission
pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act
of 1934, prior to the filing of a post-effective amendment which indicates
that all securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed incorporated by reference
into this Registration Statement to be a part hereof from the date of the
filing of such documents.  Any statement contained in the documents
incorporated, or deemed to be incorporated, by reference herein shall be
deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement.  Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Registration Statement.

     All information appearing in this Registration Statement is qualified in
its entirety by the detailed information, including financial statements,
appearing in the documents incorporated herein by reference.

Item 4.  Description of Securities
-------

     Not Applicable

Item 5.  Interests of Named Experts and Counsel
-------

     Not Applicable

Item 6. Indemnification of Directors and Officers
-------

     Article XIV of the Registrant's Articles of Incorporation requires
indemnification of directors, officers, employees, trustees and agents of the
Registrant for expenses actually and reasonably incurred in connection with
the defense or settlement of any threatened, pending or completed action, suit
or proceeding.

     Chapter 8, Article 5 of the South Carolina Business Corporation Act
provides for permissible, mandatory and court-ordered indemnification of
directors, officers, employees and agents in certain circumstances.  Sections
33-8-510, 33-8-520 and 33-8-560 provide as follows:

                                        II-1
33-8-510  AUTHORITY TO INDEMNIFY.   (a) Except as provided in subsection
(d), a corporation may indemnify an individual made a party to a proceeding
because he is or was a director against liability incurred in the proceeding
if:

     (1)  he conducted himself in good faith; and
     (2)  he reasonably believed;
     (i)  in the case of conduct in his official capacity with the
corporation, that his conduct was in the best interest; and
     (ii) in all other cases, that his conduct was at least not opposed to its
best interest; and
     (3)  in the case of any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful.
     (b)  A director's conduct with respect to an employee benefit plan for a
purpose he reasonably believed to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a)(2)(ii).
     (c)  The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
     (d)  A corporation may not indemnify a director under this section:
     (1)  in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
     (2)  in connection with any other proceeding charging improper personal
benefit to him, whether or not involving action in his official capacity, in
which he was adjudged liable on the basis that personal benefit was improperly
received by him.
     (e) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.

     33-8-520  MANDATORY INDEMNIFICATION.   Unless limited by its articles of
incorporation, a corporation shall indemnify a director who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party because he is or was a director of the corporation
against reasonable expenses incurred by him in connection with the proceeding.

     33-8-560  INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS.   Unless a
corporation's articles of incorporation provide otherwise:
     (1) an officer of the corporation who is not a director is entitled to
mandatory indemnification under  Section 33-8-520, and is entitled to apply
for court-ordered indemnification under Section 33-8-540, in each case to the
same extent as a director;
     (2) the corporation may indemnify and advance expenses under this
subchapter to an officer, employee, or agent of the corporation who is not a
director to the same extent as to a director; and
     (3) a corporation also may indemnify and advance expenses to an officer,
employee, or agent who is not a director to the extent, consistent with public
policy, that may be provided by its articles of incorporation, bylaws, general
or specific action of its board of directors, or contract.

     Section 33-8-570 also authorizes a corporation to purchase and maintain
insurance for directors, officers, employees and agents against liability
arising from their positions, whether or not the corporation would have the
power

to indemnify against the same liability under Section 33-8-510 or Section
33-8-520.  The Registrant maintains directors' and officers' liability
insurance for the benefit of its directors and officers.

Item 7. Exemption From Registration Claimed
-------

     Not Applicable
                                        II-2
Item 8. Exhibits
-------

     The following exhibits are filed with or incorporated by reference into
this Registration Statement on Form S-8:

 Exhibit Number   Description of Document
 --------------   ------------------------------------------------------------

      4.1         Articles of Incorporation of Security Federal Corporation,
                  as amended (1)

      4.2         Bylaws of Security Federal Corporation (2)

      4.3         Form of Certificate of Common Stock for Security Federal
                  Corporation (3)

      5           Opinion of Breyer & Associates PC

      23.1        Consent of Elliott Davis, LLC

      23.2        Consent of Breyer & Associates PC (contained in its opinion
                  filed as Exhibit 5)

      24          Power of attorney (contained in the signature page of the
                  Registration Statement)

      99          Security Federal Corporation 2006 Stock Option Plan

------------
(1)  Filed as an exhibit to the Registrant's 1998 Proxy Statement on June 26,
     1998 and incorporated herein by reference.

(2)  Filed as an exhibit to the Registrant's Registration Statement on Form
     S-8 on March 2, 2000 and incorporated herein by reference.

(3)  Filed as an exhibit to the Registrant's Registration Statement on Form
     8-A on August 12, 1987 and incorporated herein by reference.

Item 9. Undertakings
-------

     (a)  The undersigned Registrant hereby undertakes:

          1.  To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, (ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement,
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change in such information in the Registration Statement, provided,
however, that clauses (i) and (ii) do not apply if the information required to
be included in a post-effective amendment by those clauses is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.

          2.  That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed the initial
bona fide offering thereof.

          3.  To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

                                      II-3
(b)  The undersigned Registrant hereby undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

     (c)  Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.  In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

                                       II-4
SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Aiken, State of South Carolina, on the 22nd
day of August, 2006.

                                     SECURITY FEDERAL CORPORATION

                                     By: /s/Timothy W. Simmons
                                        --------------------------------------
                                        Timothy W. Simmons
                                        President, Chief Executive Officer and
                                        Director
                                        (Duly Authorized Representative)

                             POWER OF ATTORNEY

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.  Each person whose signature appears
below hereby makes, constitutes and appoints Timothy W. Simmons his true and
lawful attorney, with full power to sign for such person and in such person's
name and capacity indicated below, and with full power of substitution any and
all amendments to this Registration Statement, hereby ratifying and confirming
such person's signature as it may be signed by said attorney to any and all
amendments.

By:/s/Timothy W. Simmons                                   August 22, 2006
   -----------------------------------------------
   Timothy W. Simmons
   President, Chief Executive Officer and Director
   (Principal Executive Officer)

By:/s/Roy G. Lindburg                                      August 22, 2006
   -----------------------------------------------
   Roy G. Lindburg
   Treasurer, Chief Financial Officer and Director
   (Principal Financial and Accounting Officer)

By:/s/T. Clifton Weeks                                     August 22, 2006
   -----------------------------------------------
   T. Clifton Weeks
   Chairman of the Board and Director

By:/s/J. Chris Verenes                                     August 22, 2006
   -----------------------------------------------
   J. Chris Verenes
   Director

By:/s/Gasper L. Toole III                                  August 22, 2006
   -----------------------------------------------
   Gasper L. Toole III
   Director

By:/s/Harry O. Weeks Jr.                                   August 22, 2006
   -----------------------------------------------
   Harry O. Weeks Jr.
   Director

                                          II-5
By:/s/Robert E. Alexander                                  August 22, 2006
   -----------------------------------------------
   Robert E. Alexander
   Director

By:/s/Thomas L. Moore                                      August 22, 2006
   -----------------------------------------------
   Thomas L. Moore
   Director

By:/s/William Clyburn                                      August 22, 2006
   -----------------------------------------------
   William Clyburn
   Director

                                        II-6
SECURITY FEDERAL CORPORATION

                               EXHIBIT INDEX

 Exhibit Number   Description of Document
 --------------   ------------------------------------------------------------

      4.1         Articles of Incorporation of Security Federal Corporation,
                  as amended (1)

      4.2         Bylaws of Security Federal Corporation (2)

      4.3         Form of Certificate of Common Stock for Security Federal
                  Corporation (3)

      5           Opinion of Breyer & Associates PC

      23.1        Consent of Elliott Davis, LLC

      23.2        Consent of Breyer & Associates PC (contained in its opinion
                  filed as Exhibit 5)

      24          Power of attorney (contained in the signature page of the
                  Registration Statement)

      99          Security Federal Corporation 2006 Stock Option Plan

------------
(1)  Filed as an exhibit to the Registrant's 1998 Proxy Statement on June 26,
     1998 and incorporated herein by reference.

(2)  Filed as an exhibit to the Registrant's Registration Statement on Form
     S-8 on March 2, 2000 and incorporated herein by reference.

(3)  Filed as an exhibit to the Registrant's Registration Statement on Form
     8-A on August 12, 1987 and incorporated herein by reference.
Exhibit 5

                     Opinion of Breyer & Associates PC
[Letterhead of Breyer & Associates PC]

                                  August 22, 2006

Board of Directors
Security Federal Corporation
238 Richland Avenue West
Aiken, South Carolina  29801

Gentlemen:

     We have acted as special counsel to Security Federal Corporation, a South
Carolina corporation (the "Company"), in connection with the preparation of
the Registration Statement on Form S-8 filed with the Securities and Exchange
Commission ("Registration Statement") under the Securities Act of 1933, as
amended, relating to shares of common stock, par value $0.01 per share (the
"Common Stock") of the Company which may be issued pursuant to the terms of
the Security Federal Corporation 2006 Stock Option Plan (the "Plan"),
pursuant to the grant or exercise of stock options ("Options") or stock
appreciation rights ("Rights"), all as more fully described in the
Registration Statement.  The Registration Statement also registers an
indeterminate number of additional shares which may be necessary to adjust the
number of shares registered thereby for issuance as the result of a stock
split, stock dividend or similar adjustment of the number of issued and
outstanding shares of Common Stock. You have requested the opinion of this
firm with respect to certain legal aspects of the proposed offering.

     We have reviewed the Registration Statement, the Articles of
Incorporation and Bylaws of the Company, the Plan, a specimen stock
certificate evidencing the Common Stock and such other documents and records
as we have deemed necessary for purposes of this opinion.  We are relying upon
the originals, or copies certified or otherwise identified to our
satisfaction, of the corporate records of the Company and such other
instruments, certificates and representations of public officials, officers
and representatives of the Company as we have deemed applicable or relevant as
a basis for the opinions set forth below.  In addition, we have assumed,
without independent verification, the genuineness of all signatures and the
authenticity of all documents furnished to us and the conformance in all
respects of copies to originals.  Furthermore, we have made such factual
inquiries and reviewed such laws as we determined to be relevant for the
purposes of this opinion.

     For purposes of this opinion, we have also assumed that (i) the shares of
Common Stock issuable pursuant to the exercise of Options or Rights will
continue to be validly authorized on the dates the Common Stock is issued
pursuant to the exercise of the Options or Rights, (ii) on the dates the
Options or Rights are exercised, the Options or Rights will constitute valid,
legal and binding obligations of the Company and will be enforceable as to the
Company in accordance with their terms (subject to applicable bankruptcy,
moratorium, insolvency, reorganization and other laws and legal principles
affecting the enforceability of creditors' rights generally), (iii) no change
occurs in applicable law or the pertinent facts, (iv) the Options or Rights
are exercised in accordance with the terms of the Plan and any separate
agreement evidencing the grant of such Options or Rights pursuant to the Plan
and the exercise price due therefor, if any, is paid in accordance with the
terms thereof and (v) the provisions of "blue sky" and other securities laws
as may be applicable have been complied with to the extent required.
Board of Directors
Security Federal Corporation
August 22, 2006
Page 2

     Based on the foregoing, and subject to the assumptions set forth herein,
we are of the opinion as of the date hereof that the shares of Common Stock to
be issued pursuant to the Plan, upon receipt by the Company of any
consideration required thereby, as applicable, will be legally issued, fully
paid and non-assessable shares of Common Stock.

     We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-8.

                                        Sincerely,

                                        /s/BREYER & ASSOCIATES PC

                                        BREYER & ASSOCIATES PC
Exhibit 23.1

                       Consent of Elliott Davis, LLC
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           --------------------------------------------------------

The Board of Directors
Security Federal Corporation
Aiken, South Carolina

We consent to incorporation by reference in the Registration Statement on Form
S-8 of Security Federal Corporation relating to their 2006 Stock Option Plan,
of our report dated April 20, 2006, relating to the consolidated balance sheet
of Security Federal Corporation and subsidiaries as of March 31, 2006, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended, which report appears in the March 31, 2006 Annual
Report to Stockholders of Security Federal Corporation, which is incorporated
by reference in Security Federal Corporation's Annual Report on Form 10-K for
the year ended March 31, 2006.

/s/ELLIOTT DAVIS, LLC

ELLIOTT DAVIS, LLC

Columbia, South Carolina
August 22, 2006
Exhibit 99

             Security Federal Corporation 2006 Stock Option Plan
SECURITY FEDERAL CORPORATION

                           2006 STOCK OPTION PLAN

     1.   Plan Purpose.  The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining officers , directors, emeritus directors and
employees of the Corporation and its Affiliates with an equity interest in the
Corporation.  The Plan will assist the Corporation in attracting and retaining
the highest quality of experienced persons as directors, officers and
employees and in aligning the interests of such persons more closely with the
interests of the Corporation's stockholders by encouraging such parties to
maintain an equity interest in the Corporation.

     2.   Definitions.  The following definitions are applicable to the Plan:

     "Affiliate" -- means any "parent corporation" or "subsidiary corporation"
of the Corporation, as such terms are defined in Section 424(e) and (f),
respectively, of the Code.

     "Award" -- means the grant by the Committee of an Incentive Stock Option,
a Non-Qualified Stock Option, a Right, or any combination thereof, as provided
in the Plan.

     "Award Agreement" -- means the agreement evidencing the grant of an Award
made under the Plan.

     "Board" -- means the board of directors of the Corporation.

     "Cause" -- means Termination of Service by reason of personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties or gross negligence.

     "Code" -- means the Internal Revenue Code of 1986, as amended.

     "Committee" -- means the committee referred to in Section 3 hereof.

     "Corporation" -- means Security Federal Corporation, a South Carolina
corporation, and any successor thereto.

     "Disability" -- means any physical or mental injury or disease of a
permanent nature which renders a Participant incapable of meeting the
requirements of the employment or service performed by such Participant
immediately prior to the commencement of such disability.  The determination
of whether a Participant is disabled shall be made by the Board in its sole
and absolute discretion.

     "Incentive Stock Option" -- means an option to purchase Shares granted by
the Committee to a Participant which is intended to qualify as an incentive
stock option under Section 422(b) of the Code.  Unless otherwise set forth in
the Award Agreement, any Option which does not qualify as an Incentive Stock
Option for any reason shall be deemed ab initio to be a Non-Qualified Stock
Option.

     "Market Value" -- means the average of the high and low quoted sales
price on the date in question (or, if there is no reported sale on such date,
on the last preceding date on which any reported sale occurred) of a Share on
the Composite Tape for New York Stock Exchange-Listed Stocks, or, if on such
date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any
such exchange, the mean between the closing high bid and low asked quotations
with respect to a Share on such date on the Nasdaq Stock Market, or any
similar system then in use, or, if no such quotations are available, the fair
market value on such date of a Share as the Committee shall determine based on
the weighted average of the past six trades of the Shares.

     "Non-Qualified Stock Option" -- means an option to purchase Shares
granted by the Committee to a Participant which does not qualify, for any
reason, as an Incentive Stock Option.
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock
Option.

     "Participant" -- means any officer, director, emeritus director or
employee of the Corporation or any Affiliate who is selected by the Committee
to receive an Award.

     "Plan" -- means this Security Federal Corporation 2006 Stock Option Plan.

     "Related" -- means (i) in the case of a Right, a Right which is granted
in connection with, and to the extent exercisable, in whole or in part, in
lieu of, an Option or another Right and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right is exercisable, in
whole or in part, in lieu thereof.

     "Right" -- means a stock appreciation right with respect to Shares
granted by the Committee pursuant to the Plan.

     "Section 409A" -- means Code Section 409A and any guidance issued
thereunder.

     "Shares" -- means the shares of common stock of the Corporation.

     "Termination of Service" -- means cessation of service, for any reason,
whether voluntary or involuntary, so that the affected individual is not
either (i) an employee of the Corporation or any Affiliate for purposes of an
Incentive Stock Option, or (ii) a director, emeritus director or employee of
the Corporation or any Affiliate for purposes of any other Award.

     3.   Administration.  The Plan shall be administered by a Committee
consisting of two or more members of the Board, each of whom (i) shall be an
"outside director," as defined under Section 162(m) of the Code and the
Treasury regulations thereunder, and (ii) shall be a "non-employee director,"
as defined under Rule 16(b) of the Securities Exchange Act of 1934 or any
similar or successor provision.  The members of the Committee shall be
appointed by the Board.  Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion to (i) select Participants and grant Awards;
(ii) determine the number of Shares to be subject to types of Awards
generally, as well as to individual Awards granted under the Plan; (iii)
determine the terms and conditions upon which Awards shall be granted under
the Plan; (iv) prescribe the form and terms of Award Agreements; (v) establish
from time to time regulations for the administration of the Plan; and (vi)
interpret the Plan and make all determinations deemed necessary or advisable
for the administration of the Plan.

     A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.

     The Plan is intended to provide benefits that are not deferred
compensation within the meaning of Code Section 409A or any guidance issued
thereunder and the Plan shall be administered and interpreted accordingly.

     4.   Shares Subject to Plan.

           (a)  Subject to adjustment by the operation of Section 6, the
maximum number of Shares with respect to which Awards may be made under the
Plan is 50,000 plus (i) the number of Shares repurchased by the Corporation in
the open market or otherwise with an aggregate price no greater than the cash
proceeds received by the Corporation from the exercise of Options granted
under the Plan; plus (ii) any Shares surrendered to the Corporation in payment
of the exercise price of Options granted under the Plan.  The Shares with
respect to which Awards may be made under the Plan may be either authorized
and unissued Shares or previously issued Shares reacquired and held as
treasury Shares.  Shares which are subject to Related Rights and Related
Options shall be counted only once in determining whether the maximum number
of Shares with respect to which Awards may be granted under the Plan has been
exceeded.  An Award shall not be considered to have been made under the Plan
with respect to any Option or Right which terminates, and new Awards may be
granted under the Plan with respect to the number of Shares as to which such
termination has occurred.

                                    2
(b)  During any calendar year, no Participant may be granted Awards
under the Plan with respect to more than 5,000 Shares, subject to adjustment
as provided in Section 6.

     5.   Awards.

          (a)  Options.  The Committee is hereby authorized to grant Options
to Participants with the following terms and conditions and with such
additional terms and conditions not inconsistent with the provisions of the
Plan and the requirements of applicable law as the Committee shall determine,
including the granting of Options in tandem with other Awards under the Plan:

               (i)  Exercise Price.  The exercise price per Share for an
Option shall be determined by the Committee; provided, however, that such
exercise price shall not be less than 100% of the Market Value of a Share on
the date of grant of such Option.

               (ii)  Option Term.  The term of each Option shall be fixed by
the Committee, but shall be no greater than 10 years in the case of an
Incentive Stock Option or 15 years in the case of a Non-Qualified Stock
Option.

               (iii)  Time and Method of Exercise.  The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part and the method or methods by which, and the form or forms (including,
without limitation, cash, Shares, other Awards or any combination thereof,
having a fair market value on the exercise date equal to the relevant exercise
price) in which, payment of the exercise price with respect thereto may
be made or deemed to have been made.

               (iv)  Incentive Stock Options.  Incentive Stock Options may be
granted by the Committee only to employees of the Corporation or its
Affiliates.

               (v)  Termination of Service.  Unless otherwise determined by
the Committee and set forth in the Award Agreement evidencing the grant of the
Option, upon Termination of Service of the Participant for any reason other
than for Cause, all Options then currently exercisable shall remain
exercisable until the expiration of the Option by its terms.  Upon Termination
of Service for Cause, all Options not previously exercised shall immediately
be forfeited.

          (b)  Rights.  A Right shall, upon its exercise, entitle the
Participant to whom such Right was granted to receive a number of Shares or
cash or combination thereof, as the Committee in its discretion shall
determine, the aggregate value of which (i.e., the sum of the amount of cash
and/or Market Value of such Shares on date of exercise) shall equal (as nearly
as possible, it being understood that the Corporation shall not issue any
fractional Shares) the amount by which the Market Value per Share on the date
of such exercise shall exceed the exercise price of such Right, multiplied by
the number of Shares with respect to which such Right shall have been
exercised.  A Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine.  In the case of a Related Option, such Related Option shall
cease to be exercisable to the extent of the Shares with respect to which the
Related Right was exercised.  Upon the exercise or termination of a Related
Option, any Related Right shall terminate to the extent of the Shares with
respect to which the Related Option was exercised or terminated.

     6.   Adjustments Upon Changes in Capitalization.  In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan
by reason of any reorganization, recapitalization, stock split, stock
dividend, capital distribution, combination or exchange of shares, merger,
consolidation or any change in the corporate structure or Shares of the
Corporation, the maximum aggregate number and class of shares and exercise
price of the Award, if any, as to which Awards may be granted under the Plan
and the number and class of shares and exercise price of the Award, if any,
with respect to which Awards have been granted under the Plan shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive.  Except as otherwise provided herein, any Award which is adjusted
as a result of this Section 6 shall be subject to the same terms and
conditions as the original Award.

                                   3
7.   Effect of Merger on Options or Rights.  In the case of any merger,
consolidation or combination of the Corporation (other than a merger,
consolidation or combination in which the Corporation is the continuing
corporation and which does not result in the outstanding Shares being
converted into or exchanged for different securities, cash or other property,
or any combination thereof), any Participant to whom an Option or Right has
been granted shall have the additional right (subject to the provisions of the
Plan and any limitation applicable to such Option or Right), thereafter and
during the term of each such Option or Right, to receive upon exercise of any
such Option or Right an amount equal to the excess of the fair market value on
the date of such exercise of the securities, cash or other property, or
combination thereof, receivable upon such merger, consolidation or combination
in respect of a Share over the exercise price of such Right or Option,
multiplied by the number of Shares with respect to which such Option or Right
shall have been exercised.  Such amount may be payable fully in cash, fully in
one or more of the kind or kinds of property payable in such merger,
consolidation or combination, or partly in cash and partly in one or more of
such kind or kinds of property, all in the discretion of the Committee.

     8.   Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 8 shall be deemed a
"change in control": (i) any third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, shall become the
beneficial owner of shares of the Corporation with respect to which 25% or
more of the total number of votes for the election of the Board may be cast,
(ii) as a result of, or in connection with, any cash tender offer, merger or
other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the
Corporation shall cease to constitute a majority of the Board, or (iii) the
stockholders of the Corporation shall approve an agreement providing either
for a transaction in which the Corporation will cease to be an independent
publicly-owned corporation or for a sale or other disposition of all or
substantially all the assets of the Corporation. If a tender offer or exchange
offer for Shares (other than such an offer by the Corporation) is commenced,
or if a change in control shall occur, unless the Committee shall have
otherwise provided in the Award Agreement, and except as otherwise provided in
an employment agreement or arrangement between the Corporation or an Affiliate
and the Participant, all Options and Rights granted and not fully exercisable
shall become exercisable in full upon the happening of such event; provided,
however, that no Option or Right which has previously been exercised or
otherwise terminated shall become exercisable.

     9.   Assignments and Transfers.  No Incentive Stock Option granted under
the Plan shall be transferable other than by will or the laws of descent and
distribution.  Any other Award shall be transferable by will, the laws of
descent and distribution, a "domestic relations order," as defined in Section
414(p)(1)(B) of the Code, or a gift to any member of the Participant's
immediate family or to a trust for the benefit of one or more of such
immediate family members.  During the lifetime of an Award recipient, an Award
shall be exercisable only by the Award recipient unless it has been
transferred as permitted hereby, in which case it shall be exercisable only by
such transferee.  For the purpose of this Section 9, a Participant's
"immediate family" shall mean the Participant's spouse, children and
grandchildren.

     10.  Employee Rights Under the Plan.  No person shall have a right to be
selected as a Participant nor, having been so selected, to be selected again
as a Participant, and no employee or other person shall have any claim or
right to be granted an Award under the Plan or under any other incentive or
similar plan of the Corporation or any Affiliate.  Neither the Plan nor any
action taken thereunder shall be construed as giving any employee any right to
be retained in the employ of the Corporation or any Affiliate.

     11.  Delivery and Registration of Stock.  The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests,
be conditioned upon the receipt of a representation as to the investment
intention of the Participant to whom such Shares are to be delivered, in such
form as the Committee shall determine to be necessary or advisable to comply
with the provisions of the Securities Act of 1933 or any other federal, state
or local securities legislation.  It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or
other action eliminating the necessity of such representation under such
Securities Act or other securities legislation.  The Corporation shall not be
required to deliver any Shares under the Plan prior to (i) the admission of
such Shares to listing on any stock exchange on which Shares may then be
listed and (ii) the completion of such registration or other qualification of
such Shares under any state or federal law, rule or regulation, as the
Committee shall determine to be necessary or advisable.

                                    4
12.  Withholding Tax.  The Corporation shall have the right to deduct
from all amounts paid in cash with respect to the exercise of a Right under
the Plan any taxes required by law to be withheld with respect to such cash
payments.  Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option or Right pursuant to the Plan, the
Corporation shall have the right to require the Participant or such other
person to pay the Corporation the amount of any taxes which the Corporation is
required to withhold with respect to such Shares, or, in lieu thereof, to
retain, or sell without notice, a number of such Shares sufficient to cover
the amount required to be withheld.  All withholding decisions pursuant to
this Section 12 shall be at the sole discretion of the Committee or the
Corporation.

     13.  Amendment or Termination.

          (a)  The Board may amend, alter, suspend, discontinue, or terminate
the Plan without the consent of shareholders or Participants, except that any
such action will be subject to the approval of the Corporation's shareholders
if, when and to the extent such shareholder approval is necessary or required
for purposes of any applicable federal or state law or regulation or the rules
of any stock exchange or automated quotation system on which the Shares may
then be listed or quoted, or if the Board, in its discretion, determines to
seek such shareholder approval.

          (b)  The Committee may waive any conditions of or rights of the
Corporation or modify or amend the terms of any outstanding Award.  The
Committee may not, however, amend, alter, suspend, discontinue or terminate
any outstanding Award without the consent of the Participant or holder
thereof, except as otherwise provided herein.

     14.  Effective Date and Term of Plan.  The Plan shall become effective
upon the later of its adoption by the Board or its approval by the
shareholders of the Corporation.  It shall continue in effect for a term of
ten years thereafter unless sooner terminated under Section 13 hereof.

                                * * * * *

                                    5
FOR INCENTIVE STOCK OPTIONS
                                 PURSUANT TO THE
                           SECURITY FEDERAL CORPORATION
                              2006 STOCK OPTION PLAN

     OPTION for a total of ________________ Shares of common stock, par value
$0.01 per share, of SECURITY FEDERAL CORPORATION (the "Company"), which Option
is intended to qualify as an Incentive Stock Option under Section 422 of the
Internal Revenue Code of 1986, as amended, is hereby granted to ______ (the
"Optionee") at an exercise price determined as provided in, and in all
respects subject to, the terms, definitions and provisions of the 2006 Stock
Option Plan (the "Plan") adopted by the Company, which is incorporated by
reference herein, receipt of which is hereby acknowledged.

     1.   Exercise Price.  This Option shall be exercisable at $_______ for
each Share, being no less than 100 percent of the fair market value of the
common stock of the Company as determined pursuant to the Plan.

     2.   Exercise of Option.

          (a)  Vesting.  This Option shall be exercisable as follows:

                    Years of Employment          Percent
                     After Grant Date          Exercisable
                     ----------------          -----------
                            5                       20
                            6                       40
                            7                       60
                            8                       80
                            9                      100

          (b) Method of Exercise.  The notice of exercise of this Option shall
be in the form prescribed by the Committee referred to in Section 3 of the
Plan.  The date of exercise is the date on which such notice is received by
the Company.  Such notice shall be accompanied by payment in full of the
Exercise Price for the Option Shares to be purchased upon such exercise.
Payment shall be made (i) in cash, which may be in the form of a check, money
order, cashier's check or certified check, payable to the Company, or (ii) by
delivering shares of Common Stock already owned by the Optionee having a
Market Value equal to the Exercise Price, or (iii) a combination of cash and
such shares.  Promptly after such payment, subject to any withholding that may
be owed by the Optionee, the Company shall issue and deliver to the Optionee
or other person exercising this Option a certificate or certificates
representing the shares of Common Stock so purchased, registered in the name
of the Optionee (or such other person), or, upon request, in the name of the
Optionee (or such other person) and in the name of another in such form of
joint ownership as requested by the Optionee (or such other person) pursuant
to applicable law.

     3.  Nontransferability of Option.  Except as otherwise provided in the
Plan, this Option may not be transferred in any manner otherwise than by will
or the laws of descent or distribution and may be exercised during the
lifetime of the Optionee only by the Optionee. The terms of this Option shall
be binding upon the executors, administrators, heirs, successors and assigns
of the Optionee.

     4.  Term of Option.  Subject to Section 2(a) of this Agreement, this
Option is exercisable through and including the tenth anniversary of the date
of grant; provided, however, that this Option may be exercised during such
term only in accordance with the Plan and this Agreement.

     5.  Termination of Service or Death of the Optionee.  Except as provided
in this Section 5 and Section 6, notwithstanding any other provision of this
Option to the contrary, this Option shall be exercisable only if the Optionee
has not incurred a Termination of Service at the time of such exercise.

                                     ISO-1
If the Optionee incurs a Termination of Service for any reason excluding
death and Termination of Service for Cause, the Optionee may, but only within
the period of three months (or one year in the case of disability, as defined
in Section 22(e)(3) of the Code) immediately succeeding such Termination of
Service and in no event after the Expiration Date, exercise this Option to the
extent the Optionee was entitled to exercise this Option on the date of
Termination of Service.  If the Optionee incurs a Termination of Service for
Cause, all rights under this Option shall expire immediately upon the giving
to the Optionee of notice of such termination.

     In the event of the death of the Optionee prior to the Optionee's
Termination of Service or during the three-month period referred to in the
immediately preceding paragraph, the person or persons to whom the Option has
been transferred by will or by the laws of descent and distribution may, but
only to the extent the Optionee was entitled to exercise this Option on the
date of the Optionee's death, exercise this Option at any time within one year
following the death of the Optionee, but in no event after the Expiration
Date.  Following the death of the Optionee, the Committee may, in its sole
discretion, as an alternative means of settlement of this Option, elect to pay
to the person to whom this Option is transferred by will or by the laws of
descent and distribution, the amount by which the Market Value per share of
Common Stock on the date of exercise of this Option shall exceed the Exercise
Price per Option Share, multiplied by the number of Option Shares with respect
to which this Option is properly exercised.  Any such settlement of this
Option shall be considered an exercise of this Option for all purposes of this
Option and of the Plan.

     6.   Plan and Plan Interpretations as Controlling.  This Option and the
terms and conditions herein set forth are subject in all respects to the terms
and conditions of the Plan, which are controlling. All determinations and
interpretations made in the discretion of the Committee shall be final and
conclusive upon the Optionee or his legal representatives with regard to any
question arising hereunder or under the Plan.

     7.   Optionee Service.  Nothing in this Option shall limit the right of
the Company or any of its Affiliates to terminate the Optionee's service as a
director, emeritus director, or employee, or otherwise impose upon the Company
or any of its Affiliates any obligation to employ or accept the services of
the Optionee.

                              _____________________________   Optionee

                              By: _____________________________
                              For the Board of Directors
_________________
Date of Grant
                              Attest: _____________________(Seal)

                                ISO-2
STOCK OPTION AGREEMENT
                         FOR NON-QUALIFIED STOCK OPTIONS
                                 PURSUANT TO THE
                           SECURITY FEDERAL CORPORATION
                             2006 STOCK OPTION PLAN

     NON-QUALIFIED STOCK OPTION for a total of _____ Shares of common stock,
par value $0.01 per share, of SECURITY FEDERAL CORPORATION (the "Company"), is
hereby granted to _________________ (the "Optionee") at an exercise price
determined as provided in, and in all respects subject to, the terms,
definitions and provisions of the 2006 Stock Option Plan (the "Plan") adopted
by the Company, which is incorporated by reference herein, receipt of which is
hereby acknowledged.

     1.   Exercise Price.  This Non-Qualified Stock Option shall be
exercisable at $____ for each Share, being no less than 100 percent of the
fair market value of the common stock of the Company as determined pursuant to
the Plan.

     2.   Exercise of Option.

          (a)  Vesting.  This Non-Qualified Stock Option shall be exercisable
               as follows:

                    Years of Service             Percent
                    After Grant Date           Exercisable
                    ----------------           -----------
                           5                       20
                           6                       40
                           7                       60
                           8                       80
                           9                      100

         (b)  Method of Exercise.  This Non-Qualified Stock Option shall be
              exercisable by a written notice which shall:

              (i)       State the election to exercise the Non-Qualified Stock
                        Option, the number of Shares with respect to which it
                        is being exercised, the person in whose name the stock
                        certificate or certificates for such Shares is to be
                        registered, his address and Social Security Number (or
                        if more than one, the names, addresses and Social
                        Security Numbers of such persons);

              (ii)      Be signed by the person or persons entitled to
                        exercise the Non-Qualified Stock Option and, if the
                        Non-Qualified Stock Option is being exercised by any
                        person or persons other than the Optionee, be
                        accompanied by proof, satisfactory to counsel for the
                        Company, of the right of such person or persons to
                        exercise the Non-Qualified Stock Option; and

              (iii)     Be in writing and delivered in person or by certified
                        mail to the Treasurer of the Company or any other
                        person designated by the Stock Option Committee of the
                        Company.

              Payment of the purchase price of any Shares with respect to
              which the Non-Qualified Stock Option is being exercised shall be
              by certified or bank cashier's or teller's check or as otherwise
              provided by the Plan.  The certificate or certificates for
              Shares as to which the Non-Qualified Stock Option shall be
              exercised shall be registered in the name of the person or
              persons designated by the Optionee.

                                   NQSO-1
(c)  Restrictions on exercise.  This Non-Qualified Stock Option may
              not be exercised if the issuance of the Shares upon such
              exercise would constitute a violation of any applicable federal
              or state securities or other law or valid regulation.  As a
              condition to the Optionee's exercise of this option, the Company
              may require the person exercising this option to make any
              representation and warranty to the Company as may be required by
              any applicable law or regulation.

    3.   Nontransferability of Non-Qualified Stock Option.  Except as
otherwise provided in the Plan, this Non-Qualified Stock Option may not be
transferred in any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of the Optionee only by
the Optionee.  The terms of this Non-Qualified Stock Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.

    4.   Term of Non-Qualified Stock Option.  Subject  to Section 2(a) of this
Agreement, this Non-Qualified Stock Option is exercisable through and
including the tenth anniversary of the date of grant; provided, however, that
this Non-Qualified Stock Option may be exercised during such term only in
accordance with the Plan and this Agreement.

    5.   Plan and Plan Interpretations as Controlling.  This Non-Qualified
Stock Option and the terms and conditions herein set forth are subject in all
respects to the terms and conditions of the Plan, which are controlling. All
determinations and interpretations made in the discretion of the Committee
shall be final and conclusive upon the Optionee or his legal representatives
with regard to any question arising hereunder or under the Plan.

    6.   Optionee Service.  Nothing in this Non-Qualified Stock Option shall
limit the right of the Company or any of its Affiliates to terminate the
Optionee's service as a director, emeritus director, or employee, or otherwise
impose upon the Company or any of its Affiliates any obligation to employ or
accept the services of the Optionee.

                             ________________________________
                             Optionee

                             By: ____________________________
                                 For the Board of Directors
___________, 200_
Date of Grant

                             Attest: ______________________(Seal)

                                NQSO-2