8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 2013
SECURITY FEDERAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina	0-16120	57-0858504
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)
238 Richland Avenue West, Aiken, South Carolina		29801
(Address of principal executive offices)		(Zip Code)
Registrant's telephone number (including area code):  (803) 641-3000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions.
[ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02  Results of Operations and Financial Condition

On July 29, 2013, Security Federal Corporation issued its earnings release for the second quarter ended June 30, 2013 of the fiscal year ended December 31, 2013.  A copy of the earnings release is furnished herewith as Exhibit 99.1 and incorporated herein by reference.

Item 9.01  Financial Statements and Exhibits

(d)              Exhibits

The following exhibit is being filed herewith and this list shall constitute the exhibit index.

99.1           Press Release of Security Federal Corporation dated July 29, 2013.

SIGNATURES

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

	SECURITY FEDERAL CORPORATION
Date: July 29, 2013	By:	/s/Roy G. Lindburg
		Roy G. Lindburg
		Chief Financial Officer

EX-99

Exhibit 99.1

News Release

SECURITY FEDERAL CORPORATION ANNOUNCES INCREASE IN QUARTERLY AND SIX MONTH EARNINGS

Aiken, South Carolina (July 29, 2013) - Security Federal Corporation (“Company”) (OTCBB:SFDL), the holding company for Security Federal Bank (“Bank”), today announced earnings for the quarter and six month periods ended June 30, 2013.  The Company reported net income available to common shareholders of $769,000 or $0.26 per common share (basic) for the quarter ended June 30, 2013, an increase of $148,000 or 23.8% compared to net income available to common shareholders of $621,000 or $0.21 per common share (basic) for the quarter ended June 30, 2012. For the six months ended June 30, 2013, net income available to common shareholders increased $389,000 or 41.3% to $1.3 million or $0.45 per common share (basic), compared to net income available to common shareholders of $941,000 or $0.32 per common share (basic) for the same period in 2012. The increases in earnings for the quarter and six month period are primarily a result of increases in non-interest income in both periods.

Non-interest income increased $559,000 or 47.2% to $1.7 million for the quarter ended June 30, 2013 from $1.2 million for the comparable quarter in 2012. The increase is a result of an increase in gain on sale of investments of $266,000 or 256.7% combined with income related to an award the Bank received in recognition of its commitment to community development. During the quarter ended June 30, 2013, the Company recognized $220,000 in grant income in connection with this award compared to the same period in 2012 when no grant income was recognized. Non-interest income for the six-months ended June 30, 2013 increased $890,000 or 31.8% compared to the same period in 2012 as a result of a $636,000 increase in grant income.

Net interest spread increased six basis points to 2.78% for the quarter ended June 30, 2013 and increased six basis points to 2.73% for the six months ended June 30, 2013 when compared to the same periods in 2012. Despite an increase in spread, the significant decrease in the volume of interest bearing assets, particularly loans, resulted in a decrease in net interest income. For the quarter ended June 30, 2013, net interest income decreased $135,000 or 2.3% to $5.7 million compared to $5.9 million for the quarter ended June 30, 2012. Net interest income decreased $683,000 or 5.7% to $11.3 million for the six months ended June 30, 2013 compared to $12.0 million for the six months ended June 30, 2012.

Non-performing assets, which consist of non-accrual loans and repossessed assets decreased $8.2 million or 32.5% to $17.0 million at June 30, 2013 from $25.2 million at December 31, 2012 and decreased $25.0 million from $42.0 million at June 30, 2012. For the six months ended June 30, 2013, an additional $2.0 million was added to the allowance through the provision for loan losses. As a result, the allowance for loan losses represented 2.88% of total loans held for investment at June 30, 2013 and 2.80% of total loans held for investment at December 31, 2012.

Non-interest expense increased $94,000 or 1.8% to $5.4 million for the quarter ended June 30, 2013 from $5.3 million for the comparable quarter in 2012. For the six months

ended June 30, 2013, non-interest expense increased $482,000 or 4.6% to $10.9 million, compared to $10.4 million for the same period in 2012. The increase was primarily the result of prepayment penalties of $238,000 the Company incurred for paying down Federal Home Loan Bank advances during the six months ended June 30, 2013. As part of the Company’s strategy, management elected to replace some higher rate advances with lower rate callable certificates of deposit.

Total assets at June 30, 2013 were $867.4 million compared to $890.4 million at December 31, 2012, a decrease of $23.0 million or 2.6% for the six month period.  Total loans receivable, net decreased $23.7 million or 5.9% to $374.0 million at June 30, 2013 from $397.7 million at December 31, 2012 due to decreased loan demand.  Total deposits decreased $5.3 million or 0.8% to $671.1 million at June 30, 2013 compared to $676.3 million at December 31, 2012.  FHLB advances, other borrowings, convertible senior debentures and subordinated debentures decreased $13.4 million or 10.6% to $112.4 million at June 30, 2013 from $125.8 million at December 31, 2012.

Security Federal Bank has 13 full service branch locations in Aiken, Clearwater, Graniteville, Langley, Lexington, North Augusta, Wagener, Columbia and West Columbia, South Carolina and Evans, Georgia. A full range of financial services, including trust and investments, are provided by the Bank and insurance services are provided by the Bank’s wholly owned subsidiary, Security Federal Insurance, Inc.

For additional information contact Roy Lindburg, Chief Financial Officer, at (803) 641-3070

Forward-looking statements:

Certain matters discussed in this press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, potential future credit experience, and statements regarding the Company’s mission and vision.  These forward-looking statements are based upon current management expectations and may, therefore, involve risks and uncertainties.  The Company’s actual results, performance, or achievements may differ materially from those suggested, expressed, or implied by forward-looking statements as a result of a wide variety or range of factors including, but not limited to, interest rate fluctuations; economic conditions in the Company’s primary market area; demand for residential, commercial business and commercial real estate, consumer, and other types of loans; success of new products; competitive conditions between banks and non-bank financial service providers; regulatory and accounting changes; technology factors affecting operations; pricing of products and services; and other risks detailed in the Company’s reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-KT for the fiscal year ended December 31, 2012.  Accordingly, these factors should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements.  The Company undertakes no responsibility to update or revise any forward-looking statement.

SECURITY FEDERAL CORPORATION

UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTS

(In Thousands, except for Earnings per Share and Ratios)

	INCOME STATEMENT HIGHLIGHTS
		Quarter Ended June 30,		Six Months Ended June 30,
		2013	2012	2013	2012
Total interest income		$7,680	$8,475	$15,384	$17,427
Total interest expense		1,959	2,619	4,073	5,433
Net interest income		5,721	5,856	11,311	11,994
Provision for loan losses		900	725	2,045	2,675
Net interest income after
provision for loan losses		4,821	5,131	9,266	9,319
Non-interest income		1,743	1,184	3,688	2,798
Non-interest expense		5,392	5,298	10,905	10,423
Income before income taxes		1,172	1,017	2,049	1,694
Provision for income taxes		293	286	499	533
Net income		$879	$731	$1,550	$1,161
Preferred stock dividends		110	110	220	220
Net income available to common
Shareholders		$769	$621	$1,330	$941
Earnings per common share (basic)		$0.26	$0.21	$0.45	$0.32
		BALANCE SHEET HIGHLIGHTS
		June 30, 2013	December 31, 2012	%
Total assets		$867,354	$890,355	-2.6%
Cash and cash equivalents		9,336	7,904	18.1%
Total loans receivable, net		374,049	397,706	-5.9%
Investment & mortgage-backed securities		432,332	430,988	0.3%
Deposits		671,082	676,339	-0.8%
Borrowings		112,428	125,813	-10.6%
Shareholders' equity		78,351	82,592	-5.1%
Book value per share		$19.00	$20.45	-7.1%
Total risk based capital ratio (1)		20.97%	20.77%	1.0%
Non performing assets		16,987	25,159	-32.5%
Non performing assets to total assets		1.96%	2.83%	-30.7%
Allowance as a percentage of gross     loans, held for investment		2.88%	2.80%	2.9%
(1)- This ratio is calculated using Bank only information and not consolidated information