U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                           ---------------------------

                                   FORM 10-QSB

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

     For the quarterly period ended September 30, 2001

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

     For the transition period from __________ to __________

                         Commission File Number 0-22587
                                                -------

                                SFB BANCORP, INC.
    ------------------------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)


                      Tennessee                              62-1683732
---------------------------------------------           ----------------------
(State or other jurisdiction of incorporation             (I.R.S. Employer
           or organization)                             Identification Number)

          632 East Elk Avenue, Elizabethton, Tennessee          37643
------------------------------------------------------        ----------
            (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:  (423) 543-1000
                                                     --------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                            X      Yes                    No
                        ----------               --------

As of October 25, 2001,  there were 582,995  shares of the  Registrant's  common
stock,  par value  $0.10 per share,  outstanding.  The  Registrant  has no other
classes of common equity outstanding.

Transitional small business disclosure format:

                                   Yes              X     No
                        ----------               --------

                                       1
<PAGE>

                                SFB BANCORP, INC.
                                 AND SUBSIDIARY

                             Elizabethton, Tennessee

                                      Index

<TABLE>
<CAPTION>

PART I.                                                                                                             Page(s)
-------                                                                                                             -------
<S>                                                                                                             <C>
FINANCIAL INFORMATION

Item 1.
Financial Statements

Consolidated Balance Sheets-(Unaudited) as of December 31, 2000 and September 30, 2001..................................3

Consolidated  Statements of Comprehensive Income - (Unaudited) for the three and nine month
periods ended September 30, 2000 and 2001...............................................................................4

Consolidated Statements of Stockholders' Equity - (Unaudited)...........................................................5

Consolidated Statements of Cash Flows - (Unaudited) for the nine months
  ended September 30, 2000 and 2001.....................................................................................6

Notes to (Unaudited) Consolidated Financial Statements................................................................7-8

Item 2.
Management's Discussion and Analysis of Financial Condition
  and Results of Operations..........................................................................................9-13

PART II.
--------

OTHER INFORMATION

Item 1.  Legal Proceedings.............................................................................................14

Item 2.  Changes in Securities.........................................................................................14

Item 3.  Defaults Upon Senior Securities...............................................................................14

Item 4.  Submission of Matters to a Vote of Security Holders...........................................................14

Item 5.  Other Information.............................................................................................14

Item 6.  Exhibits and Reports on Form 8-K..............................................................................14

Signatures ............................................................................................................15

</TABLE>
                                       2
<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets
                                   (Unaudited)
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                   December 31,  September 30,
                                                                  -------------  -------------
           Assets                                                      2000         2001
           ------                                                      ----         ----
<S>                                                             <C>          <C>
Cash on hand                                                       $     581    $     715
Interest earning deposits                                              1,540        6,013
Investment securities:
   Held to maturity (market value of $841
     in 2000 and $729 in 2001)                                           870          749
    Available for sale                                                 1,621            -
Loans receivable, net                                                 46,814       46,075
Mortgage-backed securities:
     Available for sale                                                1,659        1,485
Premises and equipment, net                                              957          958
Federal Home Loan Bank stock, at cost                                    524          552
Accrued interest receivable                                              355          264
Other assets                                                              47           99
                                                                   ---------    ---------
         Total assets                                              $  54,968    $  56,910
                                                                   =========    =========

   Liabilities and Stockholders' Equity
   ------------------------------------
Deposits                                                           $  42,252    $  44,340
Federal Home Loan Bank advances                                        1,000            -
Advance payments by borrowers for taxes and insurance                    222          527
Accrued expenses and other liabilities                                   128          186
Income taxes:
  Current                                                                 18           79
  Deferred                                                               129          161
                                                                   ---------    ---------
         Total liabilities                                            43,749       45,293
                                                                   ---------    ---------

Stockholders' equity:
   Preferred stock ($.10 par value, 1,000,000 shares authorized;
   none outstanding)                                                       -            -
   Common stock ($.10 par value, 4,000,000 shares authorized;
     767,000 shares issue 588,595 and 582,995 outstanding at
     December 31, 2000 and September 30, 2001, respectively)              77           77
   Paid-in capital                                                     7,392        7,404
   Retained earnings, substantially restricted                         6,539        6,825
   Treasury stock at cost (178,405 shares at December 31, 2000
     and 184,005 at September 30, 2001)                               (2,245)      (2,315)
   Accumulated other comprehensive income                                (57)          (9)
   Unearned compensation:
     Employee stock ownership plan                                      (348)        (296)
     Restricted stock plan                                              (139)         (69)
                                                                   ---------    ---------
         Total stockholders' equity                                   11,219       11,617
                                                                   ---------    ---------
         Total liabilities and stockholders' equity                $  54,968    $  56,910
                                                                   =========    =========
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       3
<PAGE>

                       SFB BANCORP, INC. AND SUBSIDIARY

                 Consolidated Statements of Comprehensive Income
                                   (Unaudited)
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                      For Three Months Ended             For Nine Months Ended
                                                           September 30,                     September 30,
                                                   ------------------------------    -------------------------------
                                                          2000           2001               2000            2001
                                                          ----           ----               ----            ----
<S>                                                 <C>            <C>               <C>              <C>
Interest income:
   Loans                                             $        946    $       965       $      2,726     $     2,879
   Mortgage-backed securities                                  27             20                 83              68
   Investments                                                 49             19                148              83
   Interest earning deposits                                    8             45                 20             107
                                                     ------------    -----------       ------------    ------------
         Total interest income                              1,030          1,049              2,977           3,137
                                                     ------------    -----------       ------------    ------------

Interest expense:
   Deposits                                                   529            540              1,473           1,683
   FHLB Advances                                                4              -                 19               1
                                                     ------------    -----------       ------------    ------------
         Total interest expense                               533            540              1,492           1,684
                                                     ------------    -----------       ------------    ------------
         Net interest income                                  497            509              1,485           1,453

Provision for loan losses                                       9              9                 27              27
                                                     ------------    -----------       ------------    ------------
         Net interest income after provision
           for loan losses                                    488            500              1,458           1,426

Non-interest income:
   Loan fees and service charges                               42             51                136             147
   Other                                                        7              1                 13               7
                                                     ------------    -----------       ------------    ------------
         Total non-interest income                             49             52                149             154
                                                     ------------    -----------       ------------    ------------

Non-interest expenses:
   Compensation                                               183            177                519             515
   Employee benefits                                           31             33                 95              98
   Net occupancy expense                                       29             37                 94              99
   Deposit insurance premiums                                   2              2                  6               6
   Data processing                                             31             32                 91              98
   Other                                                       69             72                203             211
                                                     ------------    -----------       ------------    ------------
         Total non-interest expenses                          345            353              1,008           1,027
                                                     ------------    -----------       ------------    ------------

         Income  before income taxes                          192            199                599             553

Income tax expense                                             71             76                221             212
                                                     ------------    -----------       ------------    ------------

         Net income                                           121            123                378             341

Other comprehensive income (loss)                              10             30                (11)             48
                                                     ------------    -----------       -------------   ------------

         Comprehensive income                        $        131    $       153       $        367    $        389
                                                     ============    ===========       ============    ============
Earnings per share
   Basic                                             $        .22    $       .22       $        .65    $        .62
   Diluted                                           $        .22    $       .22       $        .65    $        .62
</TABLE>

                   The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       4
<PAGE>

                                SFB BANCORP, INC.
                                 AND SUBSIDIARY

                 Consolidated Statements of Stockholders' Equity
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                        Accumulated
                                                                                           Other
                                                                                           Compre-    Unearned Compensation
                                                Common   Paid-In     Retained   Treasury   hensive    ---------------------
                                                Stock    Capital     Earnings     Stock    Income      for ESOP   for RSP     Total
                                                -----    -------     --------     -----    ------      --------   -------     -----

<S>                                        <C>        <C>        <C>         <C>          <C>       <C>          <C>     <C>
Balance at December 31, 1999                $      77  $   7,382  $   6,165   $  (1,208)   $  (45)     $  (419)   $ (236)  $ 11,716

Net income                                          -          -        485           -         -            -         -        485

Other comprehensive income                          -          -          -           -       (12)           -         -        (12)

Cash dividends declared ($.20  a share)             -          -       (111)          -         -            -         -       (111)

Treasury stock purchased (90,822 shares)            -          -          -      (1,037)        -            -         -     (1,037)

Compensation earned                                 -         10          -           -         -           71        97        178
                                            ---------  ---------  ---------   ---------    ------    ---------  --------   --------

Balance at December 31, 2000                       77      7,392      6,539      (2,245)      (57)        (348)     (139)    11,219

Net income                                          -          -        341           -         -            -         -        341

Other comprehensive income                          -          -          -           -        48            -         -         48

Cash dividends declared ($.10  a share)             -          -        (55)          -         -            -         -        (55)

Treasury stock purchased (5,600 shares)             -          -          -         (70)        -            -         -        (70)

Compensation earned                                 -         12          -           -         -           52        70        134
                                            ---------  ---------  ---------   ---------    ------    ---------  --------   --------

Balance at September 30, 2001               $      77  $   7,404  $   6,825   $  (2,315)   $   (9)   $    (296)      (69)  $ 11,617
                                            =========  =========  =========   =========    ======    =========  ========   ========
</TABLE>

                  The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       5

<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                                       September 30,
                                                                     ------------------
                                                                        2000       2001
                                                                     -------    -------
<S>                                                                <C>        <C>
Operating activities:
   Net income                                                        $   378    $   341
   Adjustments to reconcile net income  to net cash  provided by
     Operating activities:
     Depreciation                                                         69         71
     Provision for loan losses                                            27         27
     Increase (decrease) in reserve for uncollected interest              (1)         -

     Net increase (decrease) in deferred loan fees                       (15)       (19)
     Accretion of discounts on investment securities, net                (19)       (20)
     Amortization of premiums on mortgage-backed securities                7          4
     Amortization of unearned compensation                               134        134
     FHLB stock dividends                                                (27)       (28)
     (Increase) decrease in other assets                                  53        (52)
     (Increase) decrease in accrued interest receivable                  (43)        91
     Increase (decrease) in accrued expenses and other liabilities        50         58
     Increase (decrease) in current income taxes                          39         61
                                                                     -------    -------
         Net cash provided by operating activities                       652        668
                                                                     -------    -------
Investing activities:

   Maturities of investment securities held to maturity                  136        140
   Purchase of investment securities available for sale                    -       (700)
   Maturities of investment securities available for sale                  -      2,325
   Principal payments on mortgage-backed securities
      Available for sale                                                 400        248
   Net increase (decrease) in loans                                   (2,225)       730
   Purchase of premises and equipment                                    (27)       (72)
                                                                     -------    -------
         Net cash (used) provided by investing activities             (1,716)     2,671
                                                                     -------    -------
Financing activities:
   Net increase (decrease) in deposits                                 1,478      2,088
    Repayment of FHLB Advances                                          (500)    (1,000)
   Increase in advance payments by borrowers for taxes
     and insurance                                                       358        305
   Treasury stock purchased                                           (1,013)       (70)
   Payment of cash dividend                                              (56)       (55)
                                                                     -------    -------
         Net cash provided by financing activities                       267      1,268
                                                                     -------    -------

         (Decrease) increase in cash and cash equivalents               (797)     4,607

Cash and cash equivalents at beginning of period                       2,162      2,121
                                                                     -------    -------

Cash and cash equivalents at end of period                           $ 1,365    $ 6,728
                                                                     =======    =======
Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
     Interest                                                        $ 1,486    $ 1,671
     Income taxes                                                        130        152
                                                                     =======    =======
Noncash transactions:
   Unrealized gains (losses) on securities and mortgage-backed
     securities available for sale, net of deferred taxes                (11)        48
   Loan charge off's                                                       7          -

</TABLE>
                   The accompanying notes are an integral part
                  of these consolidated financial statements.

                                       6
<PAGE>

SFB BANCORP, INC. AND SUBSIDIARY      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------


                                SFB BANCORP, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                   (Unaudited)
                         (Tabular amounts in thousands)

1.   Basis of Preparation
     --------------------

     The accompanying  unaudited consolidated financial statements were prepared
     in  accordance  with  instructions  for Form 10-QSB and  therefore,  do not
     include  all  disclosures  necessary  for a  complete  presentation  of the
     consolidated  balance  sheets,  consolidated  statements  of  comprehensive
     income,  consolidated  statements of stockholders' equity, and consolidated
     statements  of cash  flows  in  conformity  with U. S.  generally  accepted
     accounting principles.  However, all adjustments, which are, in the opinion
     of management, necessary for the fair presentation of the interim financial
     statements  have  been  included.  All  such  adjustments  are of a  normal
     recurring nature. The statement of comprehensive  income for the nine month
     period  ended  September  30,  2001 is not  necessarily  indicative  of the
     results  which may be  expected  for the  entire  year or any other  future
     interim period.

     It is suggested  that these  consolidated  financial  statements be read in
     conjunction with the audited  consolidated  financial  statements and notes
     thereto  for the  Company  for the year ended  December  31, 2000 which are
     included in the Form 10-KSB by reference (file no. 0-22587).

2.   Earnings Per Share
     ------------------

     Basic  earnings  per common  share  ("EPS")  for all periods  presented  is
     computed by dividing  net income by the weighted  average  number of common
     share  outstanding.  Diluted  earnings  per  common  share is  computed  by
     dividing  net  income  available  to common  stockholders  by the  weighted
     average number of common shares  outstanding and dilutive  potential common
     shares,  which include stock options.  Dilutive potential common shares are
     calculated  using the treasury  stock  method.  Options to purchase  73,630
     shares of the Company's common stock were outstanding  during the three and
     nine  months  ending  September  30,  2001,  but were not  included  in the
     computation of diluted EPS because their effect would be anti-dilutive.

                                       7
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY      Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                 Three months ended,
                                                -------------------------------------------------------
                                                    September 30, 2000          September 30, 2001
                                                --------------------------- ---------------------------
                                                      Income         Shares        Income        Shares
                                                      ------         ------        ------        ------
<S>                                                   <C>           <C>           <C>            <C>
Net Income                                              $121                        $123
BASIC  EPS
  Income available to common stockholders               $121           556          $123            552
  Per share amount                                      $.22                        $.22
Effect of Dilutive Securities                           $.00                        $.00
DILUTED EPS
  Income available to common stockholders               $121           556          $123            552
  Per share amount                                      $.22                        $.22
</TABLE>

<TABLE>
<CAPTION>
                                                                   Nine months ended,
                                                -------------------------------------------------------
                                                    September 30, 2000          September 30, 2001
                                                --------------------------- ---------------------------
                                                      Income         Shares        Income        Shares
                                                      ------         ------        ------        ------
<S>                                                   <C>           <C>           <C>            <C>
Net Income                                              $378                        $341
BASIC  EPS
  Income available to common stockholders               $378           582          $341            552
  Per share amount                                      $.65                        $.62
Effect of Dilutive Securities                           $.00                        $.00
DILUTED EPS
  Income available to common stockholders               $378           582          $341            552
  Per share amount                                      $.65                        $.62

</TABLE>

3.   Asset Quality
     -------------

     The following table provides information regarding the Bank's nonperforming
     loans  (i.e.,  loans which are  contractually  past due 90 days or more) at
     December 31, 2000 and  September  30, 2001,  respectively.  As of the dates
     indicated, the Bank had no loans categorized as troubled debt restructuring
     within the meaning of SFAS 15.

                                            December 31,    September 30,
                                                2000           2001
                                                ----           ----

                                              (Dollars in Thousands)

       Nonaccrual loans                       $   192         $   246
       Repossessed real estate                      -               -
                                              -------         -------
       Total nonperforming assets             $   192         $   246
                                              =======         =======

       Nonperforming loans to net loans          0.41%           0.53%
       Nonperforming assets to total assets      0.35%           0.43%


                                       8
<PAGE>

Item 2.
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

General

The  Private  Securities  Litigation  Reform Act of 1995  contains  safe  harbor
provisions regarding forward-looking  statements.  When used in this discussion,
the words  "believes",  "anticipates",  "contemplates",  "expects",  and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and  uncertainties  that could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in  interest  rates,  risk  associated  with the effect of opening a new
branch,  the  ability  to  control  costs and  expenses,  and  general  economic
conditions.

The following discussion and analysis is intended to assist in understanding the
financial condition and the results of operations of the Company.  References to
the "Company" include SFB Bancorp, Inc. and/or the Bank as appropriate.

Comparison of Financial Condition

The Company's total assets increased by approximately $1.9 million, or 3.5% from
approximately  $55.0 million at December 31, 2000, to $56.9 million at September
30, 2001.  The increase in assets for 2001 was primarily  due to an  approximate
$4.6 million increase in cash and interest-earning assets, offset by a reduction
in loans outstanding of approximately $739,000 and other assets.

Total cash and interest-earning deposits increased approximately $4.6 million to
$6.7 million at September  30, 2001.  The increase in cash and  interest-earning
deposits  resulted  primarily  from the $2.0 million  increase in deposits and a
$1.6 million decrease in investment  securities.  As investment  securities have
matured, these funds have not been re-invested in other securities.  The Company
anticipates  utilizing  this increase in the cash and  interest-earning  deposit
balances to fund future loan demand.

Total liabilities  increased by approximately $1.5 million from $43.7 million at
December  31, 2000,  to $45.0  million at  September  30, 2001.  The increase in
liabilities  at September  30, 2001 was  primarily  the result of a $2.0 million
increase in  deposits,  offset by a  reduction  in other  liabilities.  The $2.0
million increase in deposits was primarily comprised of certificate of deposits

Comparison  of  Results  of  Operations  for the  Three and Nine  Months  Ending
September 30, 2000 and 2001

Net Income.  Net income for the three months ending September 30, 2001 increased
$2,000,  or 1.7%,  from  $121,000  in 2000,  to  $123,000  in 2001.  Net  income
decreased $37,000, or 9.8%, to $341,000 for the nine months ending September 30,
2001,  from  $378,000  in 2000.  The  decline in net income for the nine  months
ending September 30, 2001, as compared to the same period in

                                       9
<PAGE>

2000,  was  primarily  the  result of a decline  in net  interest  income and an
increase in  non-interest  expenses.  For the current  nine month  period  ended
September 30, 2001, net interest  income  continued to be affected by the higher
short-term interest rates paid on certificates of deposits during 2000.

Net Interest Income. Net interest income increased  $12,000,  from approximately
$497,000 for the three months  ending  September  30, 2000,  to $509,000 for the
three months ending  September 30, 2001. Net interest income  decreased  $32,000
for the nine months  ending  September  30,  2001.  The increase in net interest
income for the three months  ending  September 30, 2001, as compared to the same
period in 2000,  primarily  reflects  an  increase  in average  interest-earning
assets over average  interest-bearing  liabilities  of  approximately  $233,000,
offset by a 7 basis point  decrease in the interest  rate  spread.  The interest
rate spread for the period decreased to 2.77%. The net interest margin decreased
15 basis points to 3.69% for the three months ending  September  30, 2001,  from
3.84% for the three months ending  September 30, 2000.  The overall  decrease in
net interest  income for the nine months ending  September  30, 2001,  primarily
reflects a 30 basis point  decrease in the  interest  rate spread from 2.92% for
the nine months ending  September  30, 2000, to 2.62% in 2001.  The net interest
margin  decreased 31 basis points to 3.57% for the nine months ending  September
30, 2001, from 3.88% for the nine months ending September 30, 2000.

Interest Income.  Interest income increased  $19,000 for the three months ending
September  30,  2001.  The increase  was  attributable  to a increase in average
interest-earning  assets of  approximately  $3.4 million  from $51.7  million at
September 30, 2000, to $55.1 million at September 30, 2001, offset by a decrease
in the average yield on  interest-earning  assets of 35 basis points, from 7.97%
for the three months ending  September 30, 2000, to 7.62% for the same period in
2001.  Interest income  increased  $160,000 for the nine months ending September
30,   2001.   The   increase   was   attributable   to  a  increase  in  average
interest-earning  assets of  approximately  $3.3 million,  from $51.0 million at
September 30, 2000, to $54.3 million at September 30, 2001, offset by a decrease
in the average yield on  interest-earning  assets of 8 basis points,  from 7.78%
for the nine months  ending  September 30, 2000, to 7.70% for the same period in
2001.

Interest on loans  increased  $19,000 for the three months ending  September 30,
2001 and $153,000 for the nine months ending  September 30, 2001, as compared to
the same periods in 2000. The increase for the three months ending September 30,
2001 primarily reflects a $685,000 increase in average loans outstanding,  and a
increase in the average  yield on average loans  outstanding  of 5 basis points,
from 8.25% for the three months ending September 30, 2000, to 8.30% for the same
period in 2001.  The  increase  for the nine months  ending  September  30, 2001
primarily reflects a $1.8 million increase in average loans  outstanding,  and a
increase in the average yield on average loans  outstanding  of 13 basis points,
from 8.06% for the nine months ending  September 30, 2000, to 8.19% for the same
period in 2001.

Interest on investment  securities decreased $30,000 for the three months ending
September  30, 2001 and decreased  $65,000 for the nine months ending  September
30, 2001, as compared to the same periods in 2000.  The decreases are the result
of the  reduction in funds  invested in  securities.  Investments  for the three
months ending  September  30, 2001  reflected a decrease of  approximately  $2.3
million in the average investment balance as compared to 2000. The average yield
on these  investments  also  decreased 35 basis  points,  from 5.28% in 2000, to
4.93% in 2001.  Investments  for

                                       10
<PAGE>

the nine months ending  September 30, 2001 reflected a decrease of approximately
$1.8 million in the average  investment balance as compared to 2000. The average
yield on  investments  for the nine months ending  September 30, 2001 was 5.64%,
compared to 5.28% in 2000.

Interest on  interest-earning  deposits  increased  $37,000 for the three months
ending  September 30, 2001 and $87,000 for the nine months ending  September 30,
2001,  as compared to the same periods in 2000.  These  increases in interest on
interest-earning  deposits for three and nine months ending  September 30, 2001,
compared to 2000,  primarily  reflect an increase of approximately  $5.2 million
and $3.6  million,  respectively,  in the  average  balance of  interest-earning
deposits.

Interest on  mortgage-backed  securities  decreased  $7,000 for the three months
ending  September 30, 2001 and $15,000 for the nine months ending  September 30,
2001, as compared to the same periods in 2000, as the portfolio continued to pay
down principal and those funds were invested in other earning assets.

Interest Expense. Interest expense increased $7,000, from $533,000 for the three
months  ending  September  30, 2000,  to $540,000  for the three  months  ending
September 30, 2001. Interest expense increased $192,000, from approximately $1.5
million for the nine months  ending  September 30, 2000, to $1.7 million for the
nine months ending  September 30, 2001. The increase for the three months ending
September 30, 2001,  as compared to the three months in 2000,  was primarily the
result of an increase of  approximately  $3.2 million in the average  balance of
interest-bearing liabilities, offset by a 29 basis point decrease in the average
cost of funds.  The increase for the nine months ending  September 30, 2001, was
primarily the result of a 22 basis point  increase in the average cost of funds,
combined with an  approximate  $3.3 million  increase in the average  balance of
interest-bearing  liabilities  for the nine months  ending  September  30, 2001,
compared to 2000.  Interest rates on certificate of deposits began to reprice at
lower rates during three months  ending  September  20, 2001, as compared to the
same period in 2000. The average rate paid on certificate of deposits  decreased
22 basis  points to 5.66%  during the three months  ending  September  30, 2001,
compared to 2000. The average rate paid on certificate of deposits  increased 31
basis points to 5.87% during the nine months ending September 30, 2001, compared
to 2000.  The cost of funds for  certificates  of deposit  are  affected  by the
interest rate environment at the time those  certificate  accounts are opened or
reprice.

Provision  for Loan  Losses.  The  provision  for loan losses was $9,000 for the
three months ending September 30, 2001 and 2000, respectively. The provision for
loan losses was $27,000 for the nine months ending  September 30, 2001 and 2000,
respectively.  The  Company's  management  routinely  performs  an  analysis  to
quantify the inherent risk of loss in its portfolio.  At September 30, 2001, the
ratio  of the  allowance  for  loan  loss  was at a  level  deemed  adequate  by
management to provide for losses in the loan  portfolio.  The ratio of allowance
for loan loss to  non-performing  loans at  September  30, 2001,  was 151%,  and
nonperforming   assets   represented   0.43%  of  total   consolidated   assets.
Nonperforming  assets were $246,000 at September 30, 2001,  compared to $192,000
at December 31, 2000.  Management is not aware of any trends or events  inherent
to its loan portfolio that has not been provided for in its loan loss allowance.
There, however, can be no assurance that future losses will not exceed estimated
amounts or that  additional  provisions  for loan losses will not be required in
future periods.

                                       11
<PAGE>

Non-Interest Income. Non-interest income continues to be an additional source of
income for the  Company.  The  income is  produced  by certain  fees on new loan
production and service fees on other products and services.  Total  non-interest
income  amounted to $52,000 and  $154,000  for the three and nine months  ending
September 30, 2001, respectively.

Non-Interest  Expense. For the three and nine month periods ending September 30,
2001,  non-interest  expense  increased  $8,000 and  $19,000,  respectively,  as
compared to the same periods in 2000.  For the nine months ending  September 30,
2001,  the  increase  was  primarily  the result of a combined  increase in data
processing and other expenses.  The increase in data processing expenses for the
nine months ending September 30, 2001, compared to 2000, was mainly attributable
to expenses associated with increased  transaction volumes,  data communications
expenses,  and the new teller operating  system.  The increase in other expenses
for the nine months in 2001, compared to 2000, was mainly attributable to higher
general  operating  expenses and those expenses  associated  with being a public
company.

Income Taxes.  Income tax expense for the three months ending September 30, 2000
was $71,000, compared to $76,000 for the same period in 2001. Income tax expense
for the nine months ending September 30, 2000 was $221,000  compared to $212,000
for the same period in 2001.  The effective tax rate for both the three and nine
months in 2001 and 2000 was approximately 38%.

Liquidity and Capital Resources.  The Company's primary sources of funds are new
deposits, proceeds from principal and interest payments on loans, and repayments
on mortgage-backed  securities.  While maturities and scheduled  amortization of
loans are a predictable source of funds,  deposit flows and mortgage prepayments
are greatly  influenced  by general  interest  rates,  economic  conditions  and
competition. The Company's primary investing activity is loan originations.  The
Company maintains liquidity levels adequate to fund loan commitments, investment
opportunities,  deposit withdrawals and other financial commitments. Obligations
to fund outstanding  loan  commitments at September 30, 2001 were  approximately
$382,000.

At September  30,  2001,  management  had no knowledge of any trends,  events or
uncertainties  that will have or are reasonably  likely to have material effects
on the liquidity,  capital resources or operations of the Company.  Furthermore,
at September 30, 2001,  management was not aware of any current  recommendations
by the  regulatory  authorities  that,  if  implemented,  would  have a material
effect.

                                       12
<PAGE>

The Bank exceeded all of its capital  requirements  at September  30, 2001.  The
Bank had the following capital ratios at September 30, 2001:

<TABLE>
<CAPTION>
                                                                     For Capital               Categorized as
                                            Actual                Adequacy Purposes         "Well Capitalized"(1)
                                    ------------------------    -----------------------    ------------------------
                                      Amount       Ratio          Amount      Ratio          Amount       Ratio
                                    ------------ -----------    ----------- -----------    ------------ -----------
<S>                              <C>              <C>        <C>              <C>       <C>              <C>
   As of September 30, 2001:

   Total Capital
      (to risk weighted assets)     $   10,809       31.5%      $    2,745       8.0%      $    3,431       10.0%

   Tier I Capital
      (to risk weighted assets)     $   10,437       30.4%      $    1,372       4.0%      $    2,059        6.0%

   Tier I Capital
      (to total assets)             $   10,437       18.6%      $    1,682       3.0%      $    2,804        5.0%

   Tangible Capital
      (to total assets)             $   10,437       18.6%      $      841       1.50%     $    2,804        5.0%

</TABLE>

(1)  As categorized under the Prompt Corrective Action Provisions.

                                       13
<PAGE>

Part II.                        OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------

            From time to time, the Company and its  subsidiaries  may be a party
            to various legal proceedings  incident to its or their business.  At
            September  30, 2001,  there were no legal  proceedings  to which the
            Company or any subsidiary  was a party,  or to which of any of their
            property was subject, which were expected by management to result in
            a material loss.

Item 2.  Changes in Securities
         ---------------------

            None

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

            None

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

            None

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

            None

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

(a)    3(i)    Charter of SFB Bancorp, Inc.*
       3(ii)   Bylaws of SFB Bancorp, Inc. *
       4       Specimen Stock Certificate *
       10      Employment Agreement with Peter W. Hampton  *
       10.1    SFB Bancorp, Inc. 1998 Stock Option Plan * *
       10.2    Security Federal Bank Restricted Stock Plan * *

       *   Incorporated by reference to the Registration Statement on Form SB-2,
           File No. 333-23505.

       **  Incorporated  by  reference  to  the proxy  statement  for the annual
           meeting of  stockholders  on  June 1, 1998, and filed with the SEC on
           April 17, 1998 (File No. 0-22587).

(b)            Reports on Form 8-K

               None.


                                      14
<PAGE>



                                   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 thereunto duly authorized.

                                     SFB Bancorp, Inc.



Date:      October 25, 2001          By  /s/ Peter W. Hampton
           ----------------              ---------------------------------------
                                         Peter W. Hampton
                                         (President and Chief Executive Officer)






Date:      October 25, 2001          By  /s/ Bobby Hyatt
           ----------------              ---------------------------------------
                                         Bobby Hyatt
                                         (Vice President and Finance Officer)



                                       15