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, 1997

         [   ]    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          (I.R.S. Employer Identification Number)
incorporation or organization)

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

Registrant's telephone number, including area code:  (423) 543-3518
                                                     --------------

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 September 30, 1997, there were 767,000 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
               ---------               --------

                                       
<PAGE>

                                SFB BANCORP, INC.
                                 AND SUBSIDIARY

                             Elizabethton, Tennessee

                                      Index

<TABLE>
<CAPTION>
PART I.                                                                                                             Page(s)
-------                                                                                                             -------

FINANCIAL INFORMATION
<S>                                                                                                                 <C>
Item 1.
Financial Statements
Consolidated Balance Sheets-(Unaudited) as of December 31, 1996 and September 30, 1997..................................3

Consolidated Statements of Income - (Unaudited) for the three and nine month periods
  ended September 30, 1996 and 1997.....................................................................................4

Consolidated Statements of Cash Flows - (Unaudited) for the nine months
  ended September 30, 1996 and 1997.....................................................................................5

Notes to (Unaudited) Consolidated Financial Statements................................................................6-8

Item 2.
Management's Discussion and Analysis of Financial Condition
  and Results of Operations..........................................................................................9-12

PART II.
--------

OTHER INFORMATION

Item 1.  Legal Proceedings.............................................................................................13

Item 2.  Changes in Securities.........................................................................................13

Item 3.  Defaults Upon Senior Securities...............................................................................13

Item 4.  Submission of Matters to a Vote of Security Holders...........................................................13

Item 5.  Other Information.............................................................................................13

Item 6.  Exhibits and Reports on Form 8-K..............................................................................13

Signatures.............................................................................................................14

</TABLE>
                                       2
<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets
                                   (Unaudited)
                        (in thousands except share data)
<TABLE>
<CAPTION>
                                                                            December 31,         September 30,
                                                                         -------------------- --------------------
           Assets                                                               1996                 1997
           ------                                                               ----                 ----
<S>                                                                      <C>                  <C>             
Cash on hand                                                             $             396    $            606
Interest earning deposits in other banks                                             1,018               3,872
Investment securities:
   Held to maturity (market value of $613
     in 1996 and $617 in 1997)                                                         715               1,136
   Available for sale (amortized cost of $599
     in 1996 and $649 in 1997)                                                         597                 598
Loans receivable, net                                                               36,808              39,988
Mortgage-backed securities:
   Available for sale (amortized cost of $5,941 in
     1996 and $5,577 in 1997)                                                        5,768               5,267
Premises and equipment, net                                                            533                 541
Real estate owned                                                                       60                   -
Federal Home Loan Bank stock                                                           394                 416
Accrued interest receivable                                                            257                 278
Prepaid expenses and other assets                                                       33                  55
                                                                           ---------------     ---------------

         Total assets                                                    $          46,579    $          52,757
                                                                           ===============      ===============

   Liabilities and Stockholders' Equity
   ------------------------------------
Deposits                                                                 $         40,765     $         39,853
Federal Home Loan Bank advances                                                       800                    -
Advance payments by borrowers for taxes and insurance                                 202                  480
Accrued expenses and other liabilities                                                122                  229
Income taxes payable:
   Current                                                                             13                  149
   Deferred                                                                             1                   36
                                                                         ----------------     ----------------

         Total liabilities                                                         41,903               40,747
                                                                          ---------------      ---------------

Commitments and contingencies

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 issued and outstanding at September 30, 1997 )                      -                   77
   Paid-in capital                                                                      -                7,316
   Retained earnings, substantially restricted                                      4,784                5,257
   Unrealized loss on securities available for sale, net
     of income taxes                                                                 (108)                 (47)
   Unearned compensation:
     Employee stock ownership plan                                                      -                 (593)
                                                                          ---------------      ----------------

         Total stockholders' equity                                                 4,676               12,010
                                                                          ---------------      ---------------

         Total liabilities and stockholders' equity                      $          46,579    $         52,757
                                                                           ===============     ===============
</TABLE>

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

                                       3
<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

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


<TABLE>
<CAPTION>
                                                     For Three Months Ended             For Nine Months Ended
                                                         September 30,                      September 30,
                                                 -------------------------------    -------------------------------
                                                      1996            1997               1996            1997
                                                      ----            ----               ----            ----
<S>                                              <C>             <C>                <C>             <C>    
Interest income:
   Loans                                         $          744   $         827     $        2,176         $ 2,399
   Mortgage-backed securities                                93              77                289             239
   Investments                                               22              29                 66              79
   Interest earning deposits                                 13              61                 58             121
                                                   ------------    ------------       ------------    ------------
         Total interest income                              872             994              2,589           2,838
                                                   ------------    ------------       ------------    ------------

Interest expense:
   Deposits                                                 485             489              1,479           1,491
   Federal Home Loan Bank advances                          -               -                  -                 3
                                                 --------------  --------------     --------------    ------------
         Total interest expense                             485             489              1,479           1,494
                                                   ------------    ------------       ------------    ------------
         Net interest income                                387             505              1,110           1,344

Provision for loan losses                                     8               3                 23               3
                                                   ------------    ------------       ------------    ------------
         Net interest income after provision
           for loan losses                                  379             502              1,087           1,341

Non-interest income:
   Loan fees and service charges                             44              37                117             107
   Other                                                      2               3                 10               9
                                                   ------------    ------------       ------------    ------------
         Total non-interest income                           46              40                127             116
                                                   ------------    ------------       ------------    ------------

Non-interest expenses:
   Compensation                                             108             112                326             361
   Employee benefits                                         12              15                 38              49
   Net occupancy expense                                     17              19                 57              53
   Deposit insurance premiums                               287               7                334              15
   Data processing                                           19              19                 53              55
   Other                                                     44              70                132             179
                                                   ------------    ------------       ------------    ------------
         Total non-interest expenses                        487             242                940             712
                                                   ------------    ------------       ------------    ------------

         Income (loss) before income taxes                  (62)            300                274             745

Income tax expense (benefit)                                (14)            111                104             272
                                                   -------------   ------------       ------------    ------------

         Net income (loss)                        $         (48)  $         189      $         170   $         473
                                                   ============    ============       ============    =============

Weighted average common equivalent
share outstanding:                                      N/A                707                N/A              707
       Net income per share                             N/A              $ .27                N/A            $ .67
</TABLE>

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

                                       4
<PAGE>
                        SFB BANCORP, INC. AND SUBSIDIARY

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (in thousands)
                                Nine Months Ended
<TABLE>
<CAPTION>
                                                                                          September 30,
                                                                                ----------------------------------
                                                                                            1996         1997
<S>                                                                                     <C>           <C>       
Operating activities:
   Net income                                                                           $      170    $      473

   Adjustments to reconcile net income to net cash provided
  (used) by operating activities:
     Depreciation                                                                               39            39
     Provision for loan losses                                                                  23             3
     Increase (decrease) in reserve for uncollected interest                                     2             4
     Deferred income taxes (benefit)                                                          (100)           (2) 
     Net increase (decrease) in deferred loan fees                                              11           (11)
     Accretion of discounts on investment securities net                                       (15)          (15)
     Amortization of premiums on mortgage-backed securities                                     19             9
     Amortization of unearned compensation                                                       -            30
     FHLB stock dividends                                                                      (20)          (22)
     (Increase) decrease in other assets                                                       126           (17)
     (Increase) decrease in accrued interest receivable                                        (26)          (25)
     Increase (decrease) in accrued expenses and other liabilities                             305           107
     Increase in current income taxes                                                           (5)          136
                                                                                        ----------    ----------

         Net cash provided by operating activities                                             529           709
                                                                                        ----------    ----------
Investing activities:
   Purchase of investment securities held to maturity                                            -          (500)
   Maturity of investment securities held to maturity                                           94            94
   Purchase of investment securities available for sale                                        (99)         (550)
   Maturities of investment securities available for sale                                      250           550
   Principal payments on mortgage-backed securities
     available for sale                                                                        918           589
   Proceeds from sale real estate                                                                -            10
   Net increase in loans                                                                    (3,047)       (3,127)
   Purchase of premises and equipment                                                          (19)          (47)
                                                                                        ----------    ----------

         Net cash used by investing activities                                              (1,903)       (2,981)
                                                                                        ----------    ----------

Financing activities:
   Net increase (decrease) in deposits                                                         (54)         (912)
   Increase (decrease) in advance payments by borrowers
     for taxes and insurance                                                                   203           278
   Repayment of FHLB advances                                                                    -          (800)
   Issuance of  common stock                                                                     -         7,056
   Payment of accrued conversion cost                                                            -          (286)
                                                                                        ----------    ----------
         Net cash provided (used) by financing activities                                      149         5,336
                                                                                        ----------    ----------

         Increase (decrease) in cash and cash equivalents                                   (1,225)        3,064

Cash and cash equivalents at beginning of period                                             2,729         1,414
                                                                                        ----------    ----------

Cash and cash equivalents at end of period                                              $    1,504    $    4,478
                                                                                        ==========    ==========

Supplemental  disclosures  of cash flow  information: 
  Cash paid during the year for:
     Interest                                                                           $    1,502    $    1,478
     Income taxes                                                                               51           129
                                                                                                                 
Noncash transactions
     Unrealized gain (loss) on securities  available for sale, net of deferred
       tax liability                                                                           (49)           61
     Loan to facilitate sale of real estate                                                      -            40

</TABLE>

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

                                       5
<PAGE>




                                SFB BANCORP, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                   (Unaudited)



1.   SFB Bancorp, Inc.
     -----------------

     SFB Bancorp,  Inc. ("Bancorp") was incorporated under the laws of the State
     of Tennessee  for the purpose of becoming  the holding  company of Security
     Federal Bank (the "Bank") in connection  with the Bank's  conversion from a
     federally  chartered  mutual  savings bank to a federally  chartered  stock
     savings  bank,  pursuant to its Plan of  Conversion.  Bancorp  commenced on
     April 14, 1997, a  Subscription  Offering of its shares in connection  with
     the conversion of the Savings Bank (the  "Conversion").  On May 29,1997 the
     Conversion was completed (see Note 4). The financial statements of the Bank
     are presented on a consolidated basis with those of the Bancorp.

     The consolidated  financial statements included herein are for the Bancorp,
     the Bank and the Bank's wholly owned  subsidiary,  SFS, Inc. (SFS),  herein
     collectively  know as the "Company." The impact of SFS on the  consolidated
     financial statements is insignificant.  SFS has no operating activity other
     than to own stock in a third-party service bureau.

2.   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   income,
     consolidated   statements  of   stockholders'   equity,   and  consolidated
     statements of cash flows in conformity with 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 income for the nine month period ended
     September 30, 1997 is not  necessarily  indicative of the results which may
     be expected for the entire year.

     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, 1996 which are
     included in the Form SB-2 (file no. 333-23505).

3.   Earnings Per Share
     ------------------

     Earnings  per share  amounts  for the three and nine  month  periods  ended
     September  30, 1997 are based on the average  number of shares  outstanding
     throughout  the  periods,  except that the initial  issue has been given an
     effective  date of  January  1,  1997.  No  comparative  amounts  have

                                       6
<PAGE>
SFB BANCORP, INC. AND SUBSIDIARY 
                           Notes to Consolidated Financial Statements, Continued
--------------------------------------------------------------------------------

     been  presented for the three and nine month  periods  ended  September 30,
     1996 because no shares were  outstanding  during that  period.  Unallocated
     ESOP  shares  are  not  considered  as  outstanding  for  purposes  of this
     calculation.

4.    Stockholders' Equity
      --------------------

     Bancorp was  incorporated  under Tennessee law in March 1997 to acquire and
     hold all the  outstanding  common stock of the Bank,  as part of the Bank's
     conversion  from a federally  chartered  mutual savings bank to a federally
     chartered stock savings bank. In connection with the conversion,  which was
     consummated  on May 29, 1997,  Bancorp  issued and sold  767,000  shares of
     common  stock at a price of $10.00  per share  for  total net  proceeds  of
     approximately  $7.4  million  after  conversion  expenses of  approximately
     $286,000.  Bancorp retained  approximately $3.1 million of the proceeds and
     used the remaining  proceeds to purchase the newly issued  capital stock of
     the Bank in the  amount of $3.7  million  and to make a loan to the ESOP of
     approximately $614,000.

     The Bank may not declare or pay a cash dividend if the effect thereof would
     cause its net worth to be reduced below either the amounts required for the
     liquidation account discussed below or the regulatory capital  requirements
     imposed by federal and state regulations.

     At the time of conversion, the Bank established a liquidation account in an
     amount equal to its retained income as reflected in the latest consolidated
     balance  sheet used in the final  conversion  prospectus.  The  liquidation
     account is  maintained  for the  benefit of  eligible  account  holders who
     continue to maintain their deposit  accounts in the Bank after  conversion.
     In the  event of a  complete  liquidation  of the Bank (and only in such an
     event),  eligible  depositors  who continue to maintain  accounts  shall be
     entitled to receive a distribution from the liquidation  account before any
     liquidation may be made with respect to common stock.

5.   Employee Stock Ownership Plan (ESOP)
     ------------------------------------

     As part of the conversion  discussed in Note 4, an Employee Stock Ownership
     Plan (ESOP) was  established for all employees who have attained the age of
     21 and have been  credited  with at least 1,000  hours of service  during a
     12-month period. The ESOP borrowed  approximately $614,000 from Bancorp and
     used the funds to purchase  61,360 shares of common stock of Bancorp issued
     in the  offering.  The loan  will be  repaid  principally  from the  Bank's
     discretionary  contributions  to the ESOP  over a period  of 10  years.  On
     September 30, 1997,  the loan had an outstanding  balance of  approximately
     $614,000 and an interest rate of 8.5%.  The loan  obligation of the ESOP is
     considered  unearned  compensation and, as such, recorded as a reduction of
     the  Company's  stockholders'  equity.  Both  the loan  obligation  and the
     unearned  compensation are reduced by an amount of the loan repayments made
     by the ESOP. Shares purchased with the loan proceeds are held in a suspense
     account  for  allocation   among   participants  as  the  loan  is  repaid.
     Contributions to the ESOP and shares released from the

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

     suspense  account  are  allocated  among   participants  on  the  basis  of
     compensation in the year of allocation. Benefits become fully vested at the
     end of seven  years of service  under the terms of the ESOP Plan.  Benefits
     may be payable upon  retirement,  death,  disability,  or  separation  from
     service. Since the Banks's annual contributions are discretionary, benefits
     payable  under  the ESOP  cannot  be  estimated.  Compensation  expense  is
     recognized  to the  extent  of the fair  value of  shares  committed  to be
     released.

     For the three and nine  months  ending  September  30,  1997,  compensation
     related to the ESOP of  approximately  $22,000 and  $30,000  was  expensed,
     respectively.  Compensation  is recognized at the average fair value of the
     ratably  released  shares  during the  accounting  period as the  employees
     performed services. At September 30, 1997, the ESOP had approximately 2,050
     allocated shares and 59,310 unallocated shares.

     The ESOP  administrators  will determine whether dividends on allocated and
     unallocated shares will be used for debt service.  Any allocated  dividends
     used will be replaced with common stock of equal value.  For the purpose of
     computing earnings per share, all ESOP shares committed to be released have
     been considered outstanding.

6.   Asset Quality
     -------------

     At September  30, 1997,  the Company had total  nonperforming  loans (i.e.,
     loans which are  contractually  past due 90 days or more) of  approximately
     $534,000.  Nonperforming  loans was 1.32% of total loans at  September  30,
     1997. Total nonperforming  assets as a percent of total assets at September
     30, 1997 was 1.01%.




                                       8
<PAGE>



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


General

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  Security  Federal  Bank as
appropriate.


Comparison of Financial Condition at December 31, 1996 and September  30, 1997

The Company's total consolidated  assets increased by approximately $6.2 million
or 13.2% from $46.6  million at December 31, 1996 to $52.8  million at September
30, 1997.  The increase in assets for the period was primarily  attributable  to
the net proceeds received from the initial public offering.

The composition of the Company's balance sheet has not been materially  affected
by market conditions between December 31, 1996 and September 30, 1997. Net loans
increased  $3.2  million or 8.6%.  This  increase  resulted  from the  Company's
origination of loans to satisfy  increased demand for fixed rate mortgage loans.
Interest  earning  deposits  increase  by $2.9  million  as a result  of the net
proceeds  raised in the initial  public  offering  being  invested in  overnight
accounts and short-term certificates of deposits at the Federal Home Loan Bank.

Deposits  decreased  approximately  $912,000  or 2.2%,  from  $40.8  million  at
December  31, 1996 to $39.9  million at  September  30,  1997.  The  decrease in
deposits was primarily attributable to approximately $1.9 million of withdrawals
by  customers  to purchase  stock in the recent  public  offering  offset by new
deposits of  approximately  $1  million.  The  Company  also repaid  $800,000 in
Federal Home Loan Bank advances.

Comparison  of Results of  Operations  for the Three Months Ended  September 30,
1996 and 1997

Net Income.  Net income increased  $237,000 from a net loss of ($48,000) for the
three  months  ended  September  30, 1996 to net income  $189,000  for the three
months ended  September  30, 1997.  The increase was  primarily the result of an
increase in net  interest  income and a decrease in  non-interest  expense.  The
return on average  assets was 1.43% for the three  months  ended  September  30,
1997.

Net  Interest  Income.  Net  interest  income  increased  $118,000 or 30.5% from
$387,000 for the three months ended September 30, 1996 to $505,000 for the three
months  ended  September  30,  1997.  The  improvement  in net  interest  income
primarily reflects an increase in average  interest-earning  assets over average
interest-bearing  liabilities  for the  Company of $6.8  million or 167%

                                       9
<PAGE>

for the three months ended September 30, 1997 as compared to 1996 primarily as a
result of the  proceeds  from the  stock  offering.  The  interest  rate  spread
decreased from 3.15% for three months ending September 30, 1996 to 2.93% for the
three months ending September 30, 1997.

Interest Income.  Total interest income increased $122,000 from $872,000 for the
three  months  ended  September  30, 1996 to $994,000 for the three months ended
September 30, 1997.  Interest on loans increased $83,000,  or 11.2% and interest
on  overnight   funds  increase  by  $48,000.   Interest  on   investments   and
mortgage-backed  securities  declined in  aggregate  by $9,000 as the  portfolio
continues  to mature and  principal  payments  are  received.  The  Company  has
utilized the principal  payments received on its  mortgage-backed  securities to
fund its additional loan demand.

Interest Expense.  Interest expense increased $4,000 from $485,000 for the three
months ended September 30, 1996 to $489,000 for the three months ended September
30, 1997.  The increase for the three months  ending  September 30, 1997 was the
result of a 12 basis point  increase in the  average  cost of funds  offset by a
$646,000 decrease in the average balance of deposits outstanding.

Provision for Loan Losses. The provision for loan losses for three month periods
ended  September 30, 1996 was $8,000 and $3,000 for the period ending  September
30, 1997. The ratio of the loss allowance to  non-performing  loans at September
30, 1997 was 55.8%.

Non-Interest Income. Non-interest income continues to be an insignificant source
of income for the Company. The income is produced by fees on new loan production
and service  fees on other  products and  services.  Total  non-interest  income
decreased by $6,000 for the three months  ending  September 30, 1997 compared to
1996 as a result of less loan fees generated.

Non-Interest  Expense.  Non-interest expense decreased by $245,000 from $487,000
for the three  months  ending  September  30,  1996 to  $242,000  for 1997.  The
decrease was primarily the result of a $264,000 non-recurring expense recognized
in the third  quarter  of 1996 in  regard to the  special  SAIF  assessment  for
additional deposit insurance  premiums.  Compensation,  employee  benefits,  net
occupancy and data processing  expenses  remained  relatively stable during both
three month periods.

Income Taxes.  Income tax expense for the three months ending September 30, 1997
was $111,000 compared to an income tax benefit of $14,000 for the same period in
1996. The increase was the result of pre-tax income increasing by $362,000.

Comparison of Results of Operations for the Nine Months Ended September 30, 1996
and 1997

Net Income.  Net income  increased  $303,000 or 178% from  $170,000 for the nine
months ended  September 30, 1996 to $473,000 for the nine months ended September
30, 1997.

Net Interest Income.  Net interest income increased  $234,000 or 21.1% from $1.1
million for the nine months  ended  September  30, 1996 to $1.3  million for the
nine months ended  September 30, 1997. The  improvement  in net interest  income
primarily reflects an increase in average  interest-

                                       10
<PAGE>

earning assets over average interest-bearing liabilities for the Company of $3.2
million or 82% for the nine months ended September 30, 1997 as compared to 1996.
The interest rate spread  increased from 2.91% for nine months ending  September
30, 1996 to 2.99% for the nine months ending September 30, 1997.

Interest  Income.  Total interest  income  increased  $249,000 or 9.6% from $2.6
million for the nine months  ended  September  30, 1996 to $2.8  million for the
nine months ended September 30, 1997. Interest on loans increased  $223,000,  or
10.2%.  Interest on overnight  funds  invested by the Company also  increased by
$63,000.  Interest on investments  and  mortgage-backed  securities in aggregate
decreased  by $37,000 as the  portfolio  matured  and  principal  payments  were
received.

Interest Expense.  Interest expense increased $15,000 from the nine months ended
September 30, 1996 to $1.5 million for the nine months ended September 30, 1997.
The increase for the nine months  ending  September 30, 1997 was the result of a
$868,000  increase  in average  deposits  outstanding  offset by a 6 basis point
decrease in the average cost of funds. Interest expense also increased by $3,000
for  advances  from the Federal  Home Loan Bank which were  utilized in the nine
months ending September 30, 1997.

Provision  for Loan  Losses.  The  provision  for loan losses for the nine month
period ended September 30, 1996 was $23,000 and $3,000 for the nine month period
ended September 30, 1997.  Management regularly performs an analysis to quantify
the inherent  risk of loss in its loan  portfolio.  At September  30, 1997,  the
allowance for loan loss was at a level deemed  adequate by management to provide
for losses in the loan portfolio. Nonperforming loans were $534,000 at September
30, 1997 and represented only 1.01% of total assets.

Non-Interest  Expense.  Non-interest expense decreased by $228,000 from $940,000
for the nine  months  ending  September  30,  1996 to  $712,000  for 1997.  This
decrease was the direct result of the reduction in deposit insurance premiums in
regard  to the  recapitalization  of the SAIF  during  the nine  months of 1997,
offset by additional  compensation costs and expenses of being a public company.
Increased  compensation  was  the  result  of  inflationary  increases  and  the
recognition of allocated ESOP shares at fair market value. During the nine month
period ending September 30, 1997, the Company recognized $30,000 of compensation
expense  related to the Employee  Stock  Ownership  Plan. Net occupancy cost and
data processing  remained  relatively stable as compared with the same period in
1996.

Income Taxes.  Income tax expense for the nine months ending  September 30, 1997
was $272,000  compared to $104,000 for the same period in 1996. The increase was
the result of pre-tax income  increasing by $471,000 for the nine months in 1997
as compared to 1996.

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,

                                       11
<PAGE>

deposit withdrawals and other financial commitments. At September 30, 1997 there
were no material  commitments  for  capital  expenditures.  Obligations  to fund
outstanding loan commitments at September 30, 1997 were approximately $136,000.

At September  30,  1997,  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.  Further at
September 30, 1997,  management was not aware of any current  recommendations by
the regulatory authorities which, if implemented, would have such an effect.

The Bank exceeded all of its capital  requirements  at September  30, 1997.  The
Bank had the following capital ratios at September 30, 1997:

<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, 1997:

     Total Capital
        (To risk weighted assets)   $    8,611       30.9%      $    2,233       8.00%`    $    2,792       10.0%

     Tier I Capital
        (To risk weighted assets)   $    8,332       29.9%      $    1,117       4.00%     $    1,675        6.0%

     Tier I Capital
        (To total assets)           $    8,332       16.8%      $    1,490       3.00%     $    2,484        5.0%

     Tangible Capital
        (To total assets)           $    8,332       16.8%      $      745       1.50%     $    2,484        5.0%

</TABLE>


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

                                       12
<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, 1997,  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. (incorporated by reference to the
                  Registration Statement on Form SB-2, File No. 333-23505).

          3(ii)   Bylaws of SFB Bancorp, Inc. (incorporated by reference to  the
                  Registration Statement on Form SB-2, File No. 333-23505).

          10      Employment Agreement with  Peter W. Hampton  (incorporated  by
                  reference  to  the   Registration  Statement  on    Form SB-2,
                  File No. 333-23505).

          27      Financial Data Schedule ( Electronic filing only)

(b)               Reports on Form 8-K

                         None.

                                       13
<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:     November 10, 1997                 By /s/ Peter W. Hampton
          ---------------------                ---------------------------------
                                               Peter W. Hampton
                                               (President and Chief Executive
                                               Officer)








Date:     November 10, 1997                 By /s/ Bobby Hyatt
          ----------------------               ---------------------------------
                                               Bobby Hyatt
                                               Principal Accounting Officer)




                                       14