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 June 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)

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

    632 East Elk Avenue Elizabethton, Tennessee                        7643
-------------------------------------------------------------       ----------
        (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 June 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
                                                       ---               ---


                                       1
<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 June 30, 1997 .    3

Consolidated Statements of Income - (Unaudited) for the three and six month periods    4

Consolidated Statements of Cash Flows - (Unaudited) for the six months
  ended June 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 .......................................................   9-13

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 information)
<TABLE>
<CAPTION>


                                                                        December 31,              June 30,
                                                                     ----------------------------------------   
           Assets                                                          1996                     1997
           ------                                                          ----                     ----
<S>                                                                    <C>                     <C>        
Cash on hand                                                           $        396            $       534
Interest earning deposits in other banks                                      1,018                  5,824
Investment securities:
   Held to maturity (market value of $613
     in 1996 and $617 in 1997)                                                  715                    725
   Available for sale (amortized cost of $599
     in 1996 and $649 in 1997)                                                  597                    648
Loans receivable, net                                                        36,808                 38,080
Mortgage-backed securities:
   Available for sale (amortized cost of $5,941 in
     1996 and $5,577 in 1997)                                                 5,768                  5,427
Premises and equipment, net                                                     533                    530
Real estate owned                                                                60                      -
Federal Home Loan Bank stock                                                    394                    409
Accrued interest receivable                                                     257                    266
Prepaid expenses and other assets                                                33                     72
                                                                        -----------             ----------

         Total assets                                                  $     46,579            $    52,515
                                                                        ===========             ==========

   Liabilities and Stockholders' Equity
   ------------------------------------
Deposits                                                               $     40,765            $    40,026
Federal Home Loan Bank advances                                                 800                      -
Advance payments by borrowers for taxes and insurance                           202                    460
Accrued expenses and other liabilities                                          122                    183
Income taxes payable:
   Current                                                                       13                     84
   Deferred                                                                       1                      7
                                                                        -----------             ----------   

         Total liabilities                                                   41,903                 40,760
                                                                        -----------             ----------

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 June 30, 1997 )                     -                     77
   Paid-in capital                                                                -                  7,309
   Retained earnings, substantially restricted                                4,784                  5,068
   Unrealized loss on securities available for sale, net
     of income taxes                                                           (108)                   (91)
   Unearned compensation:
     Employee stock ownership plan                                                -                   (608)
                                                                        ===========             ==========

         Total stockholders' equity                                           4,676                 11,755
                                                                        -----------             ----------

         Total liabilities and stockholders' equity                    $     46,579             $   52,515
                                                                        ===========             ==========

</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 information)
<TABLE>
<CAPTION>

                                                        For Three Months Ended                   For Six Months Ended
                                                               June 30,                                June 30,
                                                 ------------------------------------    ------------------------------------
                                                      1996               1997                    1996              1997
                                                      ----               ----                    ----              ----
<S>                                                <C>                 <C>                    <C>               <C>  
Interest income:
   Loans                                           $    733            $   793                $   1,432         $   1,572
   Mortgage-backed securities                            95                 79                      196               162
   Investments                                           22                 26                       44                50
   Interest earning deposits                             20                 51                       45                60
                                                    -------             ------                 --------          --------
         Total interest income                          870                949                    1,717             1,844
                                                    -------             ------                 --------          --------

Interest expense:
   Deposits                                             486                511                      994             1,002
   Federal Home Loan Bank advances                        -                  -                        -                 3
                                                    -------             ------                 --------          --------
         Total interst expense                          486                511                      994             1,005
                                                    -------             ------                 --------          --------
         Net interest income                            384                438                      723               839

Provision for loan losses                                 7                  -                       15                -
                                                    -------             ------                 --------          --------
         Net interest income after provision
           for loan losses                              377                438                      708               839

Non-interest income:
   Loan fees and service charges                         32                 35                       73                70
   Other                                                  3                  1                        8                 6
                                                    -------             ------                 --------          --------
         Total non-interest income                       35                 36                       81                76
                                                    -------             ------                 --------          --------

Non-interest expenses:
   Compensation                                         116                131                      218               249
   Employee benefits                                     13                 18                       26                34
   Net occupancy expense                                 20                 18                       40                34
   Deposit insurance premiums                            24                  6                       47                 8
   Data processing                                       16                 17                       34                36
   Other                                                 42                 63                       88               109
                                                    -------             ------                 --------          --------
         Total non-interest expenses                    231                253                      453               470
                                                    -------             ------                 --------          --------

         Income before income taxes                     181                221                      336               445

Income tax expense                                       65                 82                      118               161
                                                    -------             ------                 --------          --------

         Net income                                $    116            $   139                $     218         $     284
                                                    =======             ======                 ========          ========

   Weighted  average common equivalent
share outstanding:                                       N/A               706                      N/A               706
   Net income per share (since inception)                N/A             $ .19                      N/A             $ .40
</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)
<TABLE>
<CAPTION>

                                                                                           Six Months Ended
                                                                                               June 30,
                                                                                ---------------------------------------
                                                                                       1996                1997
                                                                                       ----                ----
                                    
<S>                                                                                 <C>                <C>      
Operating activities:
   Net income                                                                       $     218          $     284

   Adjustments to reconcile net income to net cash provided  (used) by operating
     activities:
     Depreciation                                                                          27                 25
     Provision for loan losses                                                             15                  -
     Increase (decrease) in reserve for uncollected interest                                -                  7
     Net increase (decrease) in deferred loan fees                                          8                (16)
     Accretion of discounts on investment securities net                                  (10)               (12)
     Amortization of premiums on mortgage-backed securities                                13                  6
     Amortization of unearned compensation                                                  -                  8
     FHLB stock dividends                                                                 (13)               (15)
     (Increase) decrease in other assets                                                   88                (14)
     (Increase) decrease in accrued interest receivable                                    (4)               (16)
     Increase (decrease) in accrued expenses and other liabilities                        (11)                61
     Increase in current income taxes                                                      21                 71
                                                                                     --------           --------          
         Net cash provided by operating activities                                        352                389
                                                                                     --------           --------

Investing activities:
   Purchase of investment securities held to maturity                                  (1,000)                 -
   Maturity of investment securities held to maturity                                   1,000                  -
   Purchase of investment securities available for sale                                   (99)              (300)
   Maturities of investment securities available for sale                                 250                250
   Principal payments on mortgage-backed securities
     available for sale                                                                   648                359
   Net increase in loans                                                               (2,014)            (1,221)
   Purchase of premises and equipment                                                      (8)               (22)
                                                                                     --------           --------

         Net cash used by investing activities                                         (1,223)              (934)
                                                                                     --------           --------          

Financing activities:
   Net increase (decrease) in deposits                                                   (282)              (739)
   Increase (decrease) in advance payments by borrowers
     for taxes and insurance                                                              201                258
   Repayment of FHLB advances                                                               -               (800)
   Issuance of  common stock                                                                -              7,056
   Payment of accrued conversion cost                                                       -               (286)
                                                                                     --------           --------                  
         Net cash provided (used) by financing activities                                 (81)             5,489
                                                                                     --------           --------
                                                                                          
         Increase (decrease) in cash and cash equivalents                                (952)             4,944

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

Cash and cash equivalents at end of period                                          $   1,777          $   6,358
                                                                                     ========           ========    



Supplemental  disclosures  of cash flow  information:  Cash paid during the year
   for:
     Interest                                                                       $   1,025          $     999
     Income taxes                                                                          51                 81
                                                  
</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. (the "Company") 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 federal  chartered mutual savings bank to a federal  chartered stock
     savings bank, pursuant to its Plan of Conversion.  The Company 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 complete (see Note 4). The financial  statements of the Bank
     are presented on a consolidated basis with those of the Company.

     The consolidated  financial statements included herein are for the Company,
     the Bank and the Bank's  wholly owned  subsidiary,  SFS,  Inc.  (SFS).  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 six month period ended
     June 30, 1997 is not  necessarily  indicative  of the results  which may be
     expected for the entire year.

     These consolidated  financial  statements should 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).







                                       6
<PAGE>

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

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

     Earnings per share  amounts for the three and six month  periods ended June
     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 been  presented  for the
     three and six month  periods  ended June 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
     --------------------

     The Company 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, the Company 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. The Company 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 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.


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


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 the Company
     and used the funds to purchase 61,360 shares of common stock of the Company
     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 June
     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 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 Bank's
     annual  contributions  are  discretionary,  benefits payable under the ESOP
     cannot be estimated.  Compensation expenses are recognized to the extent of
     the fair value of shares committed to be released.

     For the three and six months  ending June 30, 1997,  compensation  from the
     ESOP of  approximately  $8,000 was expensed.  Compensation is recognized at
     the average fair value of the ratably released shares during the accounting
     period as the employees performed services.  At June 30, 1997, the ESOP had
     approximately 510 allocated shares and 60,850 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 June 30, 1997, the Company had total  nonperforming  loans (i.e.,  loans
     which  are  contractually  past  due 90  days  or  more)  of  approximately
     $445,000.  Nonperforming  loans were 1.16% of total loans at June 30, 1997.
     Total  nonperforming  assets as a percent of total  assets at June 30, 1997
     was .85%.


                                       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 June 30, 1997

The Company's total consolidated  assets increased by approximately $5.9 million
or 12.8% from $46.6  million at December  31, 1996 to $52.5  million at June 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 June 30,  1997.  Net loans
increased  $1.3  million or 3.5%.  This  increase  resulted  from the  Company's
origination of loans to satisfy  increased demand for fixed rate mortgage loans.
Interest  earning  deposits  increased by $4.8 million mainly as a result of the
net proceeds  raised in the initial public  offering being invested in overnight
accounts and short-term certificates of deposits.

Consistent with its historical lending practices, virtually all of the Company's
loan  portfolio  at June 30, 1997  consisted  primarily of fixed rate loans with
maturities  up to fifteen  (15) years.  Consequently,  the Company is exposed to
interest  rate risk in a rising  interest  rate  environment.  The  Company  has
historically  accepted  this  risk in  light  of its  high  capital  levels  and
available liquid assets. See "Liquidity and Capital Resources" discussion below.

Deposits  decreased  approximately  $740,000  or 1.8%,  from  $40.8  million  at
December 31, 1996 to $40.0  million at June 30,  1997.  The decrease in deposits
was primarily  attributable to  approximately  $1.9 million of withdraws made to
purchase  stock  in  the  recent  public  offering  offset  by new  deposits  of
approximately  $1.2  million.  The Company also repaid  $800,000 in Federal Home
Loan Bank advances.

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

Net Income.  Net income  increased  $23,000 or 19.8% from $116,000 for the three
months ended June 30, 1996 to $139,000 for the three months ended June 30, 1997.
The increase  was  primarily  the result of an increase in net  interest  income
offset by an increase in non-interest  expense. The return on average assets was
1.09% for the three  months ended June 30, 1997  compared to 1.02% in 1996.


                                       9
<PAGE>



Net  Interest  Income.  Net  interest  income  increased  $54,000  or 14.1% from
$384,000  for the three  months  ended June 30, 1996 to  $438,000  for the three
months ended June 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 $2.4  million or 61% for the
three  months ended June 30, 1997 as compared to 1996.  This was  primarily as a
result of the  proceeds  from the  stock  offering.  The  interest  rate  spread
increased  from 2.93% for three  months  ending  June 30,  1996 to 2.95% for the
three months ending June 30, 1997.

Interest Income.  Total interest income increased  $79,000 from $870,000 for the
three months ended June 30, 1996 to $949,000 for the three months ended June 30,
1996.  Interest on loans  increased  $60,000,  or 8.2% and interest on overnight
funds  increase  by  $31,000.   Interest  on  investments  and   mortgage-backed
securities declined in aggregate by $12,000 as the portfolio declined.

Interest Expense. Interest expense increased $25,000 from $486,000 for the three
months ended June 30, 1996 to $511,000 for the three months ended June 30, 1997.
The increase for the three months  ending June 30, 1997 was the result of a $2.6
million  increase in the average deposit  outstanding  offset by a 6 basis point
decrease in the average cost of funds.

Provision for Loan Losses. The provision for loan losses for three month periods
ended June 30,  1996 was $7,000 and no  provision  was  recorded  for the period
ending June 30, 1997.  For the period  ended June 30, 1997, a provision  was not
considered  necessary  as the  allowance  for loan  loss  was at a level  deemed
adequate by management to provide for losses in the loan  portfolio.  Management
determined  not to increase the level of the  allowance for loan losses based on
its  analysis of (I) the  Comapny's  past loan loss  experience,  (ii) known and
inherent risks in the Company's loan  portfolio,  (iii) adverse  situations that
may affect the  borrower's  ability to repay,  (iv) the  estimated  value of any
underlying  collateral,  and (v) current economic  conditions.  The ratio of the
loss allowance to non-performing loans at June 30, 1997 was 68.3%.

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.

Non-Interest  Expense.  Non-interest  expense increased by $22,000 from $231,000
for the three  months  ending June 30, 1996 to  $253,000  for 1997.  The primary
reason for the  increase  was as a result of  additional  compensation  cost and
other  non-interest  expenses  offset by  reduced  deposit  insurance  premiums.
Additional  operating  expense as a public  company and the effect of  increased
compensation  from the recognition of allocated ESOP shares at fair market value
were recognized during the quarter ending June 30, 1997. The Company  recognized
$8,000 of compensation expense related to the Employee Stock Ownership Plan. Net
occupancy and data processing 


                                       10

<PAGE>


remained  relatively  stable.  Non-interest  expense  could  increase  in future
periods  if  certain  contemplated  benefit  plans are  adopted  by the board of
directors and approved by the stockholders.

Income  Taxes.  Income tax expense for the three months ending June 30, 1997 was
$82,000  compared to $65,000 for the same period in 1996.  The  increase was the
result of pre-tax income increasing by $40,000.

Comparison of Results of  Operations  for the Six Months Ended June 30, 1996 and
1997

Net Income.  Net income  increased  $66,000 or 30.3% from  $218,000  for the six
months ended June 30, 1996 to $284,000 for the six months ended June 30, 1997.

Net  Interest  Income.  Net  interest  income  increased  $116,000 or 16.0% from
$723,000  for the six months  ended June 30, 1996 to $839,000 for the six months
ended June 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 $1.5 million or 39% for the six months ended June
30, 1997 as compared to 1996. The interest rate spread  increased from 2.79% for
six months  ending  June 30,  1996 to 3.02% for the six months  ending  June 30,
1997.

Interest  Income.   Total  interest  income  increased  $127,000  or  7.4%  from
$1,717,000  for the six months  ended June 30,  1996 to  $1,844,000  for the six
months  ended June 30,  1997.  Interest on loans  increased  $140,000,  or 9.8%.
Interest on overnight  funds  invested by the Company also increased by $15,000.
Interest on investments and mortgage-backed securities in aggregate decreased by
$28,000 as the portfolio matured and principal payments were received.

Interest  Expense.  Interest expense increased $11,000 from $994,000 for the six
months ended June 30, 1996 to $1,005,000 for the six months ended June 30, 1997.
The  increase  for the six months  ending June 30, 1997 was the result of a $1.6
million  increase  in average  deposits  outstanding  offset by a 15 basis point
decrease in the average cost of funds.  Interest expense also increase by $3,000
for  advances  from the  Federal  Home Loan Bank which were  utilized in the six
months ending June 30, 1997.

Provision  for Loan  Losses.  The  provision  for loan  losss  for the six month
periods  ended June 30, 1996 was $15,000 and no provision for 1997 was recorded.
For the period ended June 30, 1997, a provision was not considered  necessary as
the  allowance  for loan loss was at a level deemed  adequate by  management  to
provide for losses in the loan portfolio.  Management determined not to increase
the level of the  allowance  for loan  losses  based on its  analysis of (I) the
Comapny's  past loan loss  experience,  (ii)  known  and  inherent  risks in the
Company's  loan  portfolio,   (iii)  adverse  situations  that  may  affect  the
borrower's  ability  to  repay,  (iv)  the  estimated  value  of any  underlying
collateral, and (v) current economic conditions.


                                       11




<PAGE>



Non-Interest  Expense.  Non-interest  expense increased by $17,000 from $453,000
for the six months ending June 30, 1996 to $470,000 for 1997.  This increase was
the direct  result of  additional  compensation,  employee  benefits,  and other
non-interest  expense  during  the six  months of 1997 and was offset by reduced
deposit   insurance   premiums.   Increased   compensation  was  the  result  of
inflationary  increases  and the  recognition  of allocated  ESOP shares at fair
market  value.  During the six month period  ending June 30,  1997,  the Company
recognized  $8,000  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.  Non-interest  expense  could
increase in future periods if certain  contemplated benefit plans are adopted by
the board of directors and approved by the stockholders.

Income  Taxes.  Income tax expense  for the six months  ending June 30, 1997 was
$161,000  compared to $118,000 for the same period in 1996.  The inrease was the
result of pre-tax income increasing by $109,000 for the six months in 1997.

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. At June 30,
1997, there were no material commitments for capital  expenditures.  Obligations
to fund  outstanding  loan  commitments  at June  30,  1997  were  approximately
$136,000.

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


                                       12
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                                
                                                                             For Capital                   Categorized as
                                            Actual                       Adequacy Purposes             "Well Capitalized"(1)
                                 ----------------------------    -----------------------------    -----------------------------
                                      Amount         Ratio             Amount         Ratio            Amount          Ratio
                                 ----------------------------    -----------------------------    -----------------------------

  As of June 30, 1997:

<S>                                 <C>            <C>               <C>            <C>               <C>              <C> 
  Total Capital
     (To risk weighted assets)        $   8,358      31.3%             $   2,137      8.00%             $   2,671       10.0%

  Tier I Capital
     (To risk weighted assets)        $   8,058      30.2%             $   1,069      4.00%             $   1,602        6.0%

  Tier I Capital
     (To total assets)                $   8,058      16.3%             $   1,482      3.00%             $   2,472        5.0%

  Tangible Capital
     (To total assets)                $   8,058      16.3%             $     741      1.50%             $   2,472        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
            June 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.


                                       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:    August 7, 1997                By /s/ Peter W. Hampton
      ---------------------               ----------------------------------
                                              Peter W. Hampton
                                              (President and Chief Executive
                                               Officer)










Date:    August 7, 1997                By /s/ Bobby Hyatt
      ---------------------               ----------------------------------
                                              Bobby Hyatt
                                              (Principal Accounting Officer)


                                       15