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, 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 August 2,  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
               ----------               --------
<PAGE>

                                SFB BANCORP, INC.
                                 AND SUBSIDIARY

                             Elizabethton, Tennessee

                                      Index

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

FINANCIAL INFORMATION

Item 1.
Financial Statements

<S>                                                                                     <C>
Consolidated Balance Sheets-(Unaudited) as of December 31, 2000 and June 30, 2001............3

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

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

Consolidated Statements of Cash Flows - (Unaudited) for the six months
  ended June 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...................................................15

Signatures..................................................................................16

</TABLE>

<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets
                                   (Unaudited)
                        (in thousands, except share data)
<TABLE>
<CAPTION>
                                                                  December 31,   June 30,
                                                                  ------------  ---------
           Assets                                                     2000         2001
           ------                                                  ---------    ---------
<S>                                                              <C>          <C>
Cash on hand                                                       $     581    $     902
Interest earning deposits                                              1,540        5,545
Investment securities:
   Held to maturity (market value of $841
     in 2000 and $757 in 2001)                                           870          811
    Available for sale                                                 1,621            -
Loans receivable, net                                                 46,814       46,875
Mortgage-backed securities:
     Available for sale                                                1,659        1,521
Premises and equipment, net                                              957          956
Federal Home Loan Bank stock, at cost                                    524          542
Accrued interest receivable                                              355          265
Other assets                                                              47           88
                                                                   ---------    ---------
         Total assets                                              $  54,968    $  57,505
                                                                   =========    =========

   Liabilities and Stockholders' Equity
   ------------------------------------
Deposits                                                           $  42,252    $  45,334
Federal Home Loan Bank advances                                        1,000         --
Advance payments by borrowers for taxes and insurance                    222          442
Accrued expenses and other liabilities                                   128          161
Income taxes:
  Current                                                                 18            8
  Deferred                                                               129          141
                                                                   ---------    ---------
         Total liabilities                                            43,749       46,086
                                                                   ---------    ---------
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, 2001 and June 30, 2001, respectively)                   77           77
   Paid-in capital                                                     7,392        7,400
   Retained earnings, substantially restricted                         6,539        6,702
   Treasury stock at cost (178,405 shares at December 31, 2000
     and 184,005 at June 30, 2001)                                    (2,245)      (2,315)
   Accumulated other comprehensive income                                (57)         (39)
   Unearned compensation:
     Employee stock ownership plan                                      (348)        (313)
     Restricted stock plan                                              (139)         (93)
                                                                   ---------    ---------
         Total stockholders' equity                                   11,219       11,419
                                                                   ---------    ---------
         Total liabilities and stockholders' equity                $  54,968    $  57,505
                                                                   =========    =========
</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 Six Months Ended
                                                       June 30,                      June 30,
                                               --------------------------    -------------------------
                                                   2000          2001           2000          2001
                                               -----------   ------------    ----------    -----------
<S>                                           <C>            <C>           <C>            <C>
Interest income:
   Loans                                       $       899    $       960   $     1,780    $     1,914
   Mortgage-backed securities                           25             22            56             48
   Investments                                          50             29            99             64
   Interest earning deposits                             8             36            12             62
                                               -----------    -----------   -----------    -----------
         Total interest income                         982          1,047         1,947          2,088
                                               -----------    -----------   -----------    -----------
Interest expense:
   Deposits                                            488            570           944          1,142
   FHLB Advances                                         8           --              15              2
                                               -----------    -----------   -----------    -----------
         Total interest expense                        496            570           959          1,144
                                               -----------    -----------   -----------    -----------
         Net interest income                           486            477           988            944

Provision for loan losses                                9              9            18             18
                                               -----------    -----------   -----------    -----------
         Net interest income after provision
           for loan losses                             477            468           970            926

Non-interest income:
   Loan fees and service charges                        43             50            94             96
   Other                                                 3              2             6              6
                                               -----------    -----------   -----------    -----------
         Total non-interest income                      46             52           100            102
                                               -----------    -----------   -----------    -----------
Non-interest expenses:
   Compensation                                        157            170           336            338
   Employee benefits                                    29             33            64             65
   Net occupancy expense                                33             31            65             62
   Deposit insurance premiums                            2              2             4              4
   Data processing                                      28             32            60             66
   Other                                                66             70           134            139
                                               -----------    -----------   -----------    -----------
         Total non-interest expenses                   315            338           663            674
                                               -----------    -----------   -----------    -----------
         Income  before income taxes                   208            182           407            354

Income tax expense                                      77             71           150            136
                                               -----------    -----------   -----------    -----------
         Net income                            $       131    $       111   $       257    $       218

Other comprehensive income (loss)                       (1)             7           (21)            18
                                               -----------    -----------   -----------    -----------
         Comprehensive income                  $       130    $      118    $       236    $      236
                                               ===========    ==========    ===========    ==========
Earnings per share
   Basic                                       $       .23    $      .20    $       .43    $      .39
   Diluted                                     $       .23    $      .20    $       .43    $      .39
</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>
                                                                        Accumu
                                                                        lated
                                                                        Other             Unearned
                                                                        Compre-         Compensation
                           Common     Paid-In   Retained    Treasury    hensive     --------------------
                           Stock      Capital    Income      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 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                       -          -        218           -           -           -           -         218

Other comprehensive
  income                         -          -          -           -          18           -           -          18

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

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

Compensation earned              -          8          -           -           -          35          46          89
                          --------   --------   --------    --------    --------    --------    --------    --------
Balance at
  June 30, 2001           $     77   $  7,400   $  6,702    $ (2,315)   $    (39)   $   (313)   $    (93)   $ 11,419
                          ========   ========   ========    ========    ========    ========    ========    ========
</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>
                                                                                   Six Months Ended
                                                                                       June 30,
                                                                                  -------------------
                                                                                     2000       2001
                                                                                   -------    -------
<S>                                                                              <C>        <C>
Operating activities:
   Net income                                                                      $   257    $   218
   Adjustments to reconcile net income to net cash provided by
     operating activities:
     Depreciation                                                                       47         45
     Provision for loan losses                                                          18         18
     Decrease in reserve for uncollected interest                                        -          -
     Net increase (decrease) in deferred loan fees                                       4        (16)
     Accretion of discounts on investment securities, net                              (13)       (14)
     Amortization of premiums on mortgage-backed securities                              5          3
     Amortization of unearned compensation                                              88         89
     FHLB stock dividends                                                              (17)       (18)
     (Increase) decrease in other assets                                                25        (41)
     (Increase) decrease in accrued interest receivable                                (28)        90
     Increase in accrued expenses and other liabilities                                 18         33
     Increase in current income taxes                                                   47        (10)
                                                                                   -------    -------
         Net cash provided by operating activities                                     451        397
                                                                                   -------    -------
Investing activities:
   Purchase of investment securities held to maturity                                    -          -
   Maturities of investment securities held to maturity                                 69         72
   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                                                                326        162
   Net increase in loans                                                            (1,676)       (63)
   Purchase of premises and equipment                                                  (21)       (44)
                                                                                   -------    -------
         Net cash (used) provided by investing activities                           (1,302)     1,752
                                                                                   -------    -------
Financing activities:
   Net increase in deposits                                                            228      3,082
   Increase in advance payments by borrowers for taxes
     and insurance                                                                     254        220
   Federal Home Loan Bank Advances                                                     100          -
   Repayment of Federal Home Loan Bank Advances                                          -     (1,000)
   Treasury stock purchased                                                           (877)       (70)
   Payment of cash dividend                                                            (56)       (55)
                                                                                   -------    -------
         Net cash (used) provided by financing activities                             (351)     2,177
                                                                                   -------    -------
         (Decrease) increase in cash and cash equivalents                           (1,202)     4,326

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

Cash and cash equivalents at end of period                                         $   960    $ 6,447
                                                                                   =======    =======

Supplemental  disclosures  of cash flow  information:
Cash paid during the year for:
     Interest                                                                      $   954    $ 1,136
     Income taxes                                                                       29        145
                                                                                   =======    =======

Noncash transactions:
   Unrealized gains (losses) on securities and mortgage-backed
     securities available for sale, net of deferred taxes                          $   (21)   $    18
</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)


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 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 six month
     period  ended June 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
     six months ending June 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,
                                                ---------------------------------------------------
                                                      June 30, 2000               June 30, 2001
                                                --------------------------- -----------------------
                                                   Income        Shares        Income        Shares
                                                   ------        ------        ------        ------
<S>                                                 <C>        <C>           <C>              <C>
Net Income                                          $131                        $111
BASIC  EPS
  Income available to common stockholders           $131           578          $111            551
  Per share amount                                  $.23                        $.20
Effect of Dilutive Securities                       $.00                        $.00
DILUTIVE EPS
  Income available to common stockholders           $131           578          $111            551
  Per share amount                                  $.23                        $.20
</TABLE>

<TABLE>
<CAPTION>
                                                                  Six months ended,
                                                ---------------------------------------------------
                                                      June 30, 2000               June 30, 2001
                                                --------------------------- -----------------------
                                                   Income        Shares        Income        Shares
                                                   ------        ------        ------        ------
<S>                                                 <C>        <C>           <C>              <C>
Net Income                                          $257                        $218
BASIC  EPS
  Income available to common stockholders           $257           594          $218            551
  Per share amount                                  $.43                        $.39
Effect of Dilutive Securities                       $.00                        $.00
DILUTIVE EPS
  Income available to common stockholders           $257           594          $218            551
  Per share amount                                  $.43                        $.39
</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  June  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,   June 30,
                                                     2000         2001
                                                     ----         ----
                                                   (Dollars in Thousands)

         Nonaccrual loans                           $ 192         $ 177
         Repossessed real estate                        -             -
                                                    -----         -----
         Total nonperforming assets                 $ 192         $ 177
                                                    =====         =====

         Nonperforming loans to net loans            0.41%         0.38%
         Nonperforming assets to total assets        0.35%         0.31%

                                       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  which 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 consolidated assets increased by approximately $2.5 million,
or 4.6% from $55.0  million at December 31, 2000,  to $57.5  million at June 30,
2001. The increase in assets for 2001 was primarily due to an  approximate  $4.3
million  increase in cash and  interest-earning  assets.  Deposits  increased to
$45.3 million at June 30, 2001. The $3.1 million increase in deposits  primarily
reflects a $2.4 million increase in certificate of deposits balance.

Total cash and interest-earning deposits increased approximately $4.3 million to
$6.5  million  at June 30,  2001.  The  increase  in cash  and  interest-earning
deposits  reflects  the $3.1  million  increase in deposits  and a $1.6  million
decrease in investment  securities.  The Company anticipates  utilizing the cash
and interest-earning deposit balances to fund future loan demand.

Comparison of Results of Operations for the Three and Six Months Ending June 30,
2000 and 2001

Net Income.  Net income for the three  months  ending June 30,  2001,  decreased
$20,000,  or 15.3%,  from  $131,000 in 2000,  to  $111,000  in 2001.  Net income
decreased  $39,000,  or 15.2%,  to $218,000  for the six months  ending June 30,
2001,  from  $257,000  in 2000.  The decline in net income for the three and six
months ended June 30, 2001 as compared to the same periods in 2000,  reflect the
decline in net interest  income and the increase in non-interest  expenses.  For
the current three and six month  periods,  net interest  income  continued to be
squeezed due to the continued  effect of the higher  short-term  interest  rates
paid on  certificates  of  deposits  during the 2000  period.  The  increase  in
non-interest  expenses  for the current  three and six month  periods  reflected
normal operating expense increases and the increase in compensation  expense for
the current three month period.

                                       9
<PAGE>

Net Interest Income. Net interest income decreased $9,000, from $486,000 for the
three months  ending June 30, 2000, to $477,000 for the three months ending June
30, 2001.  Net interest  income  decreased  $44,000,  from  $988,000 for the six
months  ending June 30,  2000,  to $944,000  for the six months  ending June 30,
2001.  The decrease in net  interest  income for the three month period in 2001,
primarily reflects a 31 basis point decrease in the interest rate spread in 2001
to 2.56%,  as  compared  to the same  period in 2000.  The net  interest  margin
decreased  32 basis  points  from 3.81% in 2000,  to 3.49% in 2001.  The overall
decrease  in net  interest  income  for the six  months  ending  June 30,  2001,
primarily  reflects a 36 basis point decrease in the net interest spread in 2001
to 2.55%, combined with a net decrease in average  interest-earning  assets over
average  interest-bearing  liabilities of approximately $510,000, as compared to
the same period in 2000.  The net interest  margin  decreased 39 basis points to
3.51% for the six months ending June 30, 2001, compared to 2000.

Interest Income.  Interest income increased $65,000, from $982,000 for the three
months ending June 30, 2000, to approximately  $1.1 million for the three months
ending June 30, 2001.  The increase was  attributable  to an increase in average
interest-earning  assets of  approximately  $3.8 million,  from $51.0 million at
June 30, 2000,  to $54.8  million at June 30, 2001,  offset by a decrease in the
average yield on  interest-earning  assets of 6 basis points, from 7.70% for the
three months ending June 30, 2000, to 7.64% for the three months ending June 30,
2001. Interest income increased $141,000, or 7.2%, to approximately $2.1 million
for the six months ending June 30, 2001, as compared to the same period in 2000.
The increase was primarily  attributable to a increase average  interest-earning
assets of  approximately  $3.3 million,  from $50.7 million at June 30, 2000, to
$54.0  million  at June  30,  2001,  and a  increase  in the  average  yield  on
interest-earning  assets of 5 basis  points,  from  7.69%  for the three  months
ending June 30, 2000, to 7.74% for the three months ending June 30, 2001.

Interest on loans  increased  $61,000 for the three months ending June 30, 2001,
as compared to the same period in 2000,  and $134,000 for the six months  ending
June 30, 2001, as compared to the same period in 2000.  The increase in interest
on loans for the three  months  ending  June 30,  2001,  primarily  reflects  an
increase of approximately $1.9 million in the average loans outstanding  balance
for 2001,  compared  to 2000,  combined  with a 17 basis  point  increase in the
average  yield on loans from 7.97% in 2000,  to 8.14% in 2001.  The  increase in
interest on loans for the six months ending June 30, 2001, primarily reflects an
increase of approximately $2.3 million in the average loans outstanding  balance
for 2001,  compared  to 2000,  combined  with a 18 basis  point  increase in the
average yield on loans from 7.96% in 2000, to 8.14% in 2001.

Interest on investment  securities decreased $21,000 for the three months ending
June 30, 2001,  as compared to the same period in 2000,  and $35,000 for the six
months  ending  June 30,  2001,  as  compared  to the same  period in 2000.  The
decrease in interest on  investments  for the three months ending June 30, 2001,
primarily  reflects a decrease  of  approximately  $1.8  million in the  average
investment  balance  for 2001,  compared  to 2000,  offset  by a 75 basis  point
increase in the average  yield on  investments  from 5.28% in 2000,  to 6.03% in
2001. The decrease in interest on investments for the six months ending June 30,
2001, primarily reflects a decrease of approximately $1.5 million in the average
investment  balance  for 2001,  compared  to 2000,  offset  by a 54 basis  point
increase in the average  yield on  investments  from 5.28% in 2000,  to 5.82% in
2001.

                                       10
<PAGE>

Interest on  interest-earning  deposits  increased  $28,000 for the three months
ending June 30,  2001,  as compared to the same period in 2000,  and $50,000 for
the six months ending June 30, 2001, as compared to the same period in 2000. The
increase in interest on  interest-earning  deposits for the three months  ending
June 30,  2001,  primarily  reflects  an  increase  in the  average  balance  of
interest-earning  deposits  of $3.9  million  for 2001,  compared  to 2000.  The
increase in interest on interest-earning deposits for the six months ending June
30,   2000,   primarily   reflects  a  increase  in  the   average   balance  of
interest-earning deposits of $2.8 million for 2001, compared to 2000.

Interest on  mortgage-backed  securities  decreased  $3,000 for the three months
ending June 30, 2001, as compared to the same period in 2000, and $8,000 for the
six months  ending June 30, 2001, as compared to the same period in 2000, as the
portfolio continued to pay down principal and those funds were invested in other
earning assets.

Interest  Expense.  Interest expense  increased  $74,000,  from $496,000 for the
three months  ending June 30, 2000, to $570,000 for the three months ending June
30, 2001. Interest expense increased $185,000,  from $959,000 for the six months
ending June 30, 2000,  to  approximately  $1.1 million for the six months ending
June 30, 2001. The increase for the three months ending June 30, 2001,  compared
to 2000,  was primarily the result of an  approximate  $3.7 million  increase in
average balance of interest-bearing liabilities,  combined with a 26 basis point
increase in the average cost of funds in 2001 to 5.09%.  The increase in average
balance of  interest-bearing  liabilities  for the three months  ending June 30,
2001, as compared to 2000,  was primarily due to a $3.6 million  increase in the
average balance of certificate of deposits,  from approximately $31.3 million in
2000,  to $34.9  million in the 2001  quarter.  The  increase for the six months
ending  June 30,  2001,  compared  to  2000,  was  primarily  the  result  of an
approximate  $3.8  million  increase  in  average  balance  of  interest-bearing
liabilities combined with a 42 basis point increase in the average cost of funds
in  2001  to  5.19%.  The  increase  in  average  balance  of   interest-bearing
liabilities  for the six months ending June 30, 2001,  as compared to 2000,  was
primarily due to a $3.5 million  increase in the average  balance of certificate
of deposits,  from approximately  $31.9 million in 2000, to $34.4 million in the
2001 quarter.

The  increase  in interest  expense for both the three and six month  periods in
2001,  compared to 2000,  reflects the  increase in  short-term  interest  rates
during 2000,  which forced the Company to reprice its certificate of deposits at
much higher  rates.  In the first half of 2001 the Federal  Reserve began a rate
reduction cycle. Until the higher priced certificate of deposits are repriced at
lower rates,  the Company's cost of funds could remain high as compared to prior
periods. If the Federal Reserve continues to reduce short term interest rates as
currently predicted,  the Company does not expect their interest rate margins to
significantly increase in future quarters of 2001.

Provision for Loan Losses.  The provision for loan losses was $9,000 three month
period  ending  June 30, 2000 and 2001,  respectively.  The  provision  for loan
losses was  $18,000  for the six month  period  ending  June 30,  2000 and 2001,
respectively.  The  Company's  management  routinely  performs  an  analysis  to
quantify the inherent risk of loss in its portfolio. At June 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  June  30,  2001,

                                       11
<PAGE>

was  approximately  205%, and  nonperforming  assets  represented 0.31% of total
consolidated  assets.  Nonperforming  assets  were  $177,000  at June 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 have not been provided for in its
loan loss allowance.  However, there 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.

Non-Interest Income. Non-interest income continues to be an additional 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
amounted to $52,000 and  $102,000  for the three and six months  ending June 30,
2001, respectively, and $46,000 and $100,000 for the three and six months ending
June 30, 2000, respectively.

Non-Interest  Expense.  For the three and six month  periods ended June 30, 2001
non-interest expense increased $23,000 and $11,000, respectively, as compared to
the same period in 2000.  For the three months ended June 30, 2001, the increase
was  primarily the result of a $13,000  increase in  compensation  expense.  The
increase in  compensation  expense  for the three  months  ended June 30,  2001,
compared to 2000, was attributable to the payment of dividend equivalency rights
("DER") on outstanding stock options. DERs are required to be paid within thirty
(30) days of the payment of cash  dividends  on Company  stock.  Generally,  DER
payments are made in July, however, those payments were made in June 2001.

Income Taxes.  Income tax expense for the three months ending June 30, 2001, was
$71,000, compared to $77,000 for the same period in 2000. Income tax expense for
the six months ending June 30, 2001, was $136,000,  compared to $150,000 for the
same  period in 2000.  The  decrease  for the three  and six month  periods  was
principally the result of lower pre-tax income.  The effective tax rate for both
the three and six months in 2001 was approximately 39%.

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 June  30,  2001  were  approximately
$645,000.

At  June  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 June 30, 2001, 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 June 30, 2001. The Bank had
the following capital ratios at June 30, 2001:

                                       12
<PAGE>

<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 June 30, 2001:

   Total Capital
      (To risk weighted assets)     $   10,634       30.5%      $    2,786       8.0%      $    3,482       10.0%

   Tier I Capital
      (To risk weighted assets)     $   10,271       29.5%      $    1,393       4.0%      $    2,089        6.0%

   Tier I Capital
      (To total assets)             $   10,271       18.1%      $    1,700       3.0%      $    2,834        5.0%

   Tangible Capital
      (To total assets)             $   10,271       18.1%      $      850       1.50%     $    2,834        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, 2000, 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
         ---------------------------------------------------

          The Annual Meeting of Stockholders of the Company ("Meeting") was held
          on May 17, 2001.  The results of the vote on the matters  presented at
          the Meeting were as follows:

          1.   The following  individuals were elected as directors,  each for a
               three-year term:

                                                 Vote For         Vote Withheld
                                                 --------         -------------

               John R. Crockett, Jr.              457,469             42,000

               Julian T. Caudill                  457,469             42,000

          2.   Ratification  of the appointment of Crisp Hughes Evans LLP as the
               Company's  independent audit firm was approved by stockholders by
               the following vote

               For 451,169;    Against 42,000;    Abstain 6,300

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

            None

                                       14


<PAGE>


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.



<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.



Date:    August 6, 2001            By: /s/ Peter W. Hampton
         --------------                -----------------------------------------
                                       Peter W. Hampton
                                       (President and Chief Executive Officer)





Date:   August 6, 2001             By: /s/ Bobby Hyatt
        --------------                 -----------------------------------------
                                       Bobby Hyatt
                                       (Vice President and Finance
                                        Officer)




                                       16