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 March 31, 1998

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

             For the transition period from __________ to __________

                         Commission File Number 0-22587

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


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

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

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

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

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

As of May 1, 1998, 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)
-------                                                                                                             -------
<S>                                                                                                                 <C>    
FINANCIAL INFORMATION
Item 1.
Financial Statements

Consolidated Balance Sheets-(Unaudited) as of December 31, 1997 and March 31, 1998......................................3

Consolidated Statements of Comprehensive Income - (Unaudited) for the three month periods
  ended March 31, 1997 and 1998.........................................................................................4

Consolidated Statements of Cash Flows - (Unaudited) for the three months
  ended March 31, 1997 and 1998.........................................................................................5

Notes to (Unaudited) Consolidated Financial Statements................................................................6-7

Item 2.
Management's Discussion and Analysis of Financial Condition
  and Results of Operations..........................................................................................8-10

PART II.
--------

OTHER INFORMATION

Item 1.  Legal Proceedings.............................................................................................11

Item 2.  Changes in Securities.........................................................................................11

Item 3.  Defaults Upon Senior Securities...............................................................................11

Item 4.  Submission of Matters to a Vote of Security Holders...........................................................11

Item 5.  Other Information.............................................................................................11

Item 6.  Exhibits and Reports on Form 8-K..............................................................................11

Signatures.............................................................................................................12
</TABLE>

                                       2
<PAGE>


                        SFB BANCORP, INC. AND SUBSIDIARY

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

<TABLE>
<CAPTION>
                                                                  December 31,              March 31,
                                                                  ------------             -----------
           Assets                                                     1997                     1998
           ------                                                  --------                  --------
<S>                                                                <C>                       <C>     
Cash on hand                                                       $    453                  $    585
Interest earning deposits                                             4,139                     4,386
Investment securities:                                                                     
   Held to maturity (market value of $526                                                  
     in 1997 and $531 in 1998)                                          577                       583
   Available for sale (amortized cost of $1,149                                            
     in 1997 and $1,300 in 1998)                                      1,148                     1,295
Loans receivable, net                                                40,648                    40,082
Mortgage-backed securities:                                                                
   Available for sale (amortized cost of $5,117 in                                         
     1997 and $4,877 in 1998)                                         5,030                     4,806
Premises and equipment, net                                             575                       567
Federal Home Loan Bank stock                                            423                       431
Accrued interest receivable                                             316                       308
Prepaid expenses and other assets                                        28                        60
                                                                   --------                  --------
         Total assets                                              $ 53,337                  $ 53,103
                                                                   ========                  ========
                                                                                           
   Liabilities and Stockholders' Equity                                                    
   ------------------------------------                                                    
Deposits                                                           $ 40,587                  $ 40,069
Federal Home Loan Bank advances                                        --                        --
Advance payments by borrowers for taxes and insurance                   199                       341
Accrued expenses and other liabilities                                  144                       164
Income taxes payable:                                                                      
   Current                                                              164                       102
   Deferred                                                              62                        54
                                                                   --------                  --------
         Total liabilities                                           41,156                    40,730
                                                                   --------                  --------
                                                                                           
                                                                                           
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 )                             77                        77
   Paid-in capital                                                    7,336                     7,345
   Retained earnings, substantially restricted                        5,373                     5,533
   Accumulated other comprehensive income                               (53)                      (45)
   Unearned compensation:                                                                  
     Employee stock ownership plan                                     (552)                     (537)
                                                                   --------                  --------
                                                                                           
         Total stockholders' equity                                  12,181                    12,373
                                                                   --------                  --------
                                                                                           
         Total liabilities and stockholders' equity                $ 53,337                  $ 53,103
                                                                   ========                  ========
</TABLE>                                                                       
                                                                             
                                                                             
                   The accompanying notes are an integral part
                   of these consolidated inancial 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
                                                                         March 31,
                                                                ---------------------------
                                                                    1997             1998
                                                                ------------    -----------
Interest income:
<S>                                                              <C>            <C>        
   Loans                                                         $       779    $       834
   Mortgage-backed securities                                             83             69
   Investments                                                            24             31
   Interest earning deposits                                               9             53
                                                                 -----------    -----------
         Total interest income                                           895            987
                                                                 -----------    -----------
Interest expense:
   Deposits                                                              491            481
   Federal Home Loan Bank advances                                         3           --
                                                                 -----------    -----------
         Total interest expense                                          494            481
                                                                 -----------    -----------
         Net interest income                                             401            506

Provision for loan losses                                               --                8
                                                                ------------    -----------
         Net interest income after provision
           for loan losses                                               401            498
                                                                ------------    -----------
Non-interest income:
   Loan fees and service charges                                          35             37
   Other                                                                   5              3
                                                                ------------    -----------
         Total non-interest income                                        40             40
                                                                ------------    -----------
Non-interest expenses:
   Compensation                                                          118            117
   Employee benefits                                                      16             32
   Net occupancy expense                                                  16             19
   Deposit insurance premiums                                              2              6
   Data processing                                                        19             20
   Other                                                                  46             90
                                                                 -----------    -----------
         Total non-interest expenses                                     217            284
                                                                 -----------    -----------
         Income  before income taxes                                     224            254

Income tax expense                                                        79             94
                                                                 -----------    -----------
         Net income                                                      145            160

Other comprehensive income:
   Net unrealized gains (losses) on securities available
     for sale net of income taxes of $10 and $5,
     respectively                                                        (10)             8
                                                                 -----------    -----------
         Comprehensive Income                                    $       135    $       168
                                                                 ===========    ===========

Weighted average common shares outstanding:                              N/A            712
Basis net income per share                                               N/A    $       .22
</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>
                                                                            Three Months Ended
                                                                                 March 31,
                                                                       ------------------------------
                                                                            1997             1998            
                                                                            ----             ----            
<S>                                                                   <C>               <C>      
Operating activities:
   Net income                                                          $    145           $   160
   Adjustments to reconcile net income  to net cash provided
     by operating activities:
     Depreciation                                                            12                13
     Provision for loan losses                                                -                 8
     Increase in reserve for uncollected interest                             2                 7
     Deferred income taxes (benefit)                                          -               (13)
     Net increase (decrease) in deferred loan fees                          (17)                2
     Accretion of discounts on investment securities, net                    (5)               (6)
     Amortization of premiums on mortgage-backed securities                   4                 3
     Amortization of unearned compensation                                    -                24
     FHLB stock dividends                                                    (7)               (8)
     (Increase) decrease in other assets                                    (22)              (32)
     (Increase) decrease in accrued interest receivable                       -                 1
     Increase (decrease) in accrued expenses and other liabilities           26                20
     Increase  (decrease) in current income taxes payable                    71               (62)
                                                                       --------           -------
         Net cash provided by operating activities                          209               117
                                                                       --------           -------

Investing activities:
   Purchase of investment securities available for sale                       -            (1,050)
   Maturities of investment securities available for sale                     -               900
   Principal payments on mortgage-backed securities
     available for sale                                                     154               237
   Net (increase) decrease in loans                                        (358)              556
   Purchase of premises and equipment                                        (6)               (5)
                                                                       --------           -------
         Net cash provided (used) by investing activities                  (210)              638
                                                                       --------           -------
Financing activities:
   Net increase (decrease) in deposits                                      926              (518)
   Increase (decrease) in advance payments by borrowers
     for taxes and insurance                                                143               142
   Repayment of FHLB advances                                              (800)                -
   Payment of accrued conversion cost                                       (81)                -
                                                                       --------           -------
         Net cash provided (used) by financing activities                   188              (376)
                                                                       --------           -------
         Increase (decrease) in cash and cash equivalents                   187               379

Cash and cash equivalents at beginning of period                          1,414             4,592
                                                                       --------           -------
Cash and cash equivalents at end of period                            $   1,601         $   4,971
                                                                      =========         =========

Supplemental disclosures of cash flow information:
   Cash paid during the year for:
     Interest                                                         $     491         $     478
     Income taxes                                                             7               168

Noncash investing transactions:
     Unrealized gain (loss) on securities  available for sale,
       net of deferred tax liability                                        (10)                8
</TABLE>

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

                                       5

<PAGE>




                                SFB BANCORP, INC.
                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements
                                   (Unaudited)



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

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

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

2.   Basis of Preparation
     --------------------

     The accompanying  unaudited consolidated financial statements were prepared
     in  accordance  with  instructions  for Form 10-QSB and  therefore,  do not
     include  all  disclosures  necessary  for a  complete  presentation  of the
     consolidated  balance  sheets,  consolidated  statements  of  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 income for the three month period ended
     March 31, 1998 is not  necessarily  indicative  of the results which may be
     expected for the entire year.

     It is suggested  that these  consolidated  financial  statements be read in
     conjunction with the audited  consolidated  financial  statements and notes
     thereto  for the  Company  for the year ended  December  31, 1997 which are
     included in the Form 10-KSB by reference (file no. 0-22587).

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

     Basic  earnings per share amount for the three month period ended March 31,
     1998 are based on the average number of shares  outstanding  throughout the
     period. No comparative amount has been presented for the three month period
     ended  March 31,  1997,  because no shares  were

                                       6
<PAGE>

     outstanding during that period.  Unallocated ESOP shares are not considered
     as  outstanding  for  purposes  of this  calculation.  There is no dilutive
     effect on earnings  per share for the three month  period  ending March 31,
     1998.

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

     For the three months  ending March 31,  1998,  compensation  related to the
     ESOP of approximately  $24,000 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 March 31, 1998, the ESOP had
     approximately 7,669 allocated shares and 53,691 unallocated shares.

5.   Asset Quality
     -------------

     The   following   table  sets  forth   information   regarding  the  Bank's
     nonperforming  loans (i.e.,  loans which are contractually past due 90 days
     or more) at December 31, 1997 and March 31, 1998,  respectively.  As of the
     dates  indicated,  the Bank  had no  loans  categorized  as  troubled  debt
     restructuring within the meaning of SFAS 15.

                                                 December 31,         March 31,
                                                     1997                1998
                                                     ----                ----

                                                   (Dollars in Thousands)

           Nonaccrual loans                      $    209              $   242
           Repossessed real estate                      -                    -
                                                 --------              -------
           Total nonperforming assets            $    209              $   242
                                                 ========              =======

           Nonperforming loans to net loans           .51%                .60%
           Nonperforming assets to total assets       .39%                .46%

 
                                      7

<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, 1997 and March 31, 1998

The Company's total consolidated  assets decreased by approximately  $234,000 or
 .44% from $53.3 million at December 31, 1997 to $53.1 million at March 31, 1998.
The decrease in assets for the period was primarily  attributable  to a decrease
in net loans outstanding as repayments exceeded new loan originations, offset by
an increase in cash and interest-earning assets and operating profits.

The composition of the Company's balance sheet has not been materially  affected
by market  conditions  between  December 31, 1997 and March 31, 1998.  Net loans
decreased $566,000 or 1.4%. The decrease was mainly  attributable to normal loan
attrition,  and  decreased  demand for the Company's  loan  products  during the
period.  Interest-earning deposits increased by approximately $247,000 primarily
as a result of loan  repayments,  and  subsequent  investment of excess funds in
overnight  accounts and short-term  certificates of deposits at the Federal Home
Loan Bank of Cincinnati.

Deposits decreased approximately $518,000 or 1.3% from $40.6 million at December
31, 1997 to $40.1  million at March 31, 1998.  The overall  decrease in deposits
was primarily  attributable to customer  withdrawals  exceeding new deposits and
estate withdrawals.  The Company's  management  regularly monitors deposit rates
within its market and competes with other  institutions  for the  attraction and
retention  of deposits  based  primarily  on its need for funds.  The  Company's
primary  market is very  competitive  and the  Company's  ability to attract and
retain  deposits is  predominantly  dependent upon the general rate  environment
with its market.

Comparison  of Results of  Operations  for the Three Months Ended March 31, 1997
and 1998

Net Income.  Net income increased  $15,000 or 10.3% for the for the three months
ended March 31, 1998 to $160,000 compared to $145,000 for the three months ended
March 31,  1997.  The increase  was  primarily  the result of an increase in net
interest  income,  offset by an increase in non-interest  expense and additional
income taxes.  The return on average assets was 1.21% for the three months ended
March 31, 1998.

Net  Interest  Income.  Net  interest  income  increased  $105,000 or 26.2% from
$401,000  for the three  months  ended March 31, 1997 to $506,000  for the three
months ended March 31, 1998. The  improvement in net interest  income  primarily
reflects   an  increase  in  average   interest-earning   assets 

                                       8
<PAGE>

over  average  interest-bearing  liabilities  for the Company of $7.4 million or
175% for the three months ended March 31, 1998 as compared to 1997  primarily as
a result of the  proceeds  from the stock  offering.  The  interest  rate spread
however decreased from 3.09% for three months ending March 31, 1997 to 2.85% for
the three months ending March 31, 1998.

Interest Income.  Total interest income increased  $92,000 from $895,000 for the
three  months  ended March 31, 1997 to $987,000 for the three months ended March
31, 1998, as average interest-earnings assets increased approximately $6 million
from $46 million at March 31, 1997 to $52 million at March 31,  1998,  which was
offset  by  a  17  basis  point   decrease  in  the  average  yield  on  average
interest-earning  assets.  Interest  on  loans  increased  $55,000  or 7.1%  and
interest  on  interest-earning   deposits  increased  by  $44,000.  Interest  on
investments and  mortgage-backed  securities  declined in aggregate by $7,000 as
the  portfolio  continues to mature and  principal  payments are  received.  The
Company has  utilized the  principal  payments  received on its  mortgage-backed
securities to fund loan demand,  to purchase  investment  securities and to fund
deposit withdrawals.

Interest Expense. Interest expense decreased $13,000 from $494,000 for the three
months  ended March 31, 1997 to $481,000  for the three  months  ended March 31,
1998.  The decrease for the three months ending March 31, 1998 was primarily the
result  of a  decrease  of $1.6  million  in the  average  balance  of  deposits
outstanding  for the three  month  period  in 1998,  compared  to 1997,  and the
repayment of FHLB  advances,  offset by a 8 basis point  increase in the average
cost of funds.

Provision for Loan Losses. The provision for loan losses for three month periods
ended March 31, 1998 was $8,000 and none for the period  ending  March 31, 1997.
Management  regularly performs an analysis to quantify the inherent risk of loss
in its portfolio. At March 31, 1998 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 March
31, 1998 was  127.69% and  nonperforming  loans  represented  only .46% of total
consolidated assets.

Non-Interest Income. Non-interest income continues to be an insignificant source
of income for the Company. The income is produced by fees on new loan production
and service fees on other products and services.  Total non-interest  income was
$40,000 for the three months ending March 31, 1998 and 1997.

Non-Interest  Expense.  Non-interest  expense increased by $67,000 from $217,000
for the three months  ending  March 31, 1997 to $284,000 for 1998.  The increase
was primarily the result of increased  employee  benefit expenses of $16,000 and
$44,000 of other expenses. The $16,000 increase in employee benefit expenses was
attributable  to the  recognition of ESOP  compensation  expense.  For financial
reporting  purposes,  ESOP shares are recorded at their fair market value as the
shares are allocated.  The increase in other expenses was mainly attributable to
an increase of $35,000 in legal and  accounting  fees and other expenses paid by
the  Company  for costs  incidental  to the  preparation  and filing of year end
regulatory  reports and  documents  related to the Company's  annual  meeting of
shareholders.  Compensation, net occupancy, deposit insurance premiums, and data
processing expenses remained relatively stable during both three month periods.


                                       9
<PAGE>

Income  Taxes.  Income tax expense for the three  months  ending  March 31, 1998
increased  $15,000 to $94,000  compared to the same period in 1996. The increase
was  the  result  of  pre-tax  income   increasing  by  $30,000  and  additional
nondeductible  expenses associated with the ESOP. The effective tax rate for the
three  months ended March 31, 1998 was 37% compared to 35.3% for the same period
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 March 31,
1998 there were no material commitments for capital expenditures. Obligations to
fund outstanding loan commitments at March 31, 1998 were approximately $651,000.

At  March  31,  1998  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
March 31, 1998,  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 March 31, 1998.  The Bank
had the following capital ratios at March 31, 1998:

<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 March 31, 1998:

     Total Capital
        (To risk weighted assets)   $    8,957       31.7%      $    2,262       8.00%     $    2,828       10.0%

     Tier I Capital
        (To risk weighted assets)   $    8,648       30.6%      $    1,131       4.00%     $    1,697        6.0%

     Tier I Capital
        (To total assets)           $    8,648       17.3%      $      848       3.00%     $    1,414        5.0%

     Tangible Capital
        (To total assets)           $    8,648       17.3%      $      424       1.50%     $    1,414        5.0%

</TABLE>


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

                                       10


<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
            March 31, 1998, there were no legal proceedings to which the Company
            or any subsidiary was a party,  or to which of any of their property
            was  subject,  which  were  expected  by  management  to result in a
            material loss.

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

            None

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

            None

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

            None

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

            None

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

(a)       3(i)  Charter of SFB Bancorp, Inc.*

          3(ii) Bylaws of SFB Bancorp, Inc. *

          4     Specimen of Stock Certificate *

          10    Employment Agreement with Peter W. Hampton  *

          27    Financial Data Schedule ( Electronic filing only)

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

(b)            Reports on Form 8-K

                      None.


                                      11
<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:     May 11, 1998                    By /s/ Peter W. Hampton
          --------------------------          ----------------------------------
                                                  Peter W. Hampton
                                                  (President and Chief Executive
                                                  Officer)








Date:     May 11, 1998                   By /s/ Bobby Hyatt
          --------------------------          ----------------------------------
                                                  Bobby Hyatt
                                                  (Principal Accounting Officer)