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, 1999

[ ]  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 May 1, 1999, there were 692,217 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>
<S>                                                                                  <C> 
PART I.                                                                                Page(s)
-------                                                                                -------

FINANCIAL INFORMATION

Item 1.
Financial Statements

Consolidated Balance Sheets-(Unaudited) as of December 31, 1998 and March 31, 1999.........3

Consolidated Statements of  Income - (Unaudited) for the three month periods
  ended March 31, 1998 and 1999............................................................4

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

Consolidated Statements of Cash Flows - (Unaudited) for the three months
  ended March 31, 1998 and 1999............................................................6

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

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

PART II.

OTHER INFORMATION

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

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

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

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

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

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

Signatures................................................................................15
</TABLE>
                                       2
<PAGE>


   SFB BANCORP, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets
                                   (Unaudited)
                        (in thousands, except share data)
<TABLE>
<CAPTION>

                                                            December 31,           March 31,
                                                            ----------------- --------------------
           Assets                                               1998                 1999
           ------                                               ----                 ----
<S>                                                       <C>                   <C>             
Cash on hand                                                $        467          $        572
Interest earning deposits                                          2,372                 3,280
Investment securities:                                                         
   Held to maturity (market value of $1,147
     In 1998 and $1,076 in 1999)                                   1,158                 1,131
   Available for sale (amortized cost of $2,325                                
     In 1998 and $2,624 in 1999)                                   2,327                 2,620
Loans receivable, net                                             40,449                40,568
Mortgage-backed securities:
   Available for sale (amortized cost of $3,544 in
     1998 and $3,106 in 1999)                                      3,502                 3,078
Premises and equipment, net                                          849                   914
Federal Home Loan Bank stock                                         454                   462
Accrued interest receivable                                          265                   270
Prepaid expenses and other assets                                     23                    41
                                                              ----------             ---------

         Total assets                                       $     51,866           $    52,936
                                                              ==========             =========
 
   Liabilities and Stockholders' Equity
Deposits                                                    $     40,106           $    40,827
Advance payments by borrowers for taxes and insurance                188                   331
Accrued expenses and other liabilities                               221                   202
Income taxes payable:                                                          
   Current                                                             -                    47
   Deferred                                                           81                    84
                                                              ----------             ---------

         Total liabilities                                        40,596                41,491
                                                              ----------             ---------


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;    694,150   
     and 692,217 outstanding at December 31, 1998 and 
     March 31, 1999, respectively )                                   77                    77
   Paid-in capital                                                 7,368                 7,373
   Retained earnings, substantially restricted                     5,732                 5,874
   Treasury  stock  at  cost  (72,850  and  74,783  
     shares  at  December 31, 1998 and March 31, 1999, 
     respectively)                                                (1,034)               (1,055)
   Accumulated other comprehensive income                            (24)                  (19)
   Unearned compensation:
     Employee stock ownership plan                                  (491)                 (474)
     Restricted stock plan                                          (358)                 (331)
                                                                ---------            ----------

         Total stockholders' equity                               11,270                11,445
                                                                --------             ---------

         Total liabilities and stockholders' equity           $   51,866           $    52,936
                                                                ========             =========

</TABLE>

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

                                       3
<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

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

                                           For Three Months Ended
                                                   March 31,
                                          -------------------------
                                               1998         1999
                                               ----         ----
Interest income:
   Loans                                  $        834  $       820
   Mortgage-backed securities                       69           43
   Investments                                      31           55
   Interest earning deposits                        53           37
                                            ----------    ---------
         Total interest income                     987          955
                                            ----------    ---------

Interest expense:
   Deposits                                        481          466
                                            ----------     --------
         Net interest income                       506          489

Provision for loan losses                            8            9
                                            ----------    ---------
         Net interest income after 
           provision for loan losses               498          480
                                            ----------    ---------

Non-interest income:
   Loan fees and service charges                    37           42
   Other                                             3            3
                                            ----------    ---------
         Total non-interest income                  40           45
                                            ----------    ---------

Non-interest expenses:
   Compensation                                    117          140
   Employee benefits                                32           32
   Net occupancy expense                            19           23
   Deposit insurance premiums                        6            6
   Data processing                                  20           25
   Other                                            90           71
                                            ----------    ---------
         Total non-interest expenses               284          297
                                            ----------    ---------

         Income  before income taxes               254          228

Income tax expense                                  94           86
                                            ----------    ---------

         Net income                        $       160   $      142
                                            ==========    =========    

Earnings per share
    Basic                                         $.22         $.22

    Diluted                                       $.22         $.22


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

                                       4
<PAGE>



                        SFB BANCORP, INC. AND SUBSIDIARY

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

<TABLE>
<CAPTION>
                                                                                          Accumulated
                                                                                            Other      Unearned Compensation
                                                       Common  Paid-In Retained Treasury Comprehensive ---------------------
                                                       Stock   Capital  Income   Stock     Income      For ESOP   For RSP    Total 
                                                       -----   -------  ------   -----     ------      --------   -------    ----- 

<S>                                                 <C>    <C>         <C>      <C>       <C>         <C>          <C>     <C>     
Balance at December 31, 1997                             77     7,336     5,373        -     (53)        (552)        -     12,181  
                                                                                                                           
Comprehensive income:                                                                                                      
   Net income                                             -         -       497        -       -            -         -        497
   Unrealized gain on securities available for sale,                                                                       
     net of income tax expense                            -         -         -        -      29            -         -         29
                                                                                                                           
Common stock purchased for RSP (30,680 shares)            -         -         -        -       -            -      (524)      (524)
                                                                                                                           
Cash dividends declared ($.20 share)                      -         -      (138)       -       -            -         -       (138)
                                                                                                                           
Treasury stock purchased (72,850 shares)                  -         -         -   (1,034)      -            -         -     (1,034)
                                                                                                                           
Compensation earned                                       -        32         -        -       -           61       166        259
                                                      -----    ------    ------  -------   -----        -----      ----    -------
                                                                                                                           
Balance at December 31, 1998                             77     7,368     5,732   (1,034)    (24)        (491)     (358)    11,270
                                                                                                                           
Comprehensive income:                                                                                                      
Net income                                                -         -       142        -       -            -         -        142
                                                                                                                           
Other Comprehensive income                                -         -         -        -       5            -         -          5
                                                                                                                           
Treasury stock purchased (1,933 shares)                   -         -         -      (21)      -            -         -        (21)
                                                                                                                           
Compensation earned                                       -         5         -        -       -           17        27         49
                                                      -----    ------    ------  -------   -----        -----     -----    -------
                                                                                                                           
Balance at March 31, 1998                            $   77 $   7,373   $ 5,874  $(1,055)  $ (19)      $ (474)    $(331)   $11,445
                                                      =====    ======    ======  =======   =====        =====     =====    =======
                                                                                                                         
</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>

                                                                Three Months Ended
                                                                     March 31,
                                                               --------------------
                                                                  1998       1999
                                                                  ----       ----
<S>                                                           <C>       <C>    
Operating activities:
   Net income                                                   $   160    $  142
   Adjustments to reconcile net income  
     to net cash  provided (used) by 
     operating activities:
     Depreciation                                                    13        17
     Provision for loan losses                                        8         9
     Increase (decrease) in reserve for uncollected interest          7         -
     Deferred income taxes (benefit)                                (13)        -
     Net increase (decrease) in deferred loan fees                    2       (10)
     Accretion of discounts on investment securities, net            (6)       (7)
     Amortization of premiums on mortgage-backed securities           3         2
     Amortization of unearned compensation                           24        49
     FHLB stock dividends                                            (8)       (8)
     (Increase) decrease in other assets                            (32)      (18)
     (Increase) decrease in accrued interest receivable               1        (5)
     Increase in accrued expenses and other liabilities              20       (19)
     Increase (decrease) in current income taxes                    (62)       47
                                                                -------- --------
         Net cash provided (used) by operating activities           117       199
                                                                -------  --------

Investing activities:
   Maturities of investment securities held to maturity               -        33
   Purchase of investment securities available for sale          (1,050)   (1,298)
   Maturities of investment securities available for sale           900     1,000
   Principal payments on mortgage-backed securities
     available for sale                                             237       436
   Net (increase) decrease in loans                                 556      (118)
   Purchase of premises and equipment                                (5)      (82)
                                                                -------  --------
         Net cash provided (used) by investing activities           638       (29)
                                                                -------  --------

Financing activities:
   Net increase (decrease) in deposits                           $ (518)    $ 721
   Increase (decrease) in advance payments by borrowers
     for taxes and insurance                                        142       143
   Treasury stock purchased                                           -       (21)
                                                                -------  --------
         Net cash provided (used) by financing activities          (376)      843
                                                                -------  --------

         Increase (decrease) in cash and cash equivalents           379     1,013

Cash and cash equivalents at beginning of period                  4,592     2,839
                                                                -------  --------

Cash and cash equivalents at end of period                      $ 4,971   $ 3,852
                                                                 ======    ======

Supplemental  disclosures  of cash flow  information:  
  Cash paid during the year for:
     Interest                                                     $ 478     $ 449
     Income taxes                                                   168        31
                                                                =======  ========

Noncash transactions:
   Unrealized gains on securities and mortgage-backed
     securities available for sale, net of deferred taxes           $ 8       $ 5

</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
                                   (Unaudited)
                         (Tabular amounts in thousands)


1.   Basis of Preparation
     --------------------
     The accompanying  unaudited consolidated financial statements were prepared
     in  accordance  with  instructions  for Form 10-QSB and  therefore,  do not
     include  all  disclosures  necessary  for a  complete  presentation  of the
     consolidated   balance   sheets,   consolidated   statements   of   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, 1999 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, 1998 which are
     included in the Form 10-KSB by reference (file no. 0-22587).

2.   Earnings Per Share
     ------------------
     Basic  earnings per common  share 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 March 1999 quarter,  but
     were not included in the  computation  of diluted EPS because  their effect
     would be anti-dilutive.


                                           March 31, 1998    March 31, 1999
                                          ----------------  ----------------
                                          Income    Shares  Income  Shares
Net Income                                 $160              $142
BASIC  EPS
  Income available to common stockholders  $160      713     $142     645
  Per share amount                         $.22              $.22
Effect of Dilutive Securities              $.00              $.00
DILUTIVE EPS
  Income available to common stockholders  $160      713     $142     645
  Per share amount                         $.22              $.22


                                       7
<PAGE>

3.   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, 1998 and March 31, 1999,  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,
                                             1998               1999
                                          ------------       -----------

Nonaccrual loans                          $      437          $      343
Repossessed real estate                            -                   -
                                           ---------           ---------
Total nonperforming assets                $      437          $      343
                                           =========           =========

Nonperforming loans to net loans                1.08%                .85%
Nonperforming assets to total assets             .84%                .65%


                                       8
<PAGE>


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

General

The  Private  Securities  Litigation  Reform Act to 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 Company undertakes no obligation to publicly release the results
of any  revisions  to those  forward  looking  statements  which  may be made to
reflect  events  or  circumstances  after  the date  hereof  or to  reflect  the
occurrence of unanticipated events.

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 Results of  Operations  for the Three Months Ended March 31, 1998
and 1999

Net Income.  Net income  decreased  $18,000 or 11.3% for the three  months ended
March 31, 1999 to  $142,000,  compared to $160,000  for the three  months  ended
March 31,  1998.  The decrease  was  primarily  the result of an decrease in net
interest income of $17,000. The return on average equity was 4.42% for the three
months ended March 31, 1999,  compared to 4.81% for the three months ended March
31,  1998.  The return on average  assets was 1.07% for the three  months  ended
March 31, 1999, compared to 1.21% for the three months ended March 31, 1998.

Net Interest Income. Net interest income decreased approximately $17,000 or 3.4%
from  $506,000  for the three  months  ended March 31, 1998 to $489,000  for the
three months ended March 31, 1999. The decrease in net interest income primarily
reflects  a  decrease  in  average   interest-earning  assets  of  approximately
$465,000,   combined  with  an  approximately   $891,000   increase  in  average
interest-bearing  liabilities. The interest rate spread, however, increased from
2.85% for three  months  ending  March  31,  1998 to 2.91% for the three  months
ending March 31, 1999,  while the net interest margin  decreased 10 basis points
to 3.83% for the three months ended March 31, 1999.

Interest Income.  Total interest income decreased  $32,000 from $987,000 for the
three  months  ended March 31, 1998 to $955,000 for the three months ended March
31,   1999.   The   decrease   was   attributable   to  a  decrease  in  average
interest-earning  assets of  approximately  $465,000 from $51.5 million at March
31, 1998 to $51.0  million at March 31, 1999,  and a 18 basis point  decrease in
the  average  yield  on  average  interest-earning  assets.  Interest  on  loans
decreased $14,000 and interest on  interest-earning  deposits decreased $16,000,
while interest on  investments  increased  $24,000.  

                                       9
<PAGE>

The  increase  in  interest  on  investments  primarily  reflects an increase of
approximately $2.0 in the average investment balance for 1999, compared to 1998.
Average  interest-earning  deposits  decreased  $600,000  as funds  were used to
purchase investment securities. Interest on mortgage-backed securities decreased
$26,000  as the  portfolio  continues  to  mature  and  principal  payments  are
received. The Company has utilized the principal payment to fund loan demand, to
purchase investment securities and to fund deposit withdrawals.

Interest Expense. Interest expense decreased $15,000 from $481,000 for the three
months  ended March 31, 1998 to $466,000  for the three  months  ended March 31,
1999.  The decrease for the three months ended March 31, 1999 was  primarily the
result of a decrease of 24 basis points in the average cost of funds,  offset by
an  increase  of  approximately  $891,000  in the  average  balance of  deposits
outstanding  for the three month period in 1999,  compared to the same period in
1998.

Provision for Loan Losses.  The provision for loan losses for three month period
ended March 31, 1999 was $9,000 and $8,000 for the period  ended March 31, 1998.
Management  regularly performs an analysis to quantify the inherent risk of loss
in its portfolio. At March 31, 1999 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,  1999  was .98%  and  nonperforming  loans  represented  only  .65% of total
consolidated assets.

Non-Interest  Income.  Non-interest  income remains 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
$45,000 for the three months  ended March 31, 1999,  compared to $40,000 for the
three months ended March 31, 1998.

Non-Interest   Expense.   Non-interest   expense   increased   by  $13,000  from
approximately  $284,000  for the three  month  period  ended  March 31,  1998 to
approximately  $297,000  for the three month  period in 1999.  The  increase was
primarily the result of increased  compensation  expense of $23,000,  a combined
$9,000  increase in net  occupancy  and data  processing  expenses,  offset by a
$19,000 reduction in other expenses incurred during the period.  The increase in
compensation  expense for the three months ended March 31, 1999,  was  primarily
attributable  to the recognition of $34,000 in additional  compensation  expense
associated  with the  stockholder  approved  Restricted  Stock  Plan  (RSP).  No
compensation  expense was recognized in the first quarter of 1998,  since it was
prior to the plan approval, which occurred on June 1, 1998. The increase in data
processing  expense was mainly  attributable  to increased costs of ATM service.
The  decrease  in  other  non-interest   expense  was  mainly   attributable  to
management's  attempt to control general  operating  expenses and those expenses
associated with being a public company.

As previously  discussed,  the Bank plans to open an additional branch office in
nearby  Mountain  City,  Tennessee,  during the first half of 1999.  The Company
expects that  non-interest  expense will  increase  during 1999 due to the costs
associated with opening and maintaining  this  additional  branch office.  It is
anticipated  that  ultimately the new branch will produce  sufficient  income to
cover these additional operating expense. See "Liquidity and Capital Resources".

                                       10

<PAGE>

Income  Taxes.  Income tax expense for the three  months  ended March 31,  1999,
decreased  $8,000 to $86,000,  compared to the same period in 1998. The decrease
was primarily the result of lower pre-tax income. The effective tax rate for the
three months ended March 31, 1999 and 1998, was approximately 37%.

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,
1999 there were no material commitments for capital expenditures. Obligations to
fund outstanding loan commitments at March 31, 1999 were approximately $263,000.

The Bank  purchased  for $135,000  land and an existing  building for the branch
office which is to be located in nearby  Mountain  City,  Tennessee.  Management
estimates  that costs  incidental to renovating and equipping the building to be
approximately  $200,000.  As  of  March  31,  1999,  the  Bank  had  capitalized
approximately  $168,000  of the  estimated  $200,000  of costs  associated  with
equipping this branch facility.  As of March 31, 1999, the branch had not opened
for business.

At  March  31,  1999  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, 1999,  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, 1999.  The Bank
had the following capital ratios at March 31, 1999:

                                       11
<PAGE>

<TABLE>
<CAPTION>

                                               For Capital  Categorized as "Well
                                Actual       Adequacy Purposes   Capitalized"(1)
                            ---------------  ----------------  -----------------
                             Amount   Ratio   Amount   Ratio    Amount   Ratio
                           --------  ------  --------- ------  -------- --------
<S>                         <C>       <C>    <C>       <C>     <C>        <C>  
As of March 31, 1999:

Total Capital
   (To risk weighted assets) $  9,148  30.9%  $  2,370  8.00%   $  2,963   10.0%

Tier I Capital
   (To risk weighted assets) $  8,813  29.8%  $  1,185  4.00%   $  1,777    6.0%

Tier I Capital
   (To total assets)         $  8,813  17.4%  $    889  3.00%   $  1,481    5.0%

Tangible Capital
   (To total assets)         $  8,813  17.4%  $    444  1.50%   $  1,481    5.0%

</TABLE>
-----------------------
(1)  As categorized under the Prompt Corrective Action Provisions.

Year 2000 Compliance.  A great deal of information has been  disseminated  about
the Year 2000 as it relates to computer systems. Many computer programs that can
only distinguish the final two digits of the year entered (a common  programming
practice in earlier years) are expected to read entries for the Year 2000 as the
Year 1900 and compute payment,  interest or delinquency  based on the wrong date
or are expected to be unable to compute payment, interest or delinquency.  Rapid
and  accurate  data  processing  is  essential  to the Bank's  operations.  Data
processing is also essential to most other financial institutions and many other
companies.  Substantially  all of the Bank's material data processing that could
be affected by this  problem is provided by a third party  service  bureau.  The
service  bureau  has  informed  the Bank that it will not be  assessing  special
charges  for  the  renovation  and  testing  of its  hardware  and  software  in
preparation for Year 2000.  However,  if the service bureau is unable to resolve
this  potential  problem in time, the Bank would likely  experience  significant
data processing delays, mistakes or failures. These delays, mistakes or failures
could have a significant  adverse impact on our financial  condition and results
of operation.

The Bank has formulated a Year 2000 Compliance Plan and a Year 2000  Contingency
Plan. The Year 2000  Compliance Plan is structured in accordance with the Office
of Thrift Supervision's Year 2000 Examination Checklist, Version 2. It addresses
the identified  phases of:  Awareness,  Assessment,  Renovation,  Validation and
Implementation.  The purpose of the plan is to outline the procedures  necessary
for  assuring  that  the  Bank is in  readiness  for the  century  date  change.
Execution of the plan is currently on target.  The Bank's Year 2000  Contingency
Plan is designed to prepare the  institution  for  returning to operation in the
event that systems do not perform as planned  either before or after the century
date change.  The plan addresses vital mission critical  applications and states
both the plans in the event of noncompliance and dates for when the plan will be
put into effect.

The Company has contacted  other material  vendors and supplier  regarding their
Year 2000 state of readiness.  The Company has obtained  written  assurance from
these third party vendors  indicating that they expect to be Year 2000 compliant
prior to the Year 2000.

                                       12
<PAGE>


The Bank's third party service bureau during October 1998, converted the Bank to
its new state of the art core account processing  platform.  This new technology
was built  with Year 2000  compatible  components.  The  service  bureau  during
October 1998,  conducted Year 2000 proxy testing on this new platform.  The Bank
expects to commence  testing in May 1999. In addition,  each  application of the
system has been renovated to run on the new platform and date fields expanded to
a four digit year.  Other service bureau  products and services  utilized by the
Bank are expected to be brought Year 2000 compliant by June 1999.

The Bank upgraded its teller  operating system during the first quarter of 1999.
This  upgrade  will  further  ensure  Year  2000  readiness  by using  Year 2000
certified  software and  hardware.  The  Company's  management  estimates  costs
incidental to the upgrade to be approximately $100,000. The Company's management
anticipates  that  substantially  all of such costs will be  capitalized.  These
costs should not be material to the Company in any single year.  As of March 31,
1999, the Company had capitalized approximately $35,000 in regard to the upgrade
of its software and hardware for Year 2000 compliance.

The Company's successful and timely completion of the Year 2000 project is based
on estimates  derived by management on assumptions  of future events,  which are
inherently uncertain,  including the progress and results of the Company's third
party service provider,  testing plans, and all vendors,  suppliers and customer
readiness.


                                       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
            March 31, 1999, there were no legal proceedings to which the Company
            or any subsidiary was a party,  or to which of any of their property
            was  subject,  which  were  expected  by  management  to result in a
            material loss.

Item 2.  Changes in Securities
         --------------------- 
            None

Item 3.  Defaults Upon Senior Securities
         ------------------------------- 
            None

Item 4.  Submission of Matters to a Vote of Security Holders
         --------------------------------------------------- 
            None

Item 5.  Other Information
         ----------------- 
            None

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------
 
(a)       3(i) Charter of SFB Bancorp, Inc.*
          3(ii) Bylaws of SFB Bancorp, Inc. *
          4    Specimen Stock Certificate *
          10   Employment Agreement with Peter W. Hampton *
          10.1 SFB Bancorp, Inc. 1998 Stock Option Plan * *
          10.2 Security Federal Bank Restricted Stock Plan * *
          27   Financial Data Schedule ( Electronic filing only)
-------------------------
          *    Incorporated by reference to the  Registration  Statement on Form
               SB-2, File No. 333-23505.
          **   Incorporated  by reference to  the Company's  Proxy Statement for
               the 1999 Annual  Meeting of  Stockholders,  filed with the SEC on
               March 31, 1999 (File No. 0-22587)

 (b)           Reports on Form 8-K

                   None.



                                       14

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                            SFB Bancorp, Inc.




Date: May 13, 1999                          By /s/ Peter W. Hampton
                                               ---------------------------------
                                               Peter W. Hampton
                                               (President and Chief Executive
                                                Officer)





Date: May 13, 1999                          By /s/ Bobby Hyatt
                                               ---------------------------------
                                               Bobby Hyatt
                                               (Principal Accounting Officer)