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, 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 August 1,  1999,  there were  689,417  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)
-------                                                                                                             -------
<S>                                                                                                                 <C>
FINANCIAL INFORMATION

Item 1.
Financial Statements

Consolidated Balance Sheets-(Unaudited) as of December 31, 1998 and June 30, 1999.......................................3

Consolidated  Statements  of  Income -  (Unaudited)  for the three and six month
periods ended June 30, 1998 and 1999....................................................................................4

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

Consolidated Statements of Cash Flows - (Unaudited) for the six months
  ended June 30, 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..........................................................................................9-14

PART II.
--------

OTHER INFORMATION

Item 1.  Legal Proceedings.............................................................................................15

Item 2.  Changes in Securities.........................................................................................15

Item 3.  Defaults Upon Senior Securities...............................................................................15

Item 4.  Submission of Matters to a Vote of Security Holders...........................................................15

Item 5.  Other Information.............................................................................................15

Item 6.  Exhibits and Reports on Form 8-K...........................................................................15-16

Signatures.............................................................................................................17

</TABLE>

                                       2
<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

                           Consolidated Balance Sheets
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                              December 31,           June 30,
           Assets                                                                 1998                 1999
           ------
                                                                          --------------------- --------------------
<S>                                                                      <C>                   <C>
Cash on hand                                                              $            467      $          1,007
Interest earning deposits                                                            2,372                 2,601
Investment securities:
   Held to maturity (market value of $1,147
     in 1998 and $1,029 in 1999)                                                     1,158                 1,104
   Available for sale (amortized cost of $2,325
     in 1998 and $2,124 in 1999)                                                     2,327                 2,111
Loans receivable, net                                                               40,449                40,782
Mortgage-backed securities:
   Available for sale (amortized cost of $3,544 in
     1998 and $2,764 in 1999)                                                        3,502                 2,725
Premises and equipment, net                                                            849                   939
Federal Home Loan Bank stock                                                           454                   470
Accrued interest receivable                                                            265                   263
Prepaid expenses and other assets                                                       23                    84
                                                                           ---------------       ---------------

         Total assets                                                     $        51,866       $         52,086
                                                                           ===============       ===============

   Liabilities and Stockholders' Equity
   ------------------------------------
Deposits                                                                  $         40,106      $         39,815
Advance payments by borrowers for taxes and insurance                                  188                   444
Accrued expenses and other liabilities                                                 221                   221
Income taxes payable:
   Current                                                                               -                     -
   Deferred                                                                             81                    76
                                                                          ----------------      ----------------

         Total liabilities                                                          40,596                40,556
                                                                           ---------------       ---------------


   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   689,417   outstanding
     at December 31, 1998 and June 30, 1999, respectively)                              77                    77
   Paid-in capital                                                                   7,368                 7,376
   Retained earnings, substantially restricted                                       5,732                 5,953
   Treasury  stock  at  cost  (72,850  and  77,583  shares  at  December
     31, 1998 and June 30, 1999, respectively)                                      (1,034)               (1,088)
   Accumulated other comprehensive income                                              (24)                  (32)
   Unearned compensation:
     Employee stock ownership plan                                                    (491)                 (455)
     Restricted stock plan                                                            (358)                 (301)
                                                                           ---------------       ---------------

         Total stockholders' equity                                                 11,270                11,530
                                                                           ---------------       ---------------

         Total liabilities and stockholders' equity                       $         51,866      $         52,086
                                                                           ===============       ===============

 </TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                       3
<PAGE>

                        SFB BANCORP, INC. AND SUBSIDIARY

                        Consolidated Statements of Income
                                   (Unaudited)
                      (in thousands, except per share data)
<TABLE>
<CAPTION>
                                                For Three Months Ended    For Six Months Ended
                                                        June 30,                 June 30,
                                              -------------------------- -------------------------
                                                    1998         1999         1998         1999
                                                ----------   ----------   ----------   ----------
<S>                                           <C>          <C>          <C>          <C>
Interest income:
   Loans                                       $      843   $      823   $    1,677   $    1,643
   Mortgage-backed securities                          63           38          132           81
   Investments                                         45           54           76          109
   Interest earning deposits                           43           39           96           76
                                                ----------   ----------   ----------   ----------
         Total interest income                        994          954        1,981        1,909
                                                ----------   ----------   ----------   ----------

Interest expense:
   Deposits                                           487          452          968          918
                                                ----------   ----------   ----------   ----------
         Total interest expense                       487          452          968          918
                                                ----------   ----------   ----------   ----------
         Net interest income                          507          502        1,013          991

Provision for loan losses                               7            9           15           18
                                                ----------   ----------   ----------   ----------
         Net interest income after provision
           for loan losses                            500          493          998          973

Non-interest income:
   Loan fees and service charges                       38           43           75           85
   Other                                                2            2            5            5
                                                ----------   ----------   ----------   ----------
         Total non-interest income                     40           45           80           90
                                                ----------   ----------   ----------   ----------

Non-interest expenses:
   Compensation                                       249          157          366          297
   Employee benefits                                   34           31           66           63
   Net occupancy expense                               20           21           39           44
   Deposit insurance premiums                           6            6           12           12
   Data processing                                     22           21           42           46
   Other                                               79           73          169          144
                                                ----------   ----------   ----------   ----------
         Total non-interest expenses                  410          309          694          606
                                                ----------   ----------   ----------   ----------

         Income  before income taxes                  130          229          384          457

Income tax expense                                     49           86          143          172
                                                ----------   ----------   ----------   ----------

         Net income                            $       81   $      143   $      241   $      285
                                                ==========   ==========   ==========   ==========

Earnings per share
   Basic                                       $      .11   $      .22   $      .34   $      .44

   Diluted                                     $      .11   $      .22   $      .34   $      .44
</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
                                   (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
   Other Comprehensive income
                                                      -         -         -         -          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                                       -         -       285         -           -            -           -      285

     Other Comprehensive income                       -         -         -         -          (8)           -           -       (8)

Cash dividends declared ($.10 share)                  -         -       (64)        -           -            -           -      (64)

Treasury stock purchased (4,733 shares)               -         -         -       (54)          -            -           -      (54)

Compensation earned                                   -         8         -         -           -           36          57      101
                                                 ------    ------    ------    ------   ---------      -------     -------   ------
Balance at June 30, 1999                        $    77   $ 7,376   $ 5,953   $(1,088) $      (32)    $   (455)   $   (301) $11,530
                                                 ======    ======    ======    ======   =========      =======     =======   ======

</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,
                                                                                   --------------------------------
                                                                                        1998              1999
                                                                                        ----              ----
<S>                                                                                <C>              <C>
Operating activities:
   Net income                                                                        $       241      $       285
   Adjustments to reconcile net income  to net cash  provided (used)
     by operating activities:
     Depreciation                                                                             27               33
     Provision for loan losses                                                                15               18
     Increase (decrease) in reserve for uncollected interest                                   9               (1)
     Deferred income taxes (benefit)                                                         (30)               -
     Net increase (decrease) in deferred loan fees                                             5              (35)
     Accretion of discounts on investment securities, net                                    (11)             (13)
     Amortization of premiums on mortgage-backed securities                                    7                5
     Amortization of unearned compensation                                                    50              101
     Repurchase of shares - RSP                                                             (117)               -
     FHLB stock dividends                                                                    (16)             (16)
     (Increase) decrease in other assets                                                     (30)             (61)
     (Increase) decrease in accrued interest receivable                                       20                2
     Increase (decrease) in accrued expenses and other liabilities                            31                -
     Increase (decrease) in current income taxes                                            (164)               -
                                                                                    ------------     ------------
         Net cash provided (used) by operating activities                                     37              318
                                                                                    ------------     ------------

Investing activities:
   Purchase of investment securities held to maturity                                       (710)               -
   Maturities of investment securities held to maturity                                       21               66
   Purchase of investment securities available for sale                                   (2,150)          (1,298)
   Maturities of investment securities available for sale                                    900            1,500
   Principal payments on mortgage-backed securities
     available for sale                                                                      663              775
   Net (increase) decrease in loans                                                          286             (316)
   Purchase of premises and equipment                                                       (159)            (123)
                                                                                    ------------     ------------
         Net cash provided (used) by investing activities                                 (1,149)             604
                                                                                    ------------     ------------

Financing activities:
   Net increase (decrease) in deposits                                                      (314)            (291)
   Increase (decrease) in advance payments by borrowers
     for taxes and insurance                                                                 253              256
   Treasury stock purchased                                                                    -              (54)
   Payment of cash dividend                                                                  (72)             (64)
                                                                                    ------------     ------------
         Net cash provided (used) by financing activities                                   (133)            (153)
                                                                                    ------------     ------------
         Increase (decrease) in cash and cash equivalents                                 (1,245)             769

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

Cash and cash equivalents at end of period                                          $      3,347     $      3,608
                                                                                    ============     ============

Supplemental  disclosures  of cash flow  information:  Cash paid during the year
   for:
     Interest                                                                       $        972     $        916
     Income taxes                                                                            326              206
                                                                                    ============     ============

Noncash transactions:
   Unrealized gains (losses) on securities and mortgage-backed
     securities available for sale, net of deferred taxes                           $         14     $         (8)
</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   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  statements  of income  for the three and six month
     periods ending June 30, 1999 are not necessarily  indicative of the results
     which may be expected for the entire year or any other 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, 1998 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 June 1999
     quarter,  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, 1998               June 30, 1999
                                                --------------------------- ---------------------------
                                                   Income        Shares        Income        Shares
                                                   ------        ------        ------        ------
<S>                                                <C>             <C>        <C>             <C>
Net Income                                            $81                        $143
BASIC  EPS
  Income available to common stockholders             $81           713          $143           645
  Per share amount                                   $.11                        $.22
Effect of Dilutive Securities                        $.00                        $.00
DILUTIVE EPS
  Income available to common stockholders             $81           714          $143           645
  Per share amount                                   $.11                        $.22
</TABLE>

<TABLE>
<CAPTION>
                                                                  Six months ended,
                                                -------------------------------------------------------
                                                      June 30, 1998               June 30, 1999
                                                --------------------------- ---------------------------
                                                   Income        Shares        Income        Shares
                                                   ------        ------        ------        ------
<S>                                                <C>            <C>          <C>            <C>
Net Income                                           $241                        $285
BASIC  EPS
  Income available to common stockholders            $241           713          $285           645
  Per share amount                                   $.34                        $.44
Effect of Dilutive Securities                        $.00                        $.00
DILUTIVE EPS
  Income available to common stockholders            $241           713          $285           645
  Per share amount                                   $.34                        $.44

</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,  1998  and  June  30,  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,     June 30,
                                                         1998            1999
                                                         ----            ----

                                                        (Dollars in Thousands)

         Nonaccrual loans                               $ 437           $ 385
         Repossessed real estate                            -               -
                                                        -----           -----
         Total nonperforming assets                     $ 437           $ 385
                                                         ====            ====

         Nonperforming loans to net loans                1.08%           0.94%
         Nonperforming assets to total assets             .84%           0.74%

                                       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.

As discussed  herein,  on July 29, 1999, the Bank opened its third branch office
in nearby Mountain City, Tennessee.

Comparison of Results of Operations for the Three and Six Months Ending June 30,
1998 and 1999

Net Income.  Net income for the three  months  ending June 30,  1999,  increased
$62,000,  or 76.5%,  from  $81,000  in 1998,  to  $143,000  in 1999.  Net income
increased  $44,000,  or 18.3%,  to $285,000  for the six months  ending June 30,
1999,  from  $241,000 in 1998.  The increase for the three and six months ending
June 30,  1999,  was  primarily  the result of an decrease in  compensation  and
employee benefits.

Net Interest Income. Net interest income decreased $5,000, from $507,000 for the
three months  ending June 30, 1998, to $502,000 for the three months ending June
30, 1999. Net interest income decreased $22,000, from approximately $1.0 million
for the six months  ending June 30, 1998,  to $991,000 for the six months ending
June 30, 1999. The decrease in net interest income for the three month period in
1999, primarily reflects a net decrease in average  interest-earning assets over
average interest-bearing liabilities of $1.5 million for the three months ending
June 30, 1999, as compared to the same period in 1998.  The overall  decrease in
net interest income for the six months ending June 30, 1999,  primarily reflects
a $1.4  million net  decrease in average  interest-earning  assets over  average
interest-bearing  liabilities,  as compared  to the same  period in 1998.  These
decreases  were offset by a 24 basis point  increase in the interest rate spread
from 2.82% for three months  ending June 30, 1998, to 3.06% for the three months
ending June 30,  1999,  and an  increase  of 15 basis  points from 2.83% for six
months  ending June 30, 1998,  to 2.98% for the six

                                       9
<PAGE>

months ending June 30, 1999. The net interest margin increased 2 basis points to
3.95% for the three months ending June 30, 1999, and decreased 4 basis points to
3.89% for the six months ending June 30, 1999.

Interest Income.  Interest income decreased $40,000, from $994,000 for the three
months  ending June 30, 1998,  to $954,000 for the three months  ending June 30,
1999. The decrease was  attributable  to a decrease in average  interest-earning
assets of approximately  $722,000, from $51.6 million at June 30, 1998, to $50.9
million  at  June  30,   1999,   and  a  decrease  in  the   average   yield  on
interest-earning  assets of 20 basis  points,  from  7.70% for the three  months
ending  June 30,  1998,  to 7.50% for the same period in 1999.  Interest  income
decreased  $72,000,  or 3.6%, from approximately $2.0 million for the six months
ending June 30, 1998,  to  approximately  $1.9 million for the six months ending
June  30,  1999.  The  decrease  was  attributable  to  a  decrease  in  average
interest-earning  assets of approximately  $593,000,  from $51.6 million at June
30, 1998, to $51.0 million at June 30, 1999, and a decrease in the average yield
on  interest-earning  assets of 19 basis  points,  from 7.68% for the six months
ending June 30, 1998, to 7.49% for the same period in 1999.

Interest on loans  decreased  $20,000 for the three months ending June 30, 1999,
as compared to the same  period in 1998,  and $34,000 for the six months  ending
June 30, 1999, as compared to the same period in 1998. These decreases primarily
reflect a 23 basis point  decrease  in the average  yield on loans for the three
months ending June 30, 1999,  from 8.34% in 1998,  and for the six months ending
June 30,  1999,  a decrease of 17 basis  points from 8.30% in 1998.  Interest on
investment  securities  increased  $9,000 for the three  months  ending June 30,
1999,  as compared  to the same  period in 1998,  and $33,000 for the six months
ending June 30,  1999,  as compared to the same period in 1998.  The increase in
interest on  investments  for the three months  ending June 30, 1999,  primarily
reflects an increase of approximately $311,000 in the average investment balance
for 1999,  compared to 1998,  and a 54 basis point increase in the average yield
on investments from 4.88% in 1998, to 5.42% in 1999. The increase in interest on
investments  for the six months  ending  June 30,  1999,  primarily  reflects an
increase of  approximately  $1.1 million in the average  investment  balance for
1999,  compared to 1998,  and an increase in the average yield on investments of
26 basis points from 5.03% in 1998, to 5.29% in 1999.

Interest on  interest-earning  deposits  decreased  $4,000 for the three  months
ending June 30,  1999,  as compared to the same period in 1998,  and $20,000 for
the six months  ending  June 30,  1999,  as compared to the same period in 1998.
These  decreases   primarily   reflect  a  decrease  in  the  average  yield  on
interest-earning deposits for both the three and six months periods in 1999. The
yield on interest-earning deposits declined to 4.28% for the three months ending
June  30,1999,  and 4.27% for the six months  ending June 30, 1999.  Interest on
mortgage-backed  securities  decreased  $25,000 for the three months ending June
30, 1999, as compared to the same period in 1998, and $51,000 for the six months
ending June 30, 1999,  as compared to the same period in 1998,  as the portfolio
continued to pay down  principal  and those funds were invested in other earning
assets.

Interest Expense. Interest expense decreased $35,000 from $487,000 for the three
months  ending June 30, 1998,  to $452,000 for the three months  ending June 30,
1999. Interest expense decreased $50,000 from $968,000 for the six months ending
June 30, 1998, to $918,000 for the six months ending June 30, 1999. The decrease
for the three months  ending June 30,  1999,  was  primarily  the

                                       10
<PAGE>

result of a 45 basis point  decrease in the average cost of funds,  offset by an
approximately $746,000 increase in the average balance of deposits for the three
months ending June 30, 1999,  compared to 1998.  The decrease for the six months
ending June 30, 1999,  was primarily the result of a 34 basis point  decrease in
the average cost of funds,  offset by an approximately  $844,000 increase in the
average balance of deposits for the six months ending June 30, 1999, compared to
1998.

Provision  for Loan Losses.  The provision for loan losses was $7,000 and $9,000
for the three .month  period  ending June 30, 1998 and 1999,  respectively.  The
provision  for loan losses was  $15,000  and  $18,000  for the six month  period
ending June 30, 1998 and 1999, respectively.  The Company's management routinely
performs an analysis to quantify the inherent risk of loss in its portfolio.  At
June 30, 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 June 30, 1999, was 112%, and
nonperforming   assets   represented   0.74%  of  total   consolidated   assets.
Nonperforming  assets were  $385,000 at June 30,  1999,  compared to $386,000 at
June 30, 1998.  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 $45,000  and  $90,000  for the three and six months  ending June 30,
1999, respectively,  and $40,000 and $80,000 for the three and six months ending
June 30, 1998, respectively.

Non-Interest Expense. Non-interest expense decreased $101,000, from $410,000 for
the three months  ending June 30, 1998,  to $309,000 for 1999.  The decrease for
the three  month  period  was  primarily  the result of  decreased  compensation
expenses of $92,000.  Non-interest expense decreased $88,000,  from $694,000 for
the six months  ending June 30,  1998,  to $606,000  for 1999.  The decrease was
primarily the result of decreased compensation expense of $69,000 and $25,000 of
other expenses during the period.  The decrease in compensation  expense for the
three and six months  periods  ending June 30,  1999,  as compared to 1998,  was
primarily  attributable to the compensation  expense  associated with the Bank's
Restricted Stock Plan ("RSP"),  which was approved by the Company's shareholders
on June 1, 1998.  The RSP vests over a four year  period with 20% vesting on the
date of grant and 20% annually thereafter.  Accordingly, the Company immediately
expensed  20% of the value of the  awards on the  grant  date and the  remaining
value is being  amortized to  compensation  expense on a monthly  basis over the
remaining four year vesting term.  Compensation expense recognized for the three
and six month  pe-riods  ending  June 30, 1998 for the RSP awards was  $114,000.
Compensation  expense for the RSP for the three  months  ended June 30, 1999 was
$31,000 and $65,000 for the six months  ending June 30,  1999.  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. Net occupancy,  deposit insurance premiums,  and data processing
expenses remained relatively stable during both three and six month periods.

                                       11
<PAGE>

As  previously  discussed,  on July 29,  1999,  the Bank opened its third branch
office in nearby Mountain City, Tennessee. 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".

Income Taxes.  Income tax expense for the three months ending June 30, 1999, was
$86,000, compared to $49,000 for the same period in 1998. Income tax expense for
the six months ending June 30, 1999, was $172,000,  compared to $143,000 for the
same  period in 1998.  The  increase  for the three  and six month  periods  was
principally the result of higher pre-tax income. The effective tax rate for both
the three and six months in 1997 and 1998 was approximately 38%.

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,  1999  were  approximately
$430,000.

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  June  30,  1999,  the  Bank  had  capitalized
approximately  $177,000  of the  estimated  $200,000  of costs  associated  with
equipping this branch facility. The branch office was opened on July 29, 1999.

At  June  30,  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.  Furthermore,
at June 30, 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 June 30, 1999. The Bank had
the following capital ratios at June 30, 1999:

                                       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, 1999:

   Total Capital
      (To risk weighted assets)     $    9,350       31.1%      $    2,406       8.0%      $    3,007       10.0%

   Tier I Capital
      (To risk weighted assets)     $    9,007       30.0%      $    1,203       4.0%      $    1,804        6.0%

   Tier I Capital
      (To total assets)             $    9,007       17.8%      $      902       3.0%      $    1,504        5.0%

   Tangible Capital
      (To total assets)             $    9,007       17.8%      $      451       1.50%     $    1,504        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.

The Bank has  formulated a Year 2000  Compliance  Plan, a Year 2000  Contingency
Plan and a Year 2000 Testing 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.  The Company is in the  implementation
phase of the plan. 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
Bank's Year 2000 Testing Plan is designed to outline the  methodology to be used
in testing and  certifying  Year 2000  compliance  of the Bank's  vital  mission
critical systems and applications.

The Company has contacted  other material  vendors and supplier  regarding their
Year 2000 state of readiness.  The Company has requested  written assurance from
these third party vendors  indicating that they expect to be Year 2000 compliant
prior to the Year 2000.  Substantially  all third party  vendors  have  provided
written  assurance.  Follow up  requests  are sent to any vendor  not  providing
assurance or a replacement vendor is contacted.


                                       13
<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  with each  application  of the
system  renovated to run on the new platform and date fields  expanded to a four
digit year. The service  bureau during  October 1998,  conducted Year 2000 proxy
testing on this new platform.  The Bank  conducted Year 2000 testing during June
1999. The test involved all aspects of the on-line account  processing  platform
utilizing its new teller  operating  system (as discussed  further below).  This
system and other internal  systems used by the Company were tested in accordance
with   Company's   Year  2000  Testing  Plan.  The  results  of  the  test  were
satisfactory.

The Bank upgraded its teller  operating system during the first quarter of 1999.
The upgrade will further ensure Year 2000 readiness by using Year 2000 certified
software and hardware.  The costs  incidental to the upgrade  totaled  $100,000.
Substantially  all of such costs  associated with the upgrade were  capitalized.
These costs should not be material to the Company in any single year.

No assurance can be given that the Year 2000  Compliance  Plan will be completed
successfully  by  the  Year  2000,  in  which  event  the  Company  could  incur
significant  cots.  However,  if the  third  party  service  bureau is unable to
resolve the  potential  problem in time,  the Company  would  likely  experience
significant data processing delays, mistakes or failures. These delays, mistakes
or failures could have a significant adverse impact on the financial  statements
of the Company.

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.


                                       14

<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, 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
         ---------------------------------------------------

          The Annual Meeting of Stockholders of the Company ("Meeting") was held
          on April 29, 1999. 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
                                                  --------        -------------

               Peter W. Hampton                    603,029             5,630

               Michael L. McKinney                 534,059            74,600

          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     608,434;         Against    -0-;        Abstain     225

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 *


                                       15
<PAGE>

         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 1998 Annual  Meeting of  Stockholders,  filed with the
                  SEC on March 31, 1998 (File No. 0-22587)

 (b)           Reports on Form 8-K

               None.


                                       16
<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 10, 1999             By: /s/Peter W. Hampton
         ---------------                 ---------------------------------------
                                         Peter W. Hampton
                                         (President and Chief Executive Officer)





Date:    August 10, 1999             By: /s/Bobby Hyatt
         ---------------                 ---------------------------------------
                                         Bobby Hyatt
                                         (Principal Accounting Officer)




                                       17