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 September 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          (I.R.S. Employer Identification Number)
incorporation or organization)

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

Registrant's telephone number, including area code:  (423) 543-1000
                                                     --------------

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 November 1, 1999,  there were 679,417  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)
-------                                                                                   -------
FINANCIAL INFORMATION

Item 1.
Financial Statements
<S>                                                                                        <C>
Consolidated Balance Sheets-(Unaudited) as of December 31, 1998 and September 30, 1999..........3

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

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

Consolidated Statements of Cash Flows - (Unaudited) for the nine months
  ended September 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

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

</TABLE>


                                       2
<PAGE>
                        SFB BANCORP, INC. AND SUBSIDIARY

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

<TABLE>
<CAPTION>
                                                                             December 31,         September 30,
                                                                          -----------------     -----------------
           Assets                                                                 1998                 1999
           ------                                                                 ----                 ----
<S>                                                                     <C>                   <C>
Cash on hand                                                              $             467     $           1,694
Interest-earning deposits in other banks                                              2,372                   964
Investment securities:
   Held to maturity (market value of $1,147
     in 1998 and $958 in 1999)                                                        1,158                 1,045
   Available for sale (amortized cost of $2,325
     in 1998 and $2,124 in 1999)                                                      2,327                 2,099
Loans receivable, net                                                                40,449                42,430
Mortgage-backed securities:
   Available for sale (amortized cost of $3,544
     in 1998 and $2,458 in 1999)                                                      3,502                 2,416
Premises and equipment, net                                                             849                 1,021
Federal Home Loan Bank stock                                                            454                   479
Accrued interest receivable                                                             265                   271
Prepaid expenses and other assets                                                        23                    62
                                                                            ---------------       ---------------
         Total assets                                                     $          51,866     $          52,481
                                                                            ===============       ===============
   Liabilities and Stockholders' Equity
   ------------------------------------

Deposits                                                                  $          40,106     $          40,014
Advance payments by borrowers for taxes and insurance                                   188                   559
Accrued expenses and other liabilities                                                  221                   244
Income taxes payable:
   Current                                                                                -                     -
   Deferred                                                                              81                    70
                                                                            ---------------       ---------------
         Total liabilities                                                           40,596                40,887
                                                                            ---------------       ---------------
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 679,417 outstanding at                           77                    77
     December 31, 1998 and September 30, 1999)
   Paid-in capital                                                                    7,368                 7,379
   Retained earnings, substantially restricted                                        5,732                 6,091
   Treasury stock, at cost (72,850 and 87,583 at December 31,
     1998 and September 30, 1999, respectively)                                      (1,034)               (1,208)
   Accumulated other comprehensive income (loss)                                        (24)                  (40)
   Unearned compensation:
     Employee stock ownership plan                                                     (491)                 (437)
     Restricted stock plan                                                             (358)                 (268)
                                                                            ---------------       ---------------
              Total stockholders' equity                                             11,270                11,594
                                                                            ---------------       ---------------
         Total liabilities and stockholders' equity                       $          51,866     $          52,481
                                                                            ===============       ===============
</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 Nine Months Ended
                                                           September 30,                     September 30,
                                                   ------------------------------    -------------------------------
                                                        1998           1999               1998            1999
                                                        ----           ----               ----            ----
<S>                                              <C>              <C>              <C>             <C>
Interest income:
   Loans                                            $         864   $        842     $        2,541  $        2,485
   Mortgage-backed securities                                  56             34                188             115
   Investments                                                 56             51                132             160
   Interest earning deposits                                   35             23                131              99
                                                     ------------    -----------       ------------    ------------
         Total interest income                              1,011            950              2,992           2,859
                                                     ------------    -----------       ------------    ------------
Interest expense:
   Deposits                                                   502            442              1,470           1,360
                                                     ------------    -----------       ------------    ------------
         Total interest expense                               502            442              1,470           1,360
                                                     ------------    -----------       ------------    ------------
         Net interest income                                  509            508              1,522           1,499

Provision for loan losses                                       8              9                 23              27
                                                     ------------    -----------       ------------    ------------
         Net interest income after provision
           for loan losses                                    501            499              1,499           1,472

Non-interest income:
   Loan fees and service charges                               40             45                115             130
   Other                                                        4              3                  9               8
                                                     ------------    -----------       ------------    ------------
         Total non-interest income                             44             48                124             138
                                                     ------------    -----------       ------------    ------------
Non-interest expenses:
   Compensation                                               154            166                520             463
   Employee benefits                                           32             32                 98              95
   Net occupancy expense                                       21             28                 60              72
   Deposit insurance premiums                                   7              6                 19              18
   Data processing                                             22             28                 64              74
   Other                                                       74             64                243             208
                                                     ------------    -----------       ------------    ------------
         Total non-interest expenses                          310            324              1,004             930
                                                     ------------    -----------       ------------    ------------
         Income  before income taxes                          235            223                619             680

Income tax expense                                             86             85                229             257
                                                     ------------    -----------       ------------    ------------
         Net income                                 $         149   $        138      $         390   $         423
                                                     ============    ===========       ============    ============
Earnings per share
   Basic                                            $         .21   $        .21      $         .55   $         .66

   Diluted                                          $         .21   $        .21      $         .55   $         .66

</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        Unearned
                                                                                          Other          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                                       -         -       423          -          -          -         -       423
     Other Comprehensive income                       -         -         -          -        (16)         -         -       (16)

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

Treasury stock purchased (14,733 shares)              -         -         -       (174)         -          -         -      (174)

Compensation earned                                   -        11         -          -          -         54        90       155
                                                  -----    ------    ------    -------      -----      -----     -----   -------
Balance at September 30, 1999                    $   77   $ 7,379   $ 6,091   $ (1,208)    $  (40)    $ (437)   $ (268) $ 11,594
                                                  =====    ======    ======    =======      =====      =====     =====   =======
</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>
                                                                                        Nine Months Ended
                                                                                           September 30,
                                                                                ----------------------------------
                                                                                       1998              1999
                                                                                       ----              ----
<S>                                                                             <C>               <C>
Operating activities:
   Net income                                                                     $          390    $         423
   Adjustments to reconcile net income  to net cash  provided by
     operating activities:
     Depreciation                                                                             41               53
     Provision for loan losses                                                                23               27
     Increase (decrease) in reserve for uncollected interest                                  15               (1)
     Deferred income taxes (benefit)                                                         (15)               -
     Net increase (decrease) in deferred loan fees                                             1              (54)
     Accretion of discounts on investment securities, net                                    (15)             (18)
     Amortization of premiums on mortgage-backed securities                                   10                7
     Amortization of unearned compensation                                                   216              155
     Repurchase of shares - RSP                                                             (525)               -
     FHLB stock dividends                                                                    (23)             (25)
     (Increase) decrease in other assets                                                     (34)             (39)
     (Increase) decrease in accrued interest receivable                                       31               (6)
     Increase (decrease) in accrued expenses and other liabilities                            84               23
     Increase (decrease) in current income taxes                                            (164)               -
                                                                                    ------------     ------------
         Net cash provided by operating activities                                            35              545
                                                                                    ------------     ------------
Investing activities:
   Purchase of investment securities held to maturity                                       (710)               -
   Maturities of investment securities held to maturity                                       84              130
   Purchase of investment securities available for sale                                   (2,475)          (1,299)
   Maturities of investment securities available for sale                                  1,200            1,500
   Principal payments on mortgage-backed securities
      available for sale                                                                   1,135            1,080
   Net decrease in loans                                                                    (389)          (1,953)
   Purchase of premises and equipment                                                       (208)            (225)
                                                                                    ------------     ------------
         Net cash used by investing activities                                            (1,363)            (767)
                                                                                    ------------     -------------
Financing activities:
   Net (decrease) in deposits                                                               (299)             (92)
   Increase in advance payments by borrowers for taxes
     and insurance                                                                           245              371
   Treasury stock purchased                                                                 (596)            (174)
   Payment of cash dividend                                                                  (72)             (64)
                                                                                    ------------     ------------
         Net cash provided (used) by financing activities                                   (722)              41
                                                                                    ------------     ------------

         Decrease in cash and cash equivalents                                            (2,050)            (181)

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

Cash and cash equivalents at end of period                                        $        2,542    $       2,658
                                                                                   =============     ============
Supplemental  disclosures  of cash flow  information:
  Cash paid during the year for:
     Interest                                                                     $        1,452    $       1,348
     Income taxes                                                                            426              289
                                                                                    ============     ============
Noncash transactions:
   Unrealized gains (losses) on securities and mortgage-backed
     securities available for sale, net of deferred taxes                                     35              (16)
   Loan charge off's                                                                           6                2

</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)
                         (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  statements  of income for the three and nine month
     periods  ending  September 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 three and
     nine months  period  ended  September  1999,  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,
                                                -------------------------------------------------------
                                                    September 30, 1998          September 30, 1999
                                                --------------------------- ---------------------------
                                                      Income        Shares        Income        Shares
                                                      ------        ------        ------        ------
<S>                                                   <C>            <C>          <C>             <C>
Net Income                                              $149                        $138
BASIC EPS
  Income available to common stockholders               $149           702          $138            643
  Per share amount                                      $.21                        $.21
Effect of Dilutive Securities                           $.00                        $.00
DILUTIVE EPS
  Income available to common stockholders               $149           702          $138            643
  Per share amount                                      $.21                        $.21
</TABLE>

<TABLE>
<CAPTION>
                                                                  Nine months ended,
                                                -------------------------------------------------------
                                                    September 30, 1998          September 30, 1999
                                                --------------------------- ---------------------------
                                                      Income        Shares        Income        Shares
                                                      ------        ------        ------        ------
<S>                                                   <C>            <C>          <C>             <C>
Net Income                                              $390                        $423
BASIC EPS
  Income available to common stockholders               $390           709          $423            644
  Per share amount                                      $.55                        $.66
Effect of Dilutive Securities                           $.00                        $.00
DILUTIVE EPS
  Income available to common stockholders               $390           710          $423            644
  Per share amount                                      $.55                        $.66
</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  September  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,   September 30,
                                                       1998            1999
                                                       ----            ----

                                                      (Dollars in Thousands)

         Nonaccrual loans                           $    437        $    349
         Repossessed real estate                           -               -
                                                    --------        --------
         Total nonperforming assets                 $    437        $    349
                                                    ========        ========

         Nonperforming loans to net loans               1.08%           0.82%
         Nonperforming assets to total assets           0.84%           0.66%

                                       8
<PAGE>


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

General

The following discussion and analysis is intended to assist in understanding the
financial condition and the results of operations of the Company.  References to
the  "Company"  include  SFB  Bancorp,  Inc.  and/or  Security  Federal  Bank as
appropriate.

The  Private  Securities  Litigation  Reform Act of 1995  contains  safe  harbor
provisions regarding forward-looking  statements.  When used in this discussion,
the words  "believes",  "anticipates",  "contemplates"  "expects",  and  similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties  which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in  interest  rates,  risk  associated  with the effect of opening a new
branch,  the  ability  to  control  costs and  expenses,  and  general  economic
conditions. The 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.

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 Nine  Months  Ending
September 30, 1998 and 1999

Net Income. Net income for the three months ending September 30, 1999, decreased
$11,000,  or 7.4%,  from  $149,000  in 1998,  to  $138,000  in 1999.  Net income
increased $33,000, or 8.5%, to $423,000 for the nine months ending September 30,
1999, from $390,000 in 1998. The decrease for the three months ending  September
30, 1999, was primarily the result of an increase in non-interest  expense.  The
increase for the nine months ending September 30, 1999, was primarily the result
of a decrease in  non-interest  expense,  offset by a decrease  in net  interest
income.

Net Interest Income.  Net interest income decreased $1,000,  from  approximately
$509,000 for the three months  ending  September  30, 1998,  to $508,000 for the
three months ending September 30, 1999. Net interest income decreased $23,000 to
$1.5 million for the nine months ending  September 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  September 30, 1999, as
compared to the same period in 1998.  The  decreases  for the three month period
ending  September  30,  1999,  was offset by a 36 basis  point  increase  in the
interest rate spread from 2.87% for the three months ending  September 30, 1998,
to 3.23% in 1999. The net interest margin increased 13 basis points to 4.08% for
the three months  ending  September  30,  1999,  from 3.95% for the three months
ending  September 30, 1998. The overall  decrease in net interest income for the
nine months ending

                                       9

<PAGE>

September  30, 1999,  primarily  reflects a $1.5 million net decrease in average
interest-earning assets over average interest-bearing  liabilities,  as compared
to the same  period in 1998.  The  decreases  for the nine month  period  ending
September 30, 1999, was offset by a 22 basis point increase in the interest rate
spread from 2.84% for the nine months  ending  September  30, 1998,  to 3.06% in
1999.  The net  interest  margin  increased 2 basis points to 3.95% for the nine
months  ending  September  30,  1999,  from  3.93%  for the nine  months  ending
September 30, 1998.

Interest Income.  Interest income decreased  $61,000,  from  approximately  $1.0
million for the three months  ending  September  30,  1998,  to $950,000 for the
three months  ending  September  30, 1999.  The decrease was  attributable  to a
decrease in average  interest-earning  assets of approximately $1.9 million from
$51.6  million at September  30, 1998,  to $49.7  million at September 30, 1999,
combined with a decrease in the average yield on  interest-earning  assets of 19
basis  points,  from 7.84% for the three months  ending  September  30, 1998, to
7.65% for the same period in 1999. Interest income decreased $133,000,  or 4.4%,
from  approximately  $3.0 million for the nine months ending September 30, 1998,
to approximately $2.9 million for the nine months ending September 30, 1999. The
decrease was  attributable to a decrease in average  interest-earning  assets of
approximately  $1.0 million,  from $51.5 million at September 30, 1998, to $50.5
million  at  September  30,  1999,  and a  decrease  in  the  average  yield  on
interest-earning  assets of 19 basis  points,  from  7.74%  for the nine  months
ending September 30, 1998, to 7.54% for the same period in 1999.

Interest on loans  decreased  $22,000 for the three months ending  September 30,
1999,  as compared  to the same period in 1998,  and $56,000 for the nine months
ending  September  30,  1999,  as  compared  to the same  period in 1998.  These
decreases  primarily  reflect a 43 basis point  decrease in the average yield on
loans for the three months ending  September 30, 1999,  from 8.44% in 1998,  and
for the nine months  ending  September  30,  1999, a decrease of 26 basis points
from 8.35% in 1998.

Interest on investment  securities  decreased $5,000 for the three months ending
September  30,  1999,  as  compared to the same  period in 1998,  and  increased
$28,000 for the nine months  ending  September 30, 1999, as compared to the same
period in 1998.  The  decrease in interest on  investments  for the three months
ending  September  30,  1999,  primarily  reflects an decrease of  approximately
$386,000 in the average  investment  balance for 1999,  compared to 1998,  and a
decrease in the average  yield on  investments  on 11 basis points from 5.37% in
1998,  to 5.26%.  The  increase in interest on  investments  for the nine months
ending  September  30,  1999,  primarily  reflects an increase of  approximately
$619,000 in the average  investment  balance for 1999,  compared to 1998, and an
increase in the average  yield on  investments  of 10 basis points from 5.18% in
1998, to 5.28% in 1999.

Interest on  interest-earning  deposits  decreased  $12,000 for the three months
ending September 30, 1999, as compared to the same period in 1998, and decreased
$32,000 for the nine months  ending  September 30, 1999, as compared to the same
period in 1998.  These  decreases in interest on  interest-earning  deposits for
three and nine months  ending  September 30, 1999,  compared to 1998,  primarily
reflects a decrease of approximately $1.0 million and $406,000, respectively, in
the

                                       10

<PAGE>

average  balance of  interest-earning  deposits.  Beginning in the September 30,
1999 quarter,  the Bank began to implement its Year 2000 Cash Contingency  Plan.
See "Liquidity and Capital Resources."

Interest on  mortgage-backed  securities  decreased $22,000 for the three months
ending  September 30, 1999, as compared to the same period in 1998,  and $73,000
for the nine months ending September 30, 1999, as compared to the same period in
1998,  as the  portfolio  continued to pay down  principal and those funds being
invested in other earning assets.

Interest Expense. Interest expense decreased $60,000 from $502,000 for the three
months  ending  September  30, 1998,  to $442,000  for the three  months  ending
September 30, 1999.  Interest expense decreased $110,000 from approximately $1.5
million for the nine months  ending  September 30, 1998, to $1.4 million for the
nine months ending  September 30, 1999. The decrease for the three months ending
September 30, 1999, was primarily the result of a 55 basis point decrease in the
average cost of funds,  and an  approximately  $376,000  decrease in the average
balance of deposits for the three months ending September 30, 1999,  compared to
1998. The decrease for the nine months ending  September 30, 1999, was primarily
the result of a 41 basis point decrease in the average cost of funds,  offset by
an  approximately  $437,000  increase in the average balance of deposits for the
nine months ending September 30, 1999, compared to 1998.

Provision  for Loan Losses.  The provision for loan losses was $8,000 and $9,000
for the three month period ending September 30, 1998 and 1999, respectively. The
provision  for loan losses was  $23,000  and  $27,000 for the nine month  period
ending  September  30, 1998 and 1999,  respectively.  The  Company's  management
routinely  performs an analysis to  quantify  the  inherent  risk of loss in its
portfolio.  At September 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
September 30, 1999, was 100.64%,  and nonperforming  assets represented 0.66% of
total consolidated assets. Nonperforming assets decreased $62,000 to $349,000 at
September 30, 1999, from $411,000 at September 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 $48,000 and $138,000 for the three and nine months ending  September
30, 1999,  respectively,  and $44,000 and $124,000 for the three and nine months
ending September 30, 1998, respectively.

Non-Interest Expense.  Non-interest expense increased $14,000, from $310,000 for
the three months ending  September 30, 1998, to $324,000 for 1999.  The increase
for the three month period was  primarily  the result of increased  compensation
expenses  of  $12,000.  Net  occupancy,  deposit  insurance  premiums,  and data
processing  expenses remained  relatively stable during the three month periods.
Non-interest expense decreased $74,000,  from approximately $1.0 million for the
nine months ending  September  30, 1998, to $930,000 for 1999.  The decrease was
primarily the

                                       11
<PAGE>

result of  decreased  compensation  expense  of  $57,000  and  $35,000  of other
expenses,  offset by a $12,000  increase in net  occupancy  expenses  during the
period. The decrease in compensation  expense for the nine months periods ending
September  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  nine  month  periods  ending
September 30, 1998 for the RSP awards was $151,000, compared to $103,000 for the
nine months  ending  September  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.
The  increase  in net  occupancy  expense  was mainly  attributable  to expenses
associated with the Bank's recently opened third branch office in Mountain City,
Tennessee.  Deposit insurance  premiums,  and data processing  expenses remained
relatively stable during the nine month periods.

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  continue  to  increase  for 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.

Income Taxes. Income tax expense for the three months ending September 30, 1999,
was $85,000, compared to $86,000 for the same period in 1998. Income tax expense
for the nine  months  ending  September  30,  1999,  was  $257,000,  compared to
$229,000  for the same period in 1998.  The  decrease for the three month period
ending September 30, 1999, compared to 1998 was principally due to lower pre-tax
income.  The  increase  for the nine month  period  ending  September  30, 1999,
compared to 1998,  was  principally  the result of higher  pre-tax  income.  The
effective  tax  rate for both the  three  and nine  months  in 1998 and 1999 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 September 30, 1999 were  approximately
$885,000.

Due to the year 2000,  the Company has  instituted  a cash  contingency  plan in
order to meet the  possible  larger cash  withdrawals  of  customers in December
1999. Such plan may decrease the Company's investment in interest earning assets
and may increase its investment in interest bearing liabilities, which may cause
the Company's net income to slightly decrease in the 1999 fourth quarter.

                                       12
<PAGE>


The Bank exceeded all of its capital  requirements  at September  30, 1999.  The
Bank had the following capital ratios at September 30, 1999:

<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 September 30, 1999:

   Total Capital
      (to risk weighted assets)     $    9,519       30.5%      $    2,494       8.0%      $    3,118       10.0%

   Tier I Capital
      (to risk weighted assets)     $    9,176       29.4%      $    1,247       4.0%      $    1,871        6.0%

   Tier I Capital
      (to total assets)             $    9,176       17.9%      $      935       3.0%      $    1,559        5.0%

   Tangible Capital
      (to total assets)             $    9,176       17.9%      $      468       1.50%     $    1,559        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 suppliers  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

                                       13

<PAGE>

vendors have provided  written  assurance.  Follow up requests have been sent to
any vendor not providing assurance or a replacement vendor is contacted.

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
September  and  October  1999.  The tests  involved  all  aspects of the on-line
account  processing  platform  utilizing  its new  teller  operating  system (as
discussed further below) and frame relay. 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 approximately
$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
            September  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
         ---------------------------------------------------

            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 1998 Annual Meeting of Stockholders, filed with the SEC on
                  March 31, 1999 (File No. 0-22587)

(b)       Reports on Form 8-K

          None.

                                       15
<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: November 5, 1999               By  /s/ Peter W. Hampton
     ------------------                  ---------------------------------------
                                         Peter W. Hampton
                                         (President and Chief Executive Officer)






Date: November 5, 1999               By  /s/ Bobby Hyatt
     ------------------                  ---------------------------------------
                                         Bobby Hyatt
                                         (Principal Accounting Officer)



                                       16