UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-QSB

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


        For the Quarter ended March 31, 1998 Commission File No. 0-25994


                                SFS BANCORP, INC.
             (Exact name of registrant as specified in its charter)



         DELAWARE                                    22-3366295
(State or other jurisdiction of                   (I.R.S. Employer 
incorporation or organization)                    Identification Number)


                   251-263 STATE STREET, SCHENECTADY, NY 12305
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (518) 395-2300 


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. 
                         Yes   [ X ]     No [   ]

Indicate the number of shares of outstanding of each of the issuer's  classes of
common stock, as of the latest practicable date:

                                                    Number of shares outstanding
      Class of Common Stock                             as of April 30, 1998
      ---------------------                       ---------------------------

      Common Stock, Par Value $.01                         1,208,472

Transitional Small Business Disclosure Format (Check One):  Yes [   ]   No [ X ]
<PAGE>
                        SFS BANCORP, INC. AND SUBSIDIARY

                                   FORM 10-QSB

                                 March 31, 1998


INDEX

Part I    FINANCIAL INFORMATION
 

Item 1.   Interim Financial Statements..........................................

            Consolidated Statements of Income for the three
            months ended March 31, 1998 and 1997, (Unaudited)...................

            Consolidated Statements of Financial Condition as
            of March 31, 1998, (Unaudited) and December 31, 1997................

            Consolidated Statements of Changes in Stockholders' Equity for
            the three months ended March 31, 1998 and 1997,  (Unaudited)........

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

            Notes to unaudited consolidated interim financial statements........

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

Part II   OTHER INFORMATION

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

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

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

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

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

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

Signatures......................................................................
<PAGE>


                        SFS BANCORP, INC. AND SUBSIDIARY

                                   FORM 10-QSB

                                 March 31, 1998



 -------------------------------------------------------------------------------


                         PART I - FINANCIAL INFORMATION


Item 1. - Interim Financial Statements

         SFS Bancorp,  Inc. (the  "Company") was formed in March of 1995 for the
purpose of acquiring all of the common stock of Schenectady Federal Savings Bank
(the  "Bank"),  concurrent  with its  conversion  from  mutual to stock  form of
ownership.  SFS Bancorp,  Inc.  completed its initial  public stock  offering of
1,495,000  shares of $.01 par value stock on June 29, 1995. The Company utilized
approximately  one half of the net stock sale  proceeds  to  acquire  all of the
common stock issued by the Bank.  For  additional  discussion  of the  Company's
formation and intended operations,  see the Form S-1 Registration Statement (No.
33-95422) filed with the Securities and Exchange Commission.

         The interim financial  statements presented in this Form 10-QSB reflect
the  consolidated  financial  condition and results of operations of the Company
and its subsidiary.
<PAGE>
<TABLE>
<CAPTION>
                           SFS BANCORP, INC. AND SUBSIDIARY
                           Consolidated Statements of Income
                         (In Thousands, Except Per Share Data)

                                                                    THREE MONTHS ENDED
                                                                          MARCH 31,
                                                                      1998       1997
                                                                     ------     ------
                                                                       (Unaudited)
<S>                                                                  <C>        <C>
Interest income:
      Loans ....................................................     $2,638      2,309
      Investment securities ....................................        434        554
      Federal funds sold and cash deposits .....................         19         47
      Securities available for sale ............................         71         37
      Stock in Federal Home Loan Bank ..........................         24         20
                                                                     ------     ------
             Total interest income .............................      3,186      2,967

Interest expense:
      Deposits .................................................      1,714      1,548
                                                                     ------     ------

             Net interest income ...............................      1,472      1,419

Provision for loan losses ......................................         30         30
                                                                     ------     ------

             Net interest income after provision for loan losses      1,442      1,389
                                                                     ------     ------
Noninterest income:
      Other loan charges .......................................         69         38
      Bank fees and service charges ............................         39         38
      Other ....................................................         25         15
                                                                     ------     ------
             Total noninterest income ..........................        133         91
                                                                     ------     ------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                           SFS BANCORP, INC. AND SUBSIDIARY
                           Consolidated Statements of Income
                         (In Thousands, Except Per Share Data)
                                     (continued)

                                                                    THREE MONTHS ENDED
                                                                          MARCH 31,
                                                                      1998       1997
                                                                     ------     ------
                                                                       (Unaudited)
<S>                                                                  <C>        <C>
Noninterest expense:
      Compensation and employee benefits .......................        726        695
      Advertising and business promotion .......................          9         42
      Office occupancy and equipment expense ...................        157        157
      Federal deposit insurance premiums .......................         23          5
      Other insurance premiums .................................         17         22
      Mortgage servicing fees ..................................          6          9
      Data processing fees .....................................         47         45
      Professional service fees ................................         61         65
      Other ....................................................         68         83
                                                                     ------     ------
             Total noninterest expense .........................      1,123      1,114
                                                                     ------     ------
                                                                                 
             Income before taxes ...............................        461        357

Income tax expense .............................................        132        191
                                                                     ------     ------
                                                                                   
             Net income ........................................     $  270        225
                                                                     ======     ======
Earnings per share:
     Basic .....................................................     $  .25        .20
                                                                     ======     ======
     Diluted ...................................................     $  .23        .19
                                                                     ======     ======
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                      SFS BANCORP, INC. AND SUBSIDIARY
                               Consolidated Statements of Financial Condition
                                     (in Thousands, Except Share Data)

                                                                                 March 31,     December 31,
                                                                                   1998             1997
                                                                                  ---------      ---------
Assets                                                                           (Unaudited)
<S>                                                                               <C>            <C>      
Cash and due from banks .....................................................     $   1,579          1,876
Federal funds sold ..........................................................         2,700            300
                                                                                  ---------      ---------
            Total cash and cash equivalents .................................         4,279          2,176

Securities available for sale, at fair value ................................         7,064          4,067
Investment securities (estimated fair value of $21,940
             at March 31, 1998 and $29,095 at December 31, 1997) ............        21,806         28,979
Stock in Federal Home Loan Bank of  NY, at cost..............................         1,338          1,338
Loans receivable, net .......................................................       136,912        133,786
Accrued interest receivable .................................................         1,006          1,130
Premises and equipment, net .................................................         2,215          2,242
Real estate owned ...........................................................            84            111
Prepaid expenses and other asset ............................................           716            599
                                                                                  ---------      ---------
            Total Assets ....................................................     $ 175,420        174,428

Liabilities and Stockholders' Equity
Liabilities:
    Due to depositors:
          Non-interest bearing deposits .....................................     $   2,387          2,265
          Savings and interest bearing demand deposits ......................        53,024         53,463
          Time deposit ......................................................        95,775         94,741
                                                                                  ---------      ---------
               Total Deposits ...............................................       151,186        150,469

     Advance payments by borrowers for property taxes and insurance .........         1,085          1,281
     Accrued expenses and other liabilities .................................         1,468          1,247
                                                                                  ---------      ---------
              Total Liabilities .............................................       153,739        152,997

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                      SFS BANCORP, INC. AND SUBSIDIARY
                               Consolidated Statements of Financial Condition
                                     (in Thousands, Except Share Data)
                                                (continued)

                                                                                 March 31,     December 31,
                                                                                   1998             1997
                                                                                  ---------      ---------
                                                                                (Unaudited)
<S>                                                                               <C>            <C>      
Stockholders' Equity:
   Preferred stock, $.01 par value.  Authorized 500,000 shares; none issued .          --             --
   Common stock, $.01 par value. Authorized 2,500,000 shares; 1,495,000
            shares issued  at March 31, 1998 and December 31, 1997 ..........            15             15
   Additional paid-in capital ...............................................        14,411         14,365
   Retained earnings, substantially restricted ..............................        12,594         12,422
   Common stock acquired by :
   Employee stock ownership plan ("ESOP") (83,720 shares) ...................          (837)          (837)
   Recognition and retention plan ("RRP") (41,680 shares) ...................          (420)          (455)
   Treasury stock, at cost (286,528 shares at  March 31, 1998 and
            December 31, 1997) ..............................................        (4,089)        (4,089)

   Accumulated other comprehensive income....................................             7             10
                                                                                  ---------      ---------
     Total Stockholders' Equity .............................................        21,681         21,431
                                                                                  ---------      ---------
     Total Liabilities and Stockholders' Equity .............................     $ 175,420        174,428
                                                                                  =========      =========
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                                  SFS BANCORP, INC. AND SUBSIDIARY
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                     (In Thousands) (Unaudited)

                                                                          Common      Common     Accumulated
                                         Additional                        Stock       Stock        Other
                               Common      Paid-in  Retained   Treasury  Acquired    Acquired   Comprehensive   Comprehensive       
                                Stock      Capital  Earnings     Stock     By ESOP     By RRP      Income          Income      Total
                                -----      -------  --------     ------     -------     ------     -----          ------       -----
<S>                             <C>         <C>      <C>          <C>       <C>        <C>          <C>           <C>      <C>      
Three Months                                                                                                                        
Ended  March 31, 1998                                                                                                               
                                                                                                                                    
Balance at December 31, 1997    $   15      14,365    12,422      (4,089)    (837)      (455)         10                     21,431 
                                                                                                                                    
Comprehensive income:                                                                                                               
  Net income                        --          --       270        --         --         --          --           $  270       270 


Other comprehensive income,
net of tax:
                                                                                                                                    
  Unrealized net holding losses                                                                                                     
      arising during the year                                                                                                       
      (pre-tax $5)                  --          --        --        --          --         --         (3)              (3)       (3)
                                                                                                                   ------           
Comprehensive income                                                                                               $  267           
                                                                                                                   ======           
                                                                                                                                    
Amortization of unearned RRP
      compensation                  --          --        --        --          --         35          --                        35 
                                                                                                                                    
Cash dividends  declared            --          --      (98)        --          --         --          --                       (98)
                                                                                                                                    
Tax benefit related to vested                                                                                                       
      RRP shares                    --          46        --        --          --         --          --                        46 
                                                                                                                                    
                                                                                                                                    
Purchase of Treasury shares         --          --        --        --          --         --          --                        -- 
                                ------      ------    ------       ------     ----       ----          --                   ------- 
                                                                                                                                    
Balance at March 31, 1998       $   15      14,411    12,594       (4,089)    (837)      (420)          7                    21,681 
                                ======      ======    ======       ======     ====       ====         ===                   ======= 
                                                                                                                                   
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                  SFS BANCORP, INC. AND SUBSIDIARY
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                     (In Thousands) (Unaudited)

                                                                             Common      Common    Accumulated
                                         Additional                           Stock      Stock       Other
                               Common      Paid-in  Retained     Treasury    Acquired   Acquired  Comprehensive Comprehensive
                                Stock      Capital  Earnings      Stock      By ESOP     By RRP      Income      Income     Total
                                -----      -------  --------      -----      ------     -------     ------      ------       -----
<S>                             <C>         <C>      <C>          <C>       <C>        <C>         <C>             <C>      <C>     
Three Months                                                                                                                        
Ended March 31, 1997                                                                                                                
                                                                                                                                    
Balance at December 31, 1996    $   15      14,260    11,687       46        (957)      (540)       (2,840)                   21,671
                                                                                                                                    
Comprehensive income:                                                                                                               
  Net income                        --          --       225       --          --         --            --         $   225      225 
  Unrealized net holding losses                                                                                                     
    arising during the period       
    (pre-tax $39)                   --          --        --      (24)         --         --            --             (24)     (24)
                                                                                                                   -------  
Comprehensive income                                                                                               $   201  
                                                                                                                   =======  
Amortizationof unearned RRP
    compensation                    --          --        --       --          --        137            --                      137 
                                                                                                                                    
Cash dividends declared             --          --      (76)       --          --         --            --                      (76)
                                                                                                                                    
Purchase of Treasury shares         --          --        --       --          --         --            --                       -- 
                                ------      ------    ------       --        ----       ----        ------                   -------
                                                                                                                                    
Balance at March 31, 1997       $   15      14,260     11,836      22        (957)      (403)       (2,840)                  21,933 
                                ======      ======    ======       ==        ====       ====        ======                  ======= 
</TABLE>                                                                       
See accompanying notes to unaudited consolidated interim financial statements. 
<PAGE>
<TABLE>
<CAPTION>
                                SFS BANCORP, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (In Thousands)

                                                                            Three Months Ended
                                                                                March 31,
                                                                             1998         1997
                                                                           -------      -------
                                                                                (Unaudited)
<S>                                                                        <C>          <C>
Increase (decrease) in cash and cash equivalents:           
    Reconciliation of net income to net cash provided
         by operating activities:
         Net income ..................................................     $   270          225
         Adjustments to reconcile net income to
            net cash provided by operating activities:
              Depreciation and amortization ..........................          51           42
              Net accretion on investment securities .................         (38)          (2)
              Net accretion on securities available for sale .........          (2)        --
              Amortization of unearned RRP compensation...............          35          137
              Provision for loan losses ..............................          30           30
              Decrease in accrued interest receivable ................         124          138
              Increase in prepaid expense and other assets ...........        (117)         (71)
              Increase in accrued expense and other liabilities ......         269          159
                                                                           -------      -------
                   Total adjustments .................................         352          433
                                                                           -------      -------
                 Net cash provided by operating activities ...........         622          658
                                                                           -------      -------
Cash flows from investing activities:
    Proceeds from maturity/paydown of investment securities ..........       6,044        1,229
    Purchase of securities available for sale ........................      (3,000)      (3,000)
    Purchase of Federal Home Loan Bank stock .........................        --           (123)
    Principal repayments on mortgage-backed securities ...............       1,167          777
    Net (increase) decrease in loans receivable ......................      (2,125)         187
    Purchase of loans receivable .....................................      (1,031)        (300)
    Capital expenditures, net of disposals ...........................         (24)        (315)
    Proceeds from the sale of real estate owned ......................          27          101
                                                                           -------      -------
                  Net cash provided (used) by investing activities ...       1,058       (1,444)
                                                                           -------      -------
Cash flows from financing activities:
    Net increase in deposits .........................................         717        3,758
    Net decrease in advance payments by borrowers for
         property taxes and insurance ................................        (196)        (211)
    Dividends paid ...................................................         (98)         (76)
                                                                           -------      -------
                  Net cash  provided by financing activities .........         423        3,471
                                                                           -------      -------
    Net increase in cash and cash equivalents ........................       2,103        2,685
    Cash and cash equivalents at beginning of period .................       2,176        2,896
                                                                           -------      -------
    Cash and cash equivalents at end of period .......................     $ 4,279        5,581
                                                                           =======      =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                SFS BANCORP, INC. AND SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (In Thousands)

                                                                            Three Months Ended
                                                                                March 31,
                                                                             1998         1997
                                                                           -------      -------
                                                                                (Unaudited)
<S>                                                                        <C>          <C>
Supplemental  disclosures of cash flow information:
Cash paid during the period for:
         Interest paid ...............................................     $ 1,728        1,549
                                                                           =======      =======
         Taxes paid ..................................................     $    15         --
                                                                           =======      =======
    Transfer of loans to other real estate owned .....................     $  --             12
                                                                           =======      =======
    Net unrealized loss on securities available for sale, net of taxes     $    (3)         (24)
                                                                           =======      =======
    Deferred tax (benefit) expense on unrealized gain/loss
         on securities available for sale ............................     $     2          (15)
                                                                           =======      =======

    Deferred tax benefit related to
         vested RRP shares............................................     $    46         --
                                                                           =======      =======
</TABLE>
See accompanying notes to unaudited consolidated interim financial statements.
<PAGE>
                        SFS BANCORP, INC. AND SUBSIDIARY
          NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

NOTE 1.  Presentation of Financial Information

The accompanying  unaudited  consolidated interim financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Rule 10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  The accompanying unaudited consolidated interim financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and the related  management's  discussion  and analysis of financial
condition  and  results of  operations  filed  with the 1997 Form  10-KSB of SFS
Bancorp,  Inc.  and  Subsidiary  (the  "Company").  Amounts  in  prior  periods'
unaudited  consolidated interim financial  statements are reclassified  whenever
necessary  to conform  to the  current  periods'  presentation.  The  results of
operations  for the three  months  ended  March 31,  1998,  are not  necessarily
indicative  of results that may be expected for the entire year ending  December
31, 1998.

The unaudited  consolidated interim financial statements include the accounts of
SFS Bancorp,  Inc.  (the  "Holding  Company")  and its wholly owned  subsidiary,
Schenectady Federal Savings Bank and subsidiary (the "Bank").


NOTE 2.  Earnings Per Share

The following is a  reconciliation  of the numerators and  denominators  for the
basic and diluted  earnings  per share (EPS)  calculations  for the three months
ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
                                     (in thousands except share and per share information)

                                                               1998
                                                             Weighted       Per Share
                                              Net Income   Average Shares    Amount
                                              ----------   --------------    ------
<S>                                            <C>           <C>           <C>
Basic EPS ................................     $     270     1,090,697     $   0.25
                                                                           ========
Dilutive effect of potential common shares
   related to stock based compensation ...          --          62,019
                                               ---------     ---------      
Diluted EPS ..............................     $     270     1,152,716     $   0.23
                                               =========     =========     ========
<CAPTION>
                                                               1997
                                                             Weighted       Per Share
                                              Net Income   Average Shares    Amount
                                              ----------   --------------    ------
<S>                                            <C>           <C>           <C>
Basic EPS ................................     $     225     1,139,687     $   0.20
                                                                           ========
Dilutive effect of potential common shares
   related to stock based compensation ...          --          33,396
                                               ---------     ---------      
Diluted EPS ..............................     $     225     1,173,084     $   0.19
                                               =========     =========     ========
</TABLE>
<PAGE>
NOTE 3.  Comprehensive Income

On January 1, 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting  Comprehensive  Income." This Statement
establishes  standards for reporting and display of comprehensive income and its
components.  Comprehensive  income includes the reported net income of a company
adjusted for items that are currently accounted for as direct entries to equity,
such as the mark to market adjustment on securities  available for sale, foreign
currency  items and  minimum  pension  liability  adjustments.  At the  Company,
comprehensive  income  represents  net income plus other  comprehensive  income,
which  consists of the net change in  unrealized  gains or losses on  securities
available  for sale  for the  period.  Accumulated  other  comprehensive  income
represents the net unrealized  gains or losses on securities  available for sale
as of the balance sheet dates.
<PAGE>
                        SFS BANCORP, INC. AND SUBSIDIARY

                                   FORM 10-QSB

                                 MARCH 31, 1998



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

General

SFS Bancorp, Inc. (the "Holding Company") is the holding company for Schenectady
Federal  Savings Bank and its  subsidiary  (the "Bank"),  a federally  chartered
stock savings bank. On June 29, 1995, the Bank  completed its conversion  from a
federal mutual savings and loan  association to a federal stock savings bank. On
that date, the Holding  Company  issued and sold 1,495,000  shares of its common
stock at $10.00 per share in connection with the conversion. Net proceeds to the
Holding  Company were $14.2  million  after  reflecting  conversion  expenses of
$750,000.  The Holding  Company used $7.1 million of the net proceeds to acquire
all of the issued and outstanding stock of the Bank.

The Bank operates as a thrift  institution with the principal business being the
solicitation of deposits from the general public; these deposits,  together with
funds generated from operations, are invested primarily in single-family,  owner
occupied  adjustable-rate  mortgage  loans.  The Bank is a member of the Federal
Home Loan Bank of New York ("FHLB") and is subject to certain regulations of the
Board of  Governors  of the  Federal  Reserve  System  with  respect to reserves
required to be maintained against deposits and certain other matters. The Bank's
deposit accounts are insured by the Savings Association Insurance Fund ("SAIF"),
as administered by the Federal Deposit Insurance Corporation ("FDIC"), up to the
maximum amount permitted by law. The Bank is subject to regulation by the Office
of Thrift  Supervision  ("OTS").  The Bank conducts its business  through a four
branch network  located in Schenectady  County  situated in eastern  upstate New
York. The Bank's  results of operations are dependent  primarily on net interest
income,  which is the difference  between the interest income earned on its loan
and mortgage-backed securities portfolios,  investment securities and securities
available for sale portfolios and other earning  assets,  and its cost of funds,
consisting of the interest paid on its deposits.  The Bank's  operating  results
are also impacted by the provision for loan losses,  and to a lesser extent,  by
gains and losses on the sale of its securities  available for sale portfolio and
other noninterest  income. The Bank's operating expenses  principally consist of
employee  compensation  and  benefits,  occupancy  expense and other general and
administrative expenses. The Bank's results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
market  interest  rates,  government  policies  and  actions  of the  regulatory
authorities.

Except for historical  information  contained  herein,  the matters contained in
this quarterly  report are  "forward-looking  statements"  that involve risk and
uncertainties,  including statements concerning future events or performance and
assumptions  and other  statements of historical  facts.  The Company  wishes to
caution its readers that the following  important factors,  among others,  could
cause the Company's actual results for subsequent  periods to differ  materially
from those  expressed in any  forward-looking  statement made by or on behalf of
the Company herein:
<PAGE>
      the effect of changes in laws and regulations, including federal and state
      banking  laws and  regulations,  with which the  Company  and its  banking
      subsidiary  must comply,  the cost of such  compliance  and the  potential
      material  adverse  effect if the Company or any of its banking  subsidiary
      were not in substantial  compliance  either  currently or in the future as
      applicable;

      the effect of changes in  accounting  policies  and  practices,  as may be
      adopted by the regulatory agencies as well as by the Financial  Accounting
      Standards  Board, or changes in the Company's  organization,  compensation
      and benefit plans;

      the effect on the Company's competitive position within its market area of
      increasing  consolidation  within  the  banking  industry  and  increasing
      competition from "larger regional" and out-of-state banking  organizations
      as well as non-bank providers of various financial services;

      the effect of unforeseen changes in interest rates;

      the effect of  changes in  business  cycles  and  downturns  in the local,
      regional, or national economies.



LIQUIDITY AND CAPITAL RESOURCES

The Company's most liquid assets are cash and cash equivalents and available for
sale  securities.  The  level of these  assets  is  dependent  on the  Company's
operating,  financing and investing activities during any given period. Cash and
cash equivalents of $2.2 million at December 31, 1997, increased $2.1 million to
$4.3  million at March 31, 1998  primarily  as a result of  increases in federal
funds sold.  The Company's  primary  sources of funds are deposits and principal
and interest  payments on its loan and securities  portfolios.  While maturities
and  scheduled   amortization  of  loans  and  securities  are,  in  general,  a
predictable  source of funds,  deposit  flows and loan  prepayments  are greatly
influenced by general interest rates, economic conditions and competition.

The Bank is required to maintain  minimum  levels of liquid assets as defined by
OTS Regulations.  This  requirement,  which may vary at the direction of the OTS
depending on economic  conditions and deposit flows,  is based upon a percentage
of deposits and  short-term  borrowings.  The required ratio of liquid assets to
deposits and short-term  borrowings is currently 4%. The Bank's  liquidity ratio
was 22.30% and 20.21% at March 31, 1998 and December 31, 1997, respectively.
<PAGE>
The Company's cash flows are comprised of three classifications: cash flows from
operating activities;  cash flows from investing activities; and cash flows from
financing   activities.   Net  cash  flows  provided  by  operating  activities,
consisting  primarily of interest and  dividends  received less interest paid on
deposits,  was  $622,000  and $658,000 for the three months ended March 31, 1998
and  1997,  respectively.  Net cash  used by  investing  activities,  consisting
primarily of  disbursements  for the  origination  and purchase of loans and the
acquisition  of  securities  available  for sale  partially  offset by principal
collections  on loans and  mortgage-backed  securities  and by proceeds from the
sale and  maturity of  securities,  was $1.4  million for the three months ended
March 31, 1997.  Net cash of $1.1  million was provided by investing  activities
for the three  months ended March 31, 1998 and  consisted  primarily of proceeds
from the maturity, call and paydown of investment securities and mortgage-backed
securities  offset by the  purchase  of  securities  available  for sale and the
increase  in  loans  receivable.  Net cash  provided  by  financing  activities,
consisting  primarily of a net increase in deposits  offset by a net decrease in
advance  payments by borrowers  for property  taxes and  insurance and dividends
paid,  was  $423,000  and $3.5 million for the three months ended March 31, 1998
and 1997, respectively.

During the three month  periods  ended March 31, 1998 and 1997,  the Company did
not  repurchase  any of its  shares.  The  Office  of Thrift  Supervision  (OTS)
restricts  the number of shares which may be  repurchased  during the three year
period following  conversion.  Generally,  only 5% of shares  outstanding may be
repurchased annually during the first three years following conversion. However,
the OTS has  allowed  additional  share  repurchases  of 5%  annually  based  on
extenuating facts and circumstances.

At March 31, 1998, the Bank's capital exceeded each of the capital  requirements
of the OTS. At March 31, 1998, the Bank's  tangible and core capital levels were
both $19.3 million (11.0% of total adjusted  assets) and its risk-based  capital
level was $20.1  million  (21.2% of total  risk-weighted  assets).  The  current
minimum  regulatory  capital ratio  requirements are 1.5% for tangible  capital,
3.0% for core capital and 8.0% for risk-weighted capital.


FINANCIAL CONDITION

Total assets  increased $ 1.0 million (0.6%) to $175.4 million at March 31, 1998
from $174.4 million at December 31, 1997.  This increase  occurred as securities
available  for  sale  grew  $3.0  million  (73.7%)  to $7.1  million  and  loans
receivable,  net increased  $3.1 million  (2.3%) to $136.9  million at March 31,
1998. Additionally, federal funds sold increased $2.4 million to $2.7 million at
March 31, 1998. Offsetting these increases was a combined decrease in investment
securities  and  mortgage-backed  securities  of $7.2  million  (24.8%) to $21.8
million at March 31, 1998.  The decrease in investment  securities was primarily
attributable to the calls of certain investment securities.

At March 31,  1998,  total  liabilities  were  $153.7  million  representing  an
increase of  $742,000  (0.5%)  from  December  31,  1997.  Stockholders'  equity
increased  $250,000  to $21.7  million at March 31,  1998 as  compared  to $21.4
million at December 31, 1997.  Retained earnings increased by $172,000 primarily
as a result of net income of the Company for the three month  period ended March
31, 1998 offset by dividends paid totaling $98,000.
<PAGE>
Nonperforming  assets decreased  $196,000 (13.4%) totaling $1.3 million at March
31,  1998,  compared  with $1.5  million  at  December  31,  1997.  The ratio of
nonperforming  loans to total  loans  receivable  was  .85% at March  31,  1998,
compared with 1.00% at December 31, 1997. The ratio of  nonperforming  assets to
total  assets at March 31,  1998,  was .72%  compared  with .84% at December 31,
1997.

Loan Receivable, Net

A summary of loans receivable, net at March 31, 1998 and December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
                                                       March 31,       December 31,  
                                                         1998              1997
                                                       ----------      ----------- 
<S>                                                     <C>            <C>
Loans secured by real estate:
   Residential:
      Conventional .............................        $104,842         100,277
      Home Equity ..............................          21,774          22,658
      FHA Insured ..............................           2,614           2,772
      VA Guaranteed ............................           1,849           2,028
   Commercial and multi-family .................           6,129           6,130
                                                        --------        --------
                                                         137,208         133,865
Other loans ....................................             589             721
                                                        --------        --------
                                                         137,797         134,586
                                                        --------        --------
Less:
   Unearned discount and net deferred loan fees               45              22
   Allowance for loan losses ...................             840             778
                                                        --------        --------

                                                             885             800
                                                        --------        --------

Loans receivable, net ..........................        $136,912         133,786
                                                        ========        ========
</TABLE>
The  following  table sets forth the  information  with regard to  nonperforming
assets.
<TABLE>
<CAPTION>
                                                         March 31,      December 31,  
                                                           1998            1997
                                                          ------          ------
<S>                                                       <C>             <C> 
Loans on a nonaccrual status ...................          $1,159           1,328
Loans contractually past due 90 days or
   more and still accruing interest ............              19              19
                                                          ------          ------
      Total nonperforming loans ................           1,178           1,347
Other real estate owned ........................              84             111
                                                          ------          ------
      Total nonperforming assets ...............          $1,262           1,458
                                                          ======          ======
</TABLE>
<PAGE>
The  following  table sets forth the  information  with regard to changes in the
allowance for loan losses.
<TABLE>
<CAPTION>
                                                           For the three months
                                                               ended March 31,
                                                           ---------------------
                                                             1998           1997
                                                             ----           ----
<S>                                                          <C>            <C>
Balance, beginning of period ......................          $778           642
Provision charged to operations ...................            30            30
Loans charged off .................................           --             (2)
Recoveries on loans previously charged off ........            32             6
                                                             ----          ----

Balance, end of period ............................          $840           676
                                                             ====          ====

</TABLE>
Average Balance Data,  Interest Rates and Interest  Differential and Rate/Volume
Analysis

The following  information  regarding average balances and rates earned/paid and
the rate/volume analysis is an integral component of the discussion of operating
results  for  the  three  months  ended  March  31,  1998,   compared  with  the
corresponding period of the prior year.

The average  balance data that follows  reflects the average yield on assets and
average cost of liabilities for the periods indicated. Such yields and costs are
derived by  dividing  income or  expenses  by the  average  balance of assets or
liabilities,  respectively,  for the periods shown. The yields and costs include
fees which are considered adjustments to yields.

The rate/volume  analysis table presents the extent to which changes in interest
rates and changes in the volume of interest-earning  assets and interest-bearing
liabilities have affected the Bank's interest income and interest expense during
the periods indicated.  Information is provided in each category with respect to
(i) changes  attributable to changes in volume (changes in volume  multiplied by
prior  rate),  (ii)  changes  attributable  to changes in rate  (changes in rate
multiplied by prior volume),  and (iii) the net change. The changes attributable
to the combined impact of volume and rate have been allocated proportionately to
the changes due to volume and the changes due to rate.
<PAGE>
<TABLE>
<CAPTION>
                                             SFS BANCORP, INC. AND SUBSIDIARY
                              Average Balance Data, Interest Rates and Interest Differential
                                            (Dollars in Thousands) (Unaudited)

                                                                  THREE MONTHS ENDED MARCH  31,
                                       ---------------------------------------------------------------------------------
                                                         1998                                        1997
                                       -----------------------------------------   -------------------------------------

                                          AVERAGE       INTEREST                      AVERAGE        INTEREST
                                       OUTSTANDING      EARNED/          YIELD/     OUTSTANDING       EARNED/     YIELD/
                                          BALANCE         PAID           RATE          BALANCE        PAID         RATE
                                          --------      --------         ----         --------     --------        ----     
<S>                                       <C>           <C>              <C>          <C>          <C>             <C>
Interest-earning assets:
      Loans receivable, net (1) .....     $135,377      $  2,638         7.90%        $118,970     $  2,309        7.87%    
      Mortgage-backed securities ....       16,545           259         6.35           20,028          317        6.42     
      Securities available for sale .        4,308            71         6.68            2,458           37        6.10     
      Debt securities ...............       10,419           175         6.81           14,910          237        6.45     
      Other interest-earning asset                                                                                          
           including cash equivalents        1,461            19         5.27            3,654           47        5.22     
       FHLB stock ...................        1,338            24         7.27            1,271           20        6.38     
                                          --------      --------                      --------     --------  
Total interest-earning assets .......      169,448         3,186         7.63          161,291        2,967        7.46  
                                          --------      --------                      --------     --------   
                                                                                                                         
      Savings accounts ..............       36,323           269         3.00           37,034          275        3.01  
      Money market accounts .........        7,448            63         3.38            6,300           52        3.35  
      Demand and NOW accounts (2) ...       10,514            37         1.43           10,549           38        1.46  
      Certificate accounts ..........       95,474         1,340         5.69           88,250        1,179        5.42  
      Escrow ........................          952             5         2.13              808            4        2.01  
                                          --------      --------                      --------     --------  
Total interest-bearing liabilities ..      150,821         1,714         4.61          142,941        1,548        4.39  
                                          --------      --------                      --------     --------    
                                                                                                                         
Net interest income .................                   $  1,472                                   $  1,419                     
                                                        ========                                   ========   
                                                                                                                         
Net interest rate spread ............                                    3.02%                                     3.07% 
                                                                         ====                                      ====  
Net earning assets ..................     $ 18,627                                    $ 18,350                           
                                          ========                                    ========  
Net yield on average                                                                                                     
       interest-earning assets ......                                    3.52%                                     3.57% 
                                                                         ====                                      ====  
Average interest-earning                                                                                                 
       assets to average                                                                                                 
       interest-bearing liabilities .         1.12X                                      1.13X       
                                              =====                                      =====
</TABLE>
(1) Calculated net of deferred loan fees and includes nonaccrual loans.
(2) Includes noninterest-bearing demand accounts.
<PAGE>
<TABLE>
<CAPTION>
                           SFS BANCORP, INC. AND SUBSIDIARY
                                 RATE VOLUME ANALYSIS
                              (In Thousands) (Unaudited)

                          THREE MONTHS ENDED MARCH 31, 1998
                                    COMPARED WITH
                          THREE MONTHS ENDED MARCH 31, 1997


                                              INCREASE   (DECREASE)
                                                      DUE TO
                                           VOLUME             RATE            NET
                                           ------             ----            ---
<S>                                       <C>               <C>            <C>
Interest-earning assets:
  Loans receivable, net                   $   319                 9             328
  Mortgage-backed securities                 ( 55 )             ( 3 )          ( 58)
  Securities-available for sale                31                 3              34
  Debt securities                            ( 76 )              14            ( 62)
  Other interest-earning assets              ( 29 )               1            ( 28)
  FHLB stock                                    1                 3               4
                                          -------           -------        -------- 
Total interest-earning assets             $   191                27             218
                                          =======           =======        ========

Interest-bearing liabilities:
  Savings deposits                        $   ( 5 )             ( 1 )           ( 6 )
  Money market accounts                        10                 1               11
  Demand and NOW deposits                       0               ( 1 )           ( 1 )
  Certificate accounts                         98                62             160
  Escrow                                        1                 0               1
                                          -------           -------        --------                                            

Total interest-bearing liabilities        $   104                61             165
                                          ========          =======        ======== 

 Change in net interest income                                             $     53
                                                                           ======== 
</TABLE>
<PAGE>
COMPARISONS OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 1997

Three months ended March 31, 1998 compared with 1997

Net income for the quarter  ended  March 31,  1998,  was  $270,000 or $.25 basic
earnings per share and $.23  diluted  earnings per share.  This  represented  an
increase of $45,000  (20.0%) from the comparable  quarter of the prior year. The
increase in net income was primarily attributable to an increase in net interest
income and an increase in noninterest income.  These increases were offset by an
increase in income tax expense.  The provision  for loan losses and  noninterest
expense were consistent with the same quarter a year ago. The annualized  return
on average assets ("ROA") for the current quarter amounted to .62% compared with
 .54% for the  comparable  quarter a year ago. The  annualized  return on average
equity  ("ROE") was 5.10% (on average  equity of $21.1  million)  compared  with
4.19% (on average equity of $21.5 million) a year earlier.

Interest income for the three months ended March 31, 1998, totaled $3.2 million,
an increase of $219,000  (7.4%) from 1997's first  quarter.  Average  loans as a
percentage  of total  interest-earning  assets  increased  from 73.8% during the
first quarter 1997 to 79.9% for the same period in 1998. Meanwhile, the combined
average  balances as a percentage of total  interest-earning  assets of mortgage
backed securities,  securities  available for sale and debt securities decreased
from 23.2% in 1997 to 18.5% in 1998. The factors contributing to the increase in
interest  income was an increase in earnings on loans which  increased  $329,000
(14.2%) as a result of a $16.4 million  (13.8%)  increase in the average balance
invested  combined  with a 3 basis  point  increase  in  average  rates  earned.
Interest earned on  mortgage-backed  securities  decreased  $58,000 (18.3%) as a
result of the combined effect of a $3.5 million (17.4%)  decrease in the average
balance invested and a 7 basis point decrease in average rates earned.  Interest
income on securities available for sale increased $34,000 (91.9%) as a result of
an increase of $1.8 million  (75.3%) in the average  invested  balance  combined
with an increase of 58 basis points in average rates earned.  Interest income on
debt securities  decreased  $62,000 (26.2%) as a result of a decrease in average
invested  balances of $4.5 million (30.1%) offset by an increase in rates earned
of 36 basis points. Earnings on other interest earning assets, primarily federal
funds sold,  decreased  $28,000  (59.6%) as a result of a $2.2  million  (60.0%)
decrease in the average  invested  balance offset by a 5 basis point increase in
the average rate earned.

Interest expense for the quarter ended March 31, 1998, amounted to $1.7 million,
$166,000 (10.7%) greater than the  corresponding  quarter of the prior year. The
increase  occurred  as a result of a $7.9  million  (5.5%)  increase  in average
interest  bearing  liabilities to $150.8 million  combined with a 22 basis point
increase in average  rates paid to 4.61%.  The mix within the deposit  structure
changed as the average  balances  grew in  certificate  accounts by $7.2 million
(8.2%) and in money market  accounts by $1.3 million  (20.0%).  Average  savings
account balance declined $711,000 (1.9%).  The increase in average rates paid on
certificate  accounts of 27 basis  points to 5.69% was a  reflection  of general
interest rates and a competitive  environment  that  prevailed  during the first
quarter of 1998 compared with 1997.

Net  interest  income for the three  months  ended March 31, 1998  totaled  $1.5
million,  $53,000  (3.7%)  greater than the  comparable  quarter a year ago. The
interest  rate spread  decreased 5 basis  points to 3.02% for the quarter  ended
March 31, 1998. The net interest margin for the most recent quarter of 3.52% was
5 basis points less than the comparable quarter a year ago.
<PAGE>
Provision for Loan Losses

The provision for loan losses  amounted to $30,000 for the quarters  ended March
31, 1998 and 1997.  The Bank  utilizes the provision for loan losses to maintain
an allowance for loan losses that it deems  appropriate to provide for known and
inherent  risks  in its loan  portfolio.  In  determining  the  adequacy  of its
allowance for loan losses,  management  takes into account the current status of
the Bank's loan portfolio and changes in appraised  values of collateral as well
as general economic  conditions.  As of March 31, 1998, the Bank's allowance for
loan  losses  totaled  $840,000  (0.61%  of total  gross  loans  and  71..3%  of
nonperforming  loans)  compared  with  $778,000  (0.58% of total gross loans and
57.8% of nonperforming loans) at December 31, 1997.

Noninterest Income

Noninterest  income  amounted to $133,000  for the three  months ended March 31,
1998  compared to $91,000 for the three months ended March 31, 1997.  Other loan
charges increased $31,000 (81.6%) to $69,000.

Noninterest Expense

Noninterest expense decreased $9,000 (0.8%) to $1.1 million for the three months
ended March 31, 1998, as compared with the same period in 1997. Compensation and
employee benefits increased $31,000 (4.5%) between the respective quarters. This
increase was a result of annual merit increases and increased  employee benefits
partially  due to  increases  in the  employee  stock  ownership  plan  expense.
Advertising and business promotion decreased $33,000 (78.6%) to $9,000 resulting
primarily  from  increased  advertising  in relation  to the new branch  opening
during the first quarter in 1997. FDIC premiums  increased  $18,000  (360.0%) to
$23,000 as a result of the SAIF insurance premium refunded the Bank in the first
quarter of 1997 which had been paid in the fourth quarter of 1996  subsequent to
the capitalization of SAIF. Other noninterest  expense decreased $15,000 (18.1%)
to $68,000 due in part to expenses associated with the opening of the new branch
in 1997 which were not  incurred in the current  period.  Office  occupancy  and
equipment  expense,  other  insurance  premiums,  mortgage  servicing fees, data
processing fees and professional  service fees remained  relatively the same for
the quarters ended March 31, 1998 and March 31, 1997.

Income Tax Expense

Income tax expense  totaled  $191,000  and  $132,000  for the three months ended
March 31, 1998 and 1997,  respectively.  The  increase in income tax expense was
primarily  attributable to the $104,000  (29.1%) increase in income before taxes
to $461,000 for the three months ended March 31, 1998.

Impact of New Accounting Standards

In February 1998, the Financial  Accounting  Standards Board issued Statement of
Financial Accounting  Standards No. 132,  "Employers'  Disclosure about Pensions
and Other Postretirement Benefits," (Statement 132), which amends the disclosure
requirements for Statement of Financial  Account  Standards No. 87,  "Employers'
Accounting  for Pensions,"  (Statement  87),  Statement of Financial  Accounting
Standards No. 88,  "Employers'  Accounting for Settlement  and  Curtailments  of
Defined Benefit Pension Plans and for Termination of Benefits,"  (Statement 88),
and Statement of Financial Accounting Standards No. 106, "Employers'  Accounting
for Postretirement Benefits Other Than Pensions," (Statement 106). Statement 132
<PAGE>
+standardizes  the disclosure  requirements of Statement 87 and Statement 106 to
the  extent   practicable  and  recommends  a  parallel  format  for  presenting
information about pensions and other postretirement  benefits. This Statement is
applicable to all entities and addresses disclosure only. The Statement does not
change  any  of  the  measurement  or  recognition  provisions  provided  for in
Statements 87, 88, or 106. The Statement is effective for fiscal years beginning
after  December  15,  1997.   Management   anticipates  providing  the  required
disclosures in the December 31, 1998 consolidated financial statements.

Impact of the Year 2000

The  Company  is aware of the issues  associated  with the  programming  code in
existing computer systems as the millennium ("Year 2000")  approaches.  The Year
2000 problem is pervasive and complex as virtually every computer operation will
be affected  in some way by the  rollover of the two digit year value to 00. The
issue is  whether  computer  systems  will  properly  recognize  date  sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.

The Company is  utilizing  both  internal  and  external  resources to identify,
correct or  reprogram,  and test its  systems  for Year 2000  compliance.  It is
anticipated  that all  reprogramming  efforts  will be completed by December 31,
1998,  allowing  adequate  time for testing.  To date,  confirmations  have been
received  from the  Company's  primary  processing  vendors that plans are being
developed to address  processing of transactions  in the year 2000.  Incremental
expenses related to this issue are not, at this time, expected to be material to
the performance of the Company.

The risks of this issue go beyond the  Company's  own  ability to solve the Year
2000 issues.  Should  suppliers of critical  services  fail in their  efforts to
become Year 2000 compliant,  or if significant third party interfaces fail to be
compatible with SFS Bancorp,  Inc. or fail to be Year 2000  compliant,  it could
have significant  adverse affects on the operations and financial results of the
Company.  Accordingly,  the  Company  has  begun  a  process  of  assessing  and
monitoring  the progress of all vendors of services  and third party  interfaces
for  compatibility  and Year 2000  compliance.  Management  intends  to  develop
contingency  plans for all  vendors  and/or  interfaces  deemed to  inadequately
address the problems of the Year 2000.
<PAGE>


                        SFS BANCORP, INC. AND SUBSIDIARY
                                   FORM 10-QSB
                                 MARCH 31, 1998


                           PART II - OTHER INFORMATION

Item 1.       Legal Proceedings
              The  Holding  Company  and the Bank are not  engaged  in any legal
              proceedings of a material nature at the present time.

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) Exhibits
                  None

              (b) Reports on Form 8-K
                  None


<PAGE>


                                   SIGNATURES


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



                                             SFS BANCORP, INC.
                                               (Registrant)

DATE:  May 15, 1998                    BY:/s/ Joseph H. Giaquinto
                                          -----------------------
                                          Joseph H. Giaquinto
                                          Chairman of the Board,
                                          President and Chief Executive Officer
                                          (Duly Authorized Officer)


DATE:  May 15, 1998                    BY:/s/ David J. Jurczynski
                                          -----------------------
                                          David J. Jurczynski
                                          Senior Vice President, Treasurer and
                                          Chief Financial Officer
                                          (Principal Financial Officer)