SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.
                                
                           FORM 10-QSB
                                
         [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934
                                
        For the quarterly period ended September 30, 1998
                                
                               OR
                                
         [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT
                                
      For the transition period from           to          
                                     ---------    ---------

                    Commission File No. 0-28934

                    Empire Federal Bancorp, Inc.   
      ------------------------------------------------------
      (Exact name of registrant as specified in its charter)

          Delaware                                81-0512374 
-------------------------------        ------------------------------------
(State or other jurisdiction of        (I.R.S. Employer Identification No.) 
incorporation or organization)   
                               
           123 South Main Street, Livingston, Montana  59047  
           -------------------------------------------------
               (Address of principal executive offices)

                            (406) 222-1981        
         ---------------------------------------------------
         (Registrant's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the past 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 
    ---     ---    
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.

      Class:  Common Stock, par value $.01 per share
              Outstanding at October 31, 1998: 2,339,370
Transitional Small Business Disclosure Format (check one):  YES    NO  X 
                                                                ---   ---


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                        EMPIRE FEDERAL BANCORP, INC.
                                
                           INDEX TO FORM 10-QSB
                                
                                                                       Page
PART I  FINANCIAL INFORMATION                                          ----
        ---------------------

tem 1. Financial Statements
  
         Consolidated Statements of Financial Condition at 
         September 30, 1998 and December 31, 1997 (unaudited)..........   1
   
         Consolidated Statements of Income for the Three and 
         Nine Months Ended September 30, 1998 and 1997 (unaudited).....   2
     
         Consolidated Statements of Cash Flows for the Nine 
         Months Ended September 30, 1998 and 1997 (unaudited)..........   3
     
         Notes to Unaudited Interim Consolidated Financial Statements..   4
     
Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations ....................................   7
  
PART II OTHER INFORMATION
        -----------------

Item 1. Legal Proceedings..............................................  13
  
Item 2. Changes in Securities..........................................  13
 
Item 3. Defaults upon Senior Securities................................  13
  
Item 4. Submission of Matters to a Vote of Security Holders............  13
  
Item 5. Other Information..............................................  13
  
Item 6. Exhibits and Reports on Form 8-K...............................  13
  
SIGNATURES.............................................................  14

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Part I, Item 1 - Financial Statements
-------------------------------------

               EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES 
                       Consolidated Balance Sheets
                                      
                                      
                                                September 30,   December 31,
      Assets                                        1998           1997  
      ------                                        ----           ----
                                                (unaudited)    (unaudited)

Cash and cash equivalents                     $   875,366    $   1,078,823
Interest-bearing deposits                       3,488,833        1,825,208
Investment and mortgage-backed securities 
  available-for-sale                           34,263,207       36,495,581
Investment and mortgage-backed securities 
  held-to-maturity (estimated market
  value of $12,839,698 at September 30, 
  1998 and $20,802,559 at December
  31, 1997)                                    12,643,276       20,556,479
Loans receivable, net                          49,890,763       45,713,508
Stock in Federal Home Loan Bank of Seattle,
  at cost                                       1,334,600        1,261,100
Accrued interest receivable                       354,880          427,496
Premises and equipment, net                     2,053,050        2,051,238
Prepaid expenses and other assets                 295,305          391,470
                                            -------------    -------------
      Total assets                          $ 105,199,280    $ 109,800,903
                                            =============    =============
  Liabilities and Stockholders' Equity
  ------------------------------------
Liabilities:
   Passbook Accounts                        $  13,901,662    $  13,572,343
   NOW Accounts                                13,578,862       14,838,604
   Certificates of Deposit                     37,932,683       38,448,145
                                            -------------    -------------
      Total Deposits                           65,413,207       66,859,092
   Note Payable                                   660,461          698,136
   Advances from borrowers for taxes and 
    insurance                                     402,571          208,258
   Accrued expenses and other liabilities       1,282,993        1,437,029
                                            -------------    -------------
      Total liabilities                        67,759,232       69,202,515

Stockholders' equity:
  Preferred stock, par value $.01 per share, 
   250,000 shares authorized, none issued and
   outstanding                                         --               --     
  Common stock, par value $.01 per share, 
   4,000,000 shares authorized, 2,592,100 
   issued                                          25,921           25,921
  Additional paid-in capital                   25,277,188       25,208,225
  Unearned ESOP and MRDP compensation          (3,018,530)      (2,737,305)
  Retained earnings, substantially restricted  17,187,903       16,815,367
  Accumulated other comprehensive income, net   1,614,485        1,286,180
  Treasury stock, at cost                      (3,646,919)              --
                                             ------------     ------------
            Total stockholders's equity        37,440,048       40,598,388
                                             ------------     ------------
      Total liabilities and stockholders' 
        equity                               $105,199,280     $109,800,903
                                             ============     ============

See accompanying notes to unaudited interim consolidated financial statements.

                                        1

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                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Income
           Three and Nine Months Ended September 30, 1998 and 1997
                                      
                                 Three Months Ended      Nine Months Ended
                                   September 30             September 30 
                               --------------------     -------------------
                                1998          1997       1998         1997
                                ----          ----       ----         ----
                                    (unaudited)        (unaudited)(unaudited) 
(unaudited)
Interest income:
  Loans receivable         $ 1,041,486  $   921,616  $ 3,006,795  $ 2,748,973
  Mortgage-backed 
   securities                  749,987      787,957    2,329,374    2,165,067
  Investment securities         82,590      181,504      289,633      454,137
  Other                         44,268       66,344      170,540      392,852
                           -----------  -----------  -----------  -----------  
    Total interest income    1,918,331    1,957,421    5,796,342    5,761,029
                           -----------  -----------  -----------  -----------  
Interest expense:                              
  Deposits                     732,890      761,493    2,211,511    2,245,760
  Advances from Federal 
   Home Loan Bank and other     15,276       17,285       47,044       81,638
                           -----------  -----------  -----------  -----------  
    Total interest expense     748,166      778,778    2,258,555    2,327,398
                           -----------  -----------  -----------  -----------  
  Net interest income        1,170,165    1,178,643    3,537,787    3,433,631

Provision for loan losses           --           --           --       19,895
                           -----------  -----------  -----------  -----------  
  Net interest income after
   provision for loan 
   losses                    1,170,165    1,178,643    3,537,787    3,413,736

Non-interest income:
  Insurance commission 
   income                      173,528      161,130      474,845      469,700
  Customer service charges      53,884       50,623      150,789      135,727
  Other                          3,968        8,695       18,915       17,398
                           -----------  -----------  -----------  -----------  
    Total non-interest
     income                    231,380      220,448      644,549      622,825

Non-interest expense:
  Compensation and benefits    851,698      432,674    1,731,154    1,187,636
  Occupancy and equipment       71,952       84,919      237,164      245,295
  Deposit insurance premiums    26,995       27,563       61,949       67,620
  Other                        172,065      188,034      539,017      548,657
                           -----------  -----------  -----------  -----------  
    Total non-interest
     expense                 1,122,710      733,190    2,569,284    2,049,208
                           -----------  -----------  -----------  -----------  
    Income before income
     taxes                     278,835      665,901    1,613,052    1,987,353

Income taxes                   148,176      257,421      687,223      783,377
                           -----------  -----------  -----------  -----------  
                                              
    Net income             $   130,659  $   408,480  $   925,829  $ 1,203,976
                           ===========  ===========  ===========  =========== 
Basic earnings per share   $      0.07  $      0.17  $      0.41  $      0.50
                           ===========  ===========  ===========  =========== 
Diluted earnings per share $      0.07  $      0.17  $      0.41  $      0.50
                           ===========  ===========  ===========  =========== 

See accompanying notes to unaudited interim consolidated financial statements.

                                    2

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                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
                                      
                    Consolidated Statements of Cash Flows
                                      
                Nine Months Ended September 30, 1998 and 1997
                                      
                                      
                                                      Nine Months Ended
                                                         September 30,
                                                    -----------------------
                                                       1998         1997
                                                       ----         ----
                                                    (unaudited)  (unaudited)
Cash flows from operating activities:
Net income                                      $    925,829  $   1,203,976
Adjustments to reconcile net income to net 
  cash provided by operating activities:
   Provision for loan losses                              --         19,895
  Depreciation                                       119,836        114,814
  ESOP shares committed to be released               168,860        161,762
  MRDP shares vested                                 545,854             --
  Stock dividends reinvested in Federal 
   Home Loan Bank                                    (73,500)       (67,400)
  Decrease (increase) in accrued interest 
   receivable                                         72,616        (82,348)
  Decrease in prepaid expenses and other assets       96,392        163,949
  Decrease in accrued expenses and other 
   liabilities                                      (364,163)      (508,352)
                                                 -----------  -------------
     Net cash provided by operating activities     1,491,724      1,006,296

Cash flows from investing activities:
  Net change in interest-bearing deposits         (1,663,625)    25,118,807
  Net change in loans receivable                  (4,177,255)    (2,660,872)
  Proceeds from matured or called investment 
   securities held-to-maturity                     1,500,200        248,750
  Principal payments on mortgage-backed 
   securities held-to maturity                     9,777,288      3,075,733
  Purchases of investment securities 
   available-for-sale                               (500,000)    (8,864,495)
  Proceeds from called investment securities
   available for sale                              4,500,000      2,412,500
  Principal payments on mortgage-backed 
   securities available-for sale                   6,413,003      3,116,616
  Purchases of mortgage-backed securities
   available-for-sale                            (11,006,709)   (16,029,505)
     Purchases of premises and equipment            (121,648)      (870,776)
                                                 -----------  -------------
       Net cash provided by investing
         activities                                4,721,254      5,546,758
                                                 -----------  -------------
Cash flows from financing activities:
  Net change in deposits                          (1,445,885)       448,082
  Repayment of note and advances from FHLB           (37,675)    (1,039,800)
  Net change in advances from borrowers for 
   taxes and insurance                               194,313        215,203
  Dividends paid                                    (553,293)      (357,710)
  Funding of MRDP trust                             (926,976)      (801,875)
  Refund of stock oversubscription                        --     (6,987,070)
  Proceeds from advances from Federal Home
   Loan Bank                                              --      1,750,000
  Purchase of treasury stock                      (3,646,919)            --
                                                 -----------  -------------
     Net cash used in financing activities        (6,416,435)    (6,773,170)

                                                 -----------  -------------
Net decrease in cash and cash equivalents           (203,457)      (220,116)

Cash and cash equivalents, beginning of period     1,078,823      1,165,164
                                                 -----------  -------------
Cash and cash equivalents, end of period         $   875,366  $     945,048
                                                 ===========  =============

See accompanying notes to unaudited interim consolidated financial statements.

                                      3

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                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

      Notes to Unaudited Condensed Consolidated Financial Statements
                           September 30, 1998
                                 
Note 1 Basis of Presentation
       ---------------------

       The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information.  Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for audited financial statements.  They should be read in conjunction with the
audited consolidated financial statements filed as part of the Annual Report
on Form 10-KSB for the year ended December 31, 1997.

       The accompanying consolidated financial statements include the accounts
of Empire Federal Bancorp, Inc. (the Holding Company) and its wholly-owned
subsidiary, Empire Federal Savings Bank (Empire) and Dime Service Corporation
(Dime), a wholly-owned subsidiary of Empire.  The Holding Company, Empire and
Dime are herein referred to collectively as "the Company."  All significant
intercompany balances and transactions have been eliminated in consolidation.

       In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentations have been
included.  The results of operations for the nine months ended September 30,
1998, and 1997 are not necessarily indicative of the results which may be
expected for an entire year or any other period.

Note 2 New Accounting Pronouncements
       -----------------------------

       In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS') No. 130 "Reporting
Comprehensive Income," which establishes standards for reporting and display
of comprehensive income and its components in a full set of general-purpose
financial statements.  This statement requires that all items required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence
as other financial information.  The Company adopted the provisions of SFAS
No. 130 as of January 1, 1998.  The only additional component of comprehensive
income other than net income is the Company's net unrealized gains or losses
on securities available-for-sale.  The following summarizes accumulated other
comprehensive income for the periods ended September 30, 1998, and 1997, and
for the year ended December 31, 1997:

                                                                 
                                                Accumulated Other
                                             Comprehensive Income, Net 
                                 ---------------------------------------------
                                      Nine Months Ended            Year Ended
                                 Sept. 30, 1998   Sept. 30, 1997 Dec. 31, 1997
                                 --------------   -------------- -------------
Beginning of period                 $1,286,180     $   752,458    $   752,458
Increase in unrealized gains on
 securities-available-for-sale, net    328,305         383,958        533,722
                                    ----------     -----------    -----------
Ending balance                      $1,614,485     $ 1,136,416    $ 1,286,180
                                    ==========     ===========    =========== 

                                     4

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               EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

       The increases in unrealized gains on securities-available-for-sale are
shown net of tax.  Federal and state income taxes related to the unrealized
gains are $210,000 and $198,000 for the nine-month periods ended September 30,
1998 and 1997, and $341,000 for the year ended December 31, 1997.

Note 3 Earnings Per Share
       ------------------

       In February 1997, FASB issued SFAS No. 128, "Earnings Per Share."  SFAS
No. 128 replaces the presentation of primary earnings per share (EPS) with a
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures.  SFAS No. 128 also requires a
reconciliation of the numerator and denominator of the basic and diluted EPS
computation.

       Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period.  Additionally, ESOP shares which are
unallocated and not yet committed to be released (unallocated) and unvested
MRDP shares issued are excluded from the weighted-average common shares
outstanding calculation.  At September 30, 1998, there were 13,825 allocated
shares and 10,386 committed to be released ESOP shares.  There were 32,833
vested MRDP shares.  The weighted-average common shares outstanding for the
nine months ended September 30, 1998, was 2,250,094, which is net of
weighted-average unallocated ESOP and unvested MRDP shares.

       Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or resulted
in the issuance of common stock that would share in the earnings of the
entity.  At September 30, 1998, outstanding stock options and unvested MRDP
shares did not result in dilution of EPS.  Dilutive potential common shares
are added to the weighted-average shares used to compute basic EPS.  The
following information provides a reconciliation of the numerators and
denominators of the basic and fully diluted EPS computation:

                              For the nine months ended September 30, 1998     

                              
                              Net Income           Shares       Per-Share
                              (Numerator)    (Denominator)         Amount   
Basic EPS

 Net income available to
   common stockholders        $  925,829         2,276,773         $0.41
                              ==========                           =====
Effect of Dilutive Securities
   Stock Options - granted                           3,289     

   Unvested MRDP shares                              2,095
Diluted EPS                                      ---------  

   Income available to common 
    stockholders plus assumed
     conversion               $  925,829         2,282,157         $0.41
                              ==========         =========         =====  

The weighted-average number of common shares outstanding was the same for both
basic and diluted EPS for the nine months ended September 30, 1997, given that
there were no potential common shares.

                                     5

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                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

Note 4 Cash Dividend Declared
       ----------------------

       On October 28, 1998, the Board of Directors declared a quarterly cash
dividend of $.085 per common share to stockholders of record on November 10,
1998, payable on November 25, 1998.

Note 5 Capital Compliance
       ------------------

       The following table presents Empire's compliance with its regulatory
capital requirements at September 30, 1998 (dollars in thousands):

                                                                 Percentage
                                                       Amount    of Assets
                                                       ------    ---------

     GAAP capital(1)                                   $29,337     27.89%
                                                       =======     =====     

     Tangible capital                                  $27,313     26.77%
     Tangible capital requirement                        1,530      1.50%
                                                       -------     ----- 
            Excess                                     $25,783     25.27%
                                                       =======     =====     

     Core capital                                      $27,313     26.77%
     Core capital requirement                            4,081      3.00%
                                                       -------     -----      
            Excess                                     $23,232     23.77%
                                                       =======     =====     

     Total risk-based capital(2)                       $28,536     72.25%
     Total risk-based capital requirement(2)             3,160      8.00%
                                                       -------     -----      
            Excess                                     $25,376     64.25%
                                                       =======     =====
          (1)    GAAP capital includes unrealized gains on certain
                 available-for-sale securities of $1,614,000 and $410,000 of
                 investments in Dime, which are excluded for purposes of
                 calculating both tangible and core capital.
          (2)    Based on risk-weighted assets of $39,495,000.

                                   6

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                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES                  
                  

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

General

Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company.

Operating Strategy

The business of Empire consists principally of attracting deposits from the
general public and using such deposits to originate mortgage loans secured
primarily by one- to four-family residences.  Empire also invests in
interest-bearing deposits, investment grade federal agency securities and
mortgage-backed securities.  Empire plans to continue to fund its assets
primarily with deposits, although FHLB advances may be used as a supplemental
source of funds.

Empire's profitability depends primarily on its net interest income, which is
the difference between the income it receives on its loan and investment
portfolio and its cost of funds, which consists of interest paid on deposits
and debt.  Net interest income is also affected by the relative amounts of
interest-earning assets and interest-bearing liabilities.  When
interest-earning assets equal or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.  Empire's
profitability is also affected by the level of other income and expenses. 
Other income consists of service charges on NOW accounts and other fees,
insurance commissions and net real estate owned income.  Other expenses
include compensation and employee benefits, occupancy expenses, deposit
insurance premiums, equipment and data servicing expenses, professional fees
and other operating costs.  Empire's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government legislation, and
policies concerning monetary and fiscal affairs, housing, and financial
institutions and the attendant actions of the regulatory authorities.

Year 2000 Issues

As the Year 2000 approaches, significant concerns have been expressed with
respect to the ability of existing computer software programs and operating
systems to function properly with respect to data containing dates in the Year
2000 and thereafter.  Many existing application software products were
designed to accommodate only a two digit year.  The Company's operating,
processing and accounting operations are computer reliant and could be
affected by the Year 2000 issues.  Both Empire and the holding company are
reliant on third-party vendors for most of their data processing needs as well
as certain other significant functions and services.  The Company is currently
working with its third-party vendors in order to assess their Year 2000
readiness.  While no assurances can be given that such third-party vendors
will be Year 2000 compliant, management believes that such vendors are taking
appropriate steps to address the issues on a timely basis.  While the company
currently has no reason to believe that the cost of addressing such issues
will materially affect  Empire's products, services or ability to compete
effectively, no assurance can be made that the Company or the third-party
vendors on which is relies will become Year 2000 compliant in a successful and
timely fashion.  Nevertheless, the Company does not believe that the cost of
addressing the Year 2000 issues will be a material event 

                                     7

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<PAGE>

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

or uncertainty that would cause reported financial information not to be
necessarily indicative of future operating results or financial conditions,
nor does it believe that the costs or the consequences of incomplete or
untimely resolutions of its Year 2000 issues represent a known material event
or uncertainty that is reasonably likely to affect its future financial
results, or cause its reported financial information not to be necessarily
indicative of future financial condition.

For nearly two years Empire has been investigating and addressing potential
Year 2000 problems.  In the course of this process Empire has examined its
computer systems, phone systems, mailing and fax capabilities, office
environmental systems, and servicer relationships related to daily business
processing, ATM processing, ACH processing, check processing, wire transfers
processing, travelers check processing, and all other relevant out-sourced
services.  The general plan for addressing Year 2000 problems has been
established by Company management, and is currently on schedule with respect
to implementation of that plan.  As of September 1998 all areas of potential
impact directly addressable by Empire appear to be Year 2000 compliant, except
the teller system as discussed below.  Areas to be addressed by third-party
vendors have been represented as either fully compliant or on schedule for
full compliance by December 1998.  The Company's plan for full Year 2000
compliance, including a comprehensive second round of testing of third-party
vendors' provided systems, is scheduled to be complete by April 15, 1999.  The
first round of testing, focusing on critical operational systems, is scheduled
for mid-November 1998.

The primary negative impact of the potential Year 2000 problem lies in
Empire's present Olivetti-America 8-window teller hardware/software system now
in use in all three offices.  This system has known Year 2000 problems as well
as other inadequacies relevant to current needs on the working teller line. 
Empire is in the process of replacing the existing teller system with a
PC-based teller system working internally at each office with a Local Area
Network (LAN) and tied together to the central office and our primary servicer
by a Wide Area Network (WAN).  This conversion will not only solve the
potential Year 2000 problem in the teller system, but will also position
Empire to take maximum advantage of current technology in banking as it enters
the 21st Century.  The estimated cost of conversion and re-training and
implementation of the new PC-based system is approximately $225,000 based on
information currently available, and the estimated timetable for conversion is
that it will be in process or complete by the end of 1998.  Most of the
estimated cost will be for the new teller system and will be depreciated over
five years.

Financial Condition

Consolidated assets decreased by approximately $4.6 million, or 4.2%, from
$109.8 million at December 31, 1997 to $105.2 million at September 30, 1998. 
This decrease was primarily attributable to the purchase of treasury shares of
$3.6 million, and the decline in deposits of $1.4 million.

The consolidated balance sheet was not materially affected by market
conditions between December 31, 1997 and September 30, 1998.  Maturities and
payments of $7.9 million reduced investment and mortgage-backed securities
held-to-maturity from $20.6 million at December 31, 1997, to $12.6 million at
September 30, 1998.  Net loans increased $4.2 million, or 9.1% of which $2.6
million consisted primarily of permanent and construction loans of 1-4
dwelling units and multi-family units, and $1.6 million was related to
commercial real estate.

                                  8

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<PAGE>

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

Deposits decreased by $1.4 million, or 2.2%, to $65.4 million at September 30,
1998, from $66.9 million at December 31, 1997.

Stockholders' equity decreased from $40.6 million at December 31, 1997, to
$37.4 million at September 30, 1998.  The change is the result of net income
of $926,000, the release of ESOP shares in the amount of $168,000 and an
increase of $328,000 related to the increase in market value of securities
available-for-sale.  In addition, during the first nine months of 1998 the
MRDP purchased, through a trust funded by the Company, 53,684 additional
shares of company shares for a total cost of $927,000.  In addition, 32,833
shares of the MRDP vested and unearned MRDP compensation was reduced by
$546,000.  Shareholders' equity was also decreased by the payments of $553,000
in dividends.  During the nine-month period ended September 30, 1998, the
Company repurchased 252,230 shares of its common stock in the open market for
an average price of $14.44 per share for a total of $3.6 million.

Asset Quality

At September 30, 1998 and December 31, 1997, Empire did not have any
nonaccrual loans or troubled debt restructuring.  At September 30, 1998,
Empire had six loans delinquent over 30 days amounting to $431,000 of which
$12,000 were delinquent over 90 days.  Empire has no real estate acquired
through foreclosure.

Comparison of Results of Operations for the Nine Months Ended September 30,
1998 and 1997

Net Income.  Net income was $926,000 for the nine months ended September 30,
1998, as compared to $1.2 million for the same period in 1997.  The $278,000
decline in net income is caused primarily by the accelerated vesting of shares
awarded under the Management Recognition and Development Plan ("MRDP").  Under
the terms of the  MRDP, shares awarded are vested and amortized to expense
over a 60-month period; however, upon the death of a participant, the vesting
is accelerated.   On September 5, 1998, the Chief Financial Officer of the
Company passed away, and 25,921 shares were released to the officer's estate. 
The accelerated vesting amounted to $395,000 which was charged to compensation
expense in September 1998.  Net income for the nine-month period ending
September 30, 1998 would have been $1.2 million if the accelerated vesting
would not have occurred.

Interest Income.  Total interest income increased by $35,000, or 0.6%, for the
nine months ended September 30, 1998 as compared to the same period in 1997. 
The increase in interest on mortgage loans of $258,000 was attributable to the
increase in the average balance of loans outstanding from $43.1 million for
the period ended September 30, 1997, to $48.2 million for the same period in
1998.  This increase in volume was partially offset by a decrease in the
average yield from 8.50% for the nine months ended September 30, 1997 to 8.32%
for the same period in 1998.  Interest on mortgage-backed securities increased
$164,000, or 7.59%, from $2.2 million for the nine months ended September 30,
1997 to $2.3 million for the comparable period in 1998 as a result of an
increase in average outstanding mortgage-backed securities of $2.0 million and
an increase in the average yield from 6.58% to 6.77%.  Offsetting these
increases were decreases in interest on investment securities and other
interest of $165,000 and $222,000 respectively.  These decreases are the
result of the reinvestment of maturing securities and interest bearing
deposits in mortgage loans and mortgage-backed securities, as previously
noted.

                                   9

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<PAGE>

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

Interest Expense.  Total interest expense decreased by $69,000 for the nine
months ended September 30, 1998, as compared to the same period in 1997.  The
decrease was the result of a $34,000 decrease in interest on deposits and a
$35,000 decrease in other interest expense.

Average deposits for the nine month periods ended September 30, 1998 amounted
to $66.6 million as compared to $67.1 million for the same period in 1997. 
The decline in deposit interest is the result of this reduction in average
outstanding deposits for the nine-month period ended September 30, 1998, and a
reduction in the average cost of deposits from 4.46% to 4.43% for the nine
months ended September 30, 1997 as compared to the same period for 1998.

Other interest expense of $82,000 for the nine  months ended September 30,
1997, related primarily to the interest paid to stock subscribers on the stock
issuance date of January 23, 1997.  Interest expense of $47,000 for the
comparable period in 1998 is related to the debt associated with the purchase
of the main office building.
  
Provision for Loan Losses.  There was no provision for loan losses during the
nine month period ended September 30, 1998 as compared to $20,000 for the
comparable period in 1997.  During the nine months ended September 30, 1997,
Empire charged off $20,000 of mortgage loans.  At the end of both periods the
level of reserves was deemed to be adequate by management.  Loan loss reserves
as a percentage of loans was .40% at September 30, 1998, and .45% at September
30, 1997.

Non-Interest Income.  Non-interest income increased $22,000 for the nine
months ended September 30, 1998, as compared to the same period in 1997
primarily as the result of a $15,000 increase in customer service charges and
other non-interest income and an increase in commissions and profit sharing
contingencies from insurance companies of $5,000.

Insurance commissions received from Dime are the largest component of
non-interest income.  Insurance commissions of $475,000 and $470,000 were
received for the nine months ended September 30, 1998, and 1997, respectively. 
The increase in commission income resulted primarily from increases in
premiums and commissions from key companies represented by Dime.

Non-Interest Expense.  Total non-interest expense increased $521,000 for the
nine months ended September 30, 1998, compared to the nine months ended
September 30, 1997.  This increase was the result of an increase in
compensation and benefits of $544,000, or 45.76%, from $1.2 million for the
nine month period ended September 30, 1997 to $1.7 million for the comparable
period in 1998.  The primary cause of this increase is the previously
discussed accelerated vesting of 25,921 shares of the MRDP as the result of
the death of the Chief Financial Officer of the Company.  The accelerated
vesting amounted to a $395,000 charge to compensation expense in September
1998.  In addition, other vested shares of the MRDP resulted in a charge of
$151,000 for the nine months ended September 30, 1998.  The MRDP became
effective in January 1998.

Income Taxes.  Income taxes decreased $96,000 from the nine month period ended
September 30, 1997, as compared to the same period in 1998 as the result of
the decrease in income before income taxes.  The effective combined federal
and state tax rate was 42.60% and 39.42% for the nine months ended September
30, 1998 and 1997, respectively.
      
                                     10
<PAGE>

<PAGE>
      

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

Comparison of Results of Operations for the Three Months Ended September 30,
1998 and 1997
      
Net Income.  Net income decreased by $277,000 to $131,000 for the three months
ended September 30, 1998, as compared to $408,000 for the same period in 1997. 
The decrease is caused primarily by the accelerated vesting of shares awarded
under the MRDP.  Under the terms of the MRDP, shares awarded are vested and
amortized to expense over a 60-month period; however, upon the death of a
participant, vesting is accelerated.  On September 5, 1998, the Chief
Financial Officer of the Company passed away and 25,921 shares were released
to the officer's estate.  The accelerated vesting amounted to $395,000, which
was charged to compensation expense in September 1998.  Net income for the
three-month period ending September 30, 1998 would have been $400,000 if the
accelerated vesting would not have occurred.

Interest Income.  Total interest income decreased by $39,000, or 0.2% for the
three months ended September 30, 1998 as compared to the same period in 1997. 
Interest income from investments and mortgage-backed securities decreased
$136,000 from $969,000 for the three-month period ended September 30, 1997 to
$833,000 for the same period in 1998, primarily as the result of a decrease in
average outstanding investments and mortgage-backed securities.  The decrease
was caused by net payments and maturities in excess of reinvestment.  This
decrease in interest income is partially offset by an increase in interest
from loans of $120,000 for the three-month period ended September 30, 1998 as
compared to the same period in 1997.  The increase in interest from loans is
the result of an increase in the average balance of loans outstanding from
$43.6 million for the three-month period ended September 30, 1997 to $47.7
million for the same period in 1998.

Interest Expense.  Total interest expense was $748,000 for the three months
ended September 30, 1998, as compared to $779,000 for the same period in 1997. 
The $31,000, or 3.9%, decrease was the result of a $29,000 decrease in
interest on deposits and a decrease of $2,000 in other interest expense.

Average deposits for the three-month periods ended September 30, 1998 and 1997
were $66.7 million and $69.1 million, respectively.  The decrease in interest
paid depositors is the result of the decline in average deposits coupled with
a decrease in the average rate paid in the three months ended September 30,
1997, of $4.55% as compared to 4.40% in the same period in 1998.

Other interest expense for the three-month periods ended September 30, 1998
and 1997 related to the debt associated with the purchase of the main office
building.

Provision for Loan Losses.  There was no provision for loan losses during the
three-month periods ended September 30, 1998 and 1997, and at the end of both
periods the level of reserves was deemed to be adequate by management.  Loan
loss reserves as a percentage of loans was .40% at September 30, 1998, and
 .45% at September 30, 1997.

Non-Interest Income.  Non-interest income increased $11,000 for the three
months ended September 30, 1998, as compared to the same period in 1997
primarily as a result of a $12,000 increase in commissions and profit sharing
contingencies from insurance companies and customer service charges.

                                  11

<PAGE>

<PAGE>

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

Insurance commissions received from Dime are the largest component of
non-interest income.  Insurance commissions of $173,000 and $161,000 were
received for the three months ended September 30, 1998, and 1997,
respectively.

Non-Interest Expense.  Total non-interest expense increased $390,000 for the
three months ended September 30, 1998, compared to the three months ended
September 30, 1997.  This increase is caused by the previously discussed
accelerated vesting of 25,921 shares of MRDP as the result of the death of the
Chief Financial Officer of the Company.  The accelerated vesting amounted to a
$395,000 charge to compensation expense in September 1998.

Income Taxes.  Income taxes decreased $109,000 from the three-month period
ended September 30, 1997, as compared to the same period in 1998 as the result
of the decrease in income before income taxes.  The effective combined federal
and state tax rate was 53.14% and 38.66% for the three months ended September
30, 1998 and 1997, respectively.  The increase in the 1998 federal and state
tax rate is the result of a portion of the MRDP charge for the period ended
September 30, 1998 not being deductible.

                                    12

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<PAGE>
      

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

Part II - Other Information
---------------------------

Item 1.   Legal Proceedings
          There are no pending material legal proceedings to which the
          registrant or its subsidiaries are a party.

Item 2.   Changes in Securities
          None.

Item 3.   Defaults on Senior Securities
          Not applicable.

Item 4.   Submission of Matters to a Vote of Securities Holders
          None.

Item 5.   Other Information
          None.

Item 6.   Exhibits and Reports on Form 8-K
          (a) Exhibits

       3.1    Certificate of Incorporation of Empire Federal Bancorp, Inc. (1)
  
       3.2    Bylaws of Empire Federal Bancorp, Inc. (1)
  
      10.1    Employment Agreement with Beverly D. Harris (2)
  
      10.2    Employment Agreement with Ernest A. Sandberg (2)
  
      10.3    Employee Stock Ownership Plan (1) 
                
      10.4    Management Recognition and Development Plan (3)
                
      10.5    Stock Option Plan (3)
  
        21    Subsidiaries of the Registrant (2)
  
        27    Financial Data Schedule

-------------
(1)    Incorporated by reference to the Company's Registration Statement on
       Form SB-1, as amended (File No. 333-12653).

(2)    Incorporated by reference to the Company's Annual Report on Form 10-KSB
       for the year ended December 31, 1997.

(3)    Incorporated by reference to the Company's Annual Meeting Proxy
       Statement dated March 16, 1998. 

        (b) Report on Form 8-K
              No forms 8-K were filed during the quarter ended September 30,
              1998.

                                   13

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<PAGE>

                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES

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.


Empire Federal Bancorp, Inc.


By      s/s Beverly D. Harris                    November 13,1998
        -----------------------                  ----------------
        Beverly D. Harris                             Date
        President & Chief Executive Officer
        (Principal Executive Officer)


By      s/s Linda M. Alkire                      November 13, 1998  
        -----------------------                  -----------------
        Linda M. Alkire                               Date
        Treasurer
        (Principal Financial and Accounting Officer)

                                   14

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<PAGE>

                                                               Exhibit 27
                                     
                         Financial Data Schedule
                                     
This schedule contains financial information extracted from the unaudited
consolidated financial statements of Empire Federal Bancorp., Inc. for the
nine months ended September 30, 1998, and is qualified in its entirety by
reference to such financial statements.

                  Financial Data as of
                 or for the nine months
Item Number      ended September 30, 1998   Item Description
-----------      ------------------------   ----------------
9-03(1)              $    875,366           Cash and due from banks
9-03(2)                 3,488,833           Interest-bearing deposits
9-03(3)                        --           Federal funds sold - purchased
                                              securities for resale
9-03(4)                        --           Trading account assets
9-03(6)                34,263,207           Investment and mortgage-backed
                                              securities held-for-sale
9-03(6)                12,643,276           Investment and mortgage-backed
                                              securities held to maturity -
                                              carrying value
9-03(6)                12,839,698           Investment and mortgage-backed
                                              securities held to maturity -
                                              market value
9-03(7)                50,090,763           Loans
9-03(7)(2)                200,000           Allowance for losses
9-03(11)              105,199,280           Total assets
9-03(12)               65,413,207           Deposits
9-03(13)                       --           Short-term borrowings
9-03(15)                1,685,564           Other liabilities
9-03(16)                  660,461           Long-term debt
9-03(19)                       --           Preferred stock - mandatory
                                              redemption
9-03(20)                       --           Preferred stock - no mandatory
                                              redemption
9-03(21)                   25,921           Common stocks
9-03(22)               37,414,127           Other stockholders' equity
9-03(23)              105,199,280           Total liabilities and
                                              stockholders' equity
9-04(1)                 3,006,795           Interest and fees on loans
9-04(2)                 2,619,007           Interest and dividends on
                                              investments
9-04(4)                   170,540           Other interest income
9-04)(5)                5,796,342           Total interest income
9-04(6)                 2,211,511           Interest on deposits
9-04(9)                 2,258,555           Total interest expense
9-04(10)                3,537,787           Net interest income
9-04(11)                       --           Provisions for loan losses
9-04(13)(h)                    --           Investment securities gains
                                              (losses)
9-04(14)                2,569,284           Other expenses
9-04(15)                1,613,052           Income/loss before income tax
9-04(17)                1,613,052           Income/loss before extraordinary
                                              items
9-04(18)                       --           Extraordinary items, less tax
9-04(19)                       --           Cumulative change in accounting
                                              principles
9-04(20)                  925,829           Net income of loss
9-04(21)                     0.41           Earnings per share - primary
9-04(21)                     0.41           Earnings per share - fully diluted

                                   15

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                              <PAGE>
                              
                EMPIRE FEDERAL BANCORP, INC. AND SUBSIDIARIES
                                 
                                                    Exhibit 27, Continued
                                     
                         Financial Data Schedule
                                     

                  Financial Data as of
                 or for the nine months
Item Number      ended September 30, 1998   Item Description
-----------      ------------------------   ----------------

I.B.5                         4.57%         Net yield - interest earning
                                              assets - actual
III.C.1.(a)                    None         Loans on nonaccrual
III.C.1.(b)                  12,000         Accruing loans past due 90 days or
                                              more
III.C.2.(c)                    None         Troubled debt restructuring
III.C.2                        None         Potential problem loans
IV.A.1                      200,000         Allowance for loan loss -
                                              beginning of period
IV.A.2                         None         Total charge-offs
IV.A.3                         None         Total recoveries
IV.A.4                      200,000         Allowance for loan loss - end of
                                              period
IV.B.1                      200,000         Loan loss allowance allocated to
                                              domestic loans
IV.B.2                         None         Loan loss allowance allocated to
                                              foreign loans
IV.B.3                         None         Loan loss allowance - unallocated

                                  16

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