SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549
                        ----------------------------

                              FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the fiscal year ended June 30, 1998  OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934
                 
                      Commission File Number:  0-22842
                                             ----------
                           FIRST BANCSHARES, INC.                  
     --------------------------------------------------------------
          (Exact name of registrant as specified in its charter)

        Missouri                                 43-1654695     
     -----------------                           -------------
   (State or other jurisdiction of              (I.R.S. Employer
     incorporation or organization)               Identification No.)

    142 E. First Street
    Mountain Grove, Missouri                        65711     
    -------------------------                      --------
   (Address of principal executive offices)       (Zip Code)

    Registrant's telephone number, including area 
        code:  (417) 926-5151
               --------------
    Securities registered pursuant to Section 12(b) of the Act: None

    Securities registered pursuant to Section 12(g) of the Act:

              Common Stock, par value $0.01 per share
              ---------------------------------------
                       (Title of Class)

    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 by check mark whether disclosure of delinquent filers 
pursuant to Item 405 of Regulation S-B is not contained herein, and 
will not be contained, to the best of the Registrant's knowledge, in
definitive proxy or other information statements incorporated by 
reference in Part III of this Form 10-KSB or any amendments to this 
Form 10-KSB.  / X / 
               ---
    The registrant's revenues for the fiscal year ended June 30, 1998
were $13,286,000.

    As of September 25, 1998, there were outstanding 2,163,678 shares
of the Registrant's Common Stock.  The Registrant's voting stock is 
traded over-the-counter and is listed on the Nasdaq Stock Market 
("Nasdaq/NMS") under the symbol "FBSI."  The aggregate market value 
of the voting stock held by nonaffiliates of the Registrant, based 
on the closing sales price of the Registrant's common stock as quoted
on the Nasdaq/NMS on September 25, 1998, was $20,417,352. For 
purposes of this calculation, officers and directors of the 
Registrant, the Employee Stock Ownership Plan and the Management 
Recognition Plan are considered affiliates of the Registrant.

               DOCUMENTS INCORPORATED BY REFERENCE

1.  Portions of Annual Report to Stockholders for the Fiscal Year 
      Ended June 30, 1998. (Parts I and II)

2.  Portions of Proxy Statement for the 1998 Annual Meeting of 
      Stockholders. (Part III)

Transitional Small Business Disclosure Format (check one)  
                       Yes     No  X  
                          ----   -----
</page>


                               PART I

Item 1.  Business

General

     First Bancshares, Inc. ("First Bancshares" or the "Company"), 
a Missouri corporation, was incorporated on September 30, 1993 for 
the purpose of becoming the holding company for First Home Savings 
Bank ("First Home" or the "Savings Bank") upon the Savings Bank's 
conversion from a state-chartered mutual to a state-chartered stock 
savings and loan association ("Conversion").  The Conversion was 
completed on December 22, 1993.  At June 30, 1998, the Company had 
consolidated total assets of $172.2 million, total customer deposits 
of $141.1 million and stockholders' equity of $24.4 million.  First 
Bancshares has not engaged in any significant activity other than 
holding the stock of First Home.  Accordingly, the information set 
forth in this report, including consolidated financial statements and related 
data, relates primarily to the Savings Bank.

     The Savings Bank is a Missouri-chartered, federally insured 
stock savings and loan association organized in 1911.  The Savings 
Bank conducts its business from its home office in Mountain Grove 
and seven full service branch facilities in Marshfield, Ava, 
Gainesville, Sparta, Theodosia, Crane and Galena, Missouri.  The 
deposits of the Savings Bank are insured up to applicable limits by 
the Savings Association Insurance Fund ("SAIF") of the Federal 
Deposit Insurance Corporation ("FDIC").  


     The Savings Bank provides its customers with a full array of 
community banking services.  The Savings Bank is primarily engaged 
in the business of attracting deposits from the general public and 
using such deposits, together with other funding sources, to invest 
in one- to four-family residential mortgage loans and, to a lesser 
extent, multi-family residential, consumer, and commercial mortgage 
loans, including home equity loans, for its loan portfolio, as well 
as for mortgage-backed and U.S. Government and agency securities and 
other assets.  At June 30, 1998, the Savings Bank's net loans were 
$146.4 million, or 85.0% of consolidated total assets, including 
$112.4 million, or 74.74% of total loans secured by one- to four-
family properties, $25.3 million, or 16.82% of total loans secured 
by other real estate and $10.4 million of consumer loans, or 6.89% of
total loans.  As discussed in following areas, ARM loans account for
approximately 87% of the total loan portfolio.


     In March 1998, the Savings Bank purchased two bank branch 
offices from NationsBank.  The branches are located in Crane and 
Galena, Missouri.  As part of the agreement, the Savings Bank assumed
customer deposits of $17.4 million and other liabilities of $60,000
in exchange for loans of $4.8 million, premises and 
equipment of $300,000, cash of $11.3 million and other assets
of $70,000.  The Savings Bank paid a premium of $1.0 million
for the loans purchased and the customer deposits assumed.  The
acquisition was recorded using the purchase method of accounting.
The premium paid for the branches is being amortized on a straight-
line basis over fifteen years.

Market Area

     The Savings Bank is headquartered in the town of Mountain Grove,
in Wright County, Missouri.  Wright County has a population of 
approximately 17,000 and its economy is highly diversified, with 
an emphasis on the beef and dairy industry. The Savings Bank's market
area is predominantly rural in nature and its deposit taking and 
lending activities primarily encompass Wright, Webster, Douglas, 
Christian, Ozark, and Stone counties. Companies in the area include 
Hutchens Steel, Paramont Cap, Arlee Home Fashions, Copeland 
Corporation, and Rawlings.  The Savings Bank also transacts a 
significant amount of business in Texas and Greene counties, 
Missouri.  The area, especially Ozark County due to its proximity to 
the Norfolk and Bull Shoals lakes, has experienced a rather slow but
steady growth from retirees.  Economic conditions in the Savings 
Bank's market area have been stable. 

                                 1
</page>
Selected Consolidated Financial Information

     This information is incorporated by reference to pages 4 and 
5 of the 1998 Annual Report to Stockholders  ("Annual Report") 
attached hereto as Exhibit 13.

Yields Earned and Rates Paid

     The earnings of the Savings Bank depend largely on the spread 
between the yield on interest-earning assets (primarily loans and 
investments) and the cost of interest-bearing liabilities (primarily
deposit accounts and FHLB advances), as well as the relative size of 
the Savings Bank's interest-earning assets and interest-bearing 
liability portfolios.

     The following table sets forth, for the periods indicated, 
information regarding average balances of assets and liabilities as 
well as the total dollar amounts of interest income from average 
interest-earning assets and interest expense on average interest-
bearing liabilities, resultant yields, interest rate spread, net 
interest margin, and ratio of average interest-earning assets to 
average interest-bearing liabilities.  Average balances for a period 
have been calculated using the average monthly balances for the period.  

                                  2
</page>


<TABLE>
<CAPTION>           
                                                                       Years Ended June 30,    
                                     -----------------------------------------------------------------------------------------
                                                 1998                            1997                           1996          
                                     ---------------------------   ---------------------------   -----------------------------
                                                Interest                       Interest                      Interest
                                     Average      and      Yield/   Average       and    Yield/   Average     and       Yield/
                                     Balance(2) Dividends   Cost    Balance(2) Dividends  Cost    Balance(2) Dividends   Cost
                                     ---------  ---------  ------   ---------  ---------  ----    ---------  --------   ------
                                                                      (Dollars in thousands)
<S>                                      <C>        <C>      <C>        <C>      <C>      <C>         <C>        <C>     <C>
Interest-earning assets:
 Loans(1)............................ $142,405  $11,626    8.16%    $126,587  $10,420    8.23%    $111,335  $ 8,946    8.03%
 Mortgage-backed securities..........      751       51    6.79        2,374      161    6.76        3,035      201    6.62
 Investment securities...............   11,872      873    7.35       16,834    1,029    6.11       13,275      803    6.05
 Daily interest-bearing deposits.....    5,898      213    3.61        1,723       85    4.93        3,223      163    5.06
 Federal funds sold                        172        8    4.65           -        -       -             3        -      - 
                                      --------   ------             --------  -------            ---------  -------   
    Total interest-earning assets....  161,098   12,771    7.93      147,518   11,695    7.93      130,871   10,113    7.73
Non-interest earning assets:
 Office properties and equipment, net    3,016                         2,349                         2,003
 Real estate, net....................      939                         1,159                           876
 Other non-interest-earning assets...    5,230                         3,511                         2,614
                                     ---------                      --------                      --------
   Total assets...................... $170,283                      	$154,537                      $136,364
                                      ========                      ========                      ========

Interest-bearing liabilities:
 Passbook accounts................... $  6,435      195    3.03     $  5,621      170    3.02     $  5,182      164    3.17
 NOW and Super Saver accounts........   34,462    1,003    2.91       28,140      881    3.13       26,353      858    3.25
 Certificates of deposit.............   84,219	    4,810    5.71       75,223    4,326    5.75       68,475    4,021    5.87
                                      --------    -----             --------   ------              -------    -----   
   Total deposits....................  125,116    6,008    4.80      108,984    5,377    4.93      100,010    5,043    5.04

 Other interest-bearing liabilities..   16,398      997    6.08       19,011    1,116    5.87       10,404	      618    5.94
                                      --------   ------             --------   ------              -------    -----  

   Total interest-bearing liabilities  141,514    7,005    4.95      127,995    6,493    5.07      110,414    5,661    5.13

Non-interest-bearing liabilities:
 Other liabilities...................    5,211                         3,902                     	    2,362
                                     ---------                      --------                      --------
   Total liabilities.................  146,725                       131,897                       112,776


Stockholders' equity.................   23,558                        22,640                        23,588
                                     ---------                      --------                      --------
   Total liabilities and 
     stockholders' equity.............$170,283                      $154,537                     $136,364
                                      ========                      =========                    ========
Net interest income...................           $5,766                         $5,202                       $4,452
                                                 ======                         ======                       ======

Interest rate spread..................                     2.98%                          2.86%                        2.60%

Net interest margin...................                     3.58%                          3.53%                        3.40%

Ratio of average interest-earning
 assets to average interest-
 bearing liabilities..................   114%                           115%                        119%
__________________               
(1)  Average balances include nonaccrual loans and loans 90 days or more past due. The corresponding interest up to the date 
       of nonaccrual status has been included in the "Interest and Dividends" column.
(2)  Average balances for a period have been calculated using the average monthly balances for the respective year.

</TABLE>
                                                                        3
</page>

Yields Earned and Rates Paid

     The following table sets forth (on a consolidated basis) for the
periods and at the date indicated, the weighted average yields 
earned on the Company's and First Home's assets, the weighted 
average interest rates paid on First Home's liabilities, together 
with the net yield on interest-earning assets. 

<TABLE>
<CAPTION>
	
                                                    At June 30,       Years Ended June 30,                 		
                                                        1998         1998     1997     1996
                                                    ----------       -----    -----    -----
<S>                                                     <C>          <C>       <C>     <C>

Weighted average yield on loan portfolio..............  8.22%        8.16%    8.23%    8.03%
Weighted average yield on mortgage-backed
  securities..........................................  6.97         6.79     6.76     6.62
Weighted average yield on investment securities.......  6.03         7.35     6.11     6.05
Weighted average yield on interest-bearing deposits...  6.05         3.61     4.93     5.06
Weighted average yield on federal funds sold..........   --          4.65      --       -- 
Weighted average yield on all interest-
  earning assets......................................  8.09         7.93     7.93     7.73
Weighted average rate paid on total deposits..........  4.55         4.80     4.93     5.04
Weighted average rate paid on FHLB advance............  5.89         6.08     5.87     5.94
Weighted average rate paid on all interest
 -bearing liabilities.................................  4.60         4.95     5.07     5.13
Interest rate spread (spread between weighted
 average rate on all interest-earning assets
 and all interest-bearing liabilities)................  3.49         2.98     2.86     2.60
Net interest margin (net interest income
  (expense) as a percentage of average
  interest-earning assets)............................   N/A         3.58     3.53     3.40
</TABLE>
                                                         4
</page>
  

Rate/Volume Analysis

     The following table sets forth the effects of changing rates and
volumes on net interest income of the Company and Savings Bank.  
Information is provided with respect to (i) effects on interest 
income attributable to changes in volume (changes in volume 
multiplied by prior rate); (ii) effects on interest income 
attributable to changes in rate (changes in rate multiplied by prior
volume); (iii) changes in rate/volume (change in rate multiplied by 
change in volume); and (iv) the net changes (the sum of the previous 
columns).
<TABLE>
<CAPTION>
                                      Years Ended June 30,                 Years Ended June 30,
                                       1998 Compared to 1997               1997 Compared to 1996
                                         Increase (Decrease)                 Increase (Decrease)
                                                 Due to                             Due to             
                                   ----------------------------------    -------------------------------
                                                       Rate/                               Rate/
                                    Volume     Rate    Volume   Net       Volume   Rate    Volume    Net
                                    -------   ------   ------  -----      -------  ----   --------  -----
                                                              (In thousands)
<S>                                    <C>       <C>     <C>     <C>        <C>     <C>     <C>      <C>
Interest-earning assets:
 Loans(1)..........................   $1,303   $ (87)   $(10)  $1,206     $1,225   $ 223    $ 26   $1,474
 Mortgage-backed securities........     (110)      1      (1)    (110)       (44)      4      --      (40)
 Investment securities.............     (303)    209     (62)    (156)       215       8       3      226 
 Daily interest-bearing deposits...      206     (23)    (55)     128        (76)     (4)      2      (78)
 Federal funds sold................       --	      --       8        8         --      --      --       -- 
                                    ---------  ------   -----  -------    -------   -----   -----  -------
Total net change in income on
 interest-earning assets...........    1,096     100    (120)   1,076      1,320     231      31    1,582
                                     -------   ------   -----  -------    -------   ------  -----  -------

Interest-bearing liabilities:
 Interest-bearing deposits.........      794    (142)    (21)     631        452    (110)     (8)    334
 FHLB advances.....................     (153)     40      (6)    (119)       511      (7)     (6)     498
                                      -------   -----    ----    -----     ------   -----    -----   -----

Total net change in expense on
 interest- bearing liabilities.....      641    (102)    (27)     512        963    (117)    (14)    832
                                      ------  ------   -----   ------     ------  ------  ------  ------
Net change in net interest income..   $  455  $  202   $ (93)  $  564     $  357  $  348  $   45  $  750
                                      ======  ======  ======   ======     ======  ======  ======  ======
</TABLE>                                        
                       
(1)  Includes interest on loans 90 days or more past due.
                                                   5
</page>


	

Interest Rate Sensitivity of Net Portfolio Value

The table below measures interest rate risk by estimating the change
in market value of the Savings Bank's assets, liabilities, and off-
balance sheet contracts in response to an instantaneous change in 
the general level of interest rates.  The procedure for measuring 
interest rate risk was developed by the Office of Thrift Supervision 
("OTS") to replace the "gap" analysis (the difference between 
interest-earning assets and interest-bearing liabilities that mature 
or reprice within a specific time period) used previously by the OTS.
The model first estimates the level of the Savings Bank's market 
value of portfolio equity ("MVPE") (market value of assets, less 
market value of liabilities, plus or minus the market value of any 
off-balance sheet items) under the current rate environment.  In 
general, market values are estimated by discounting the estimated 
cash flows of each instrument by appropriate discount rates.  The 
model then recalculates the Savings Bank's MVPE under different 
interest rate scenarios.  The change in MVPE under the different 
interest rate scenarios provides a measure of the Savings Bank's 
exposure to interest rate risk.  The data presented below is as of 
June 30, 1998.  
<TABLE>
<CAPTION>                       
                                                                                                                           
                        -400      -300     -200      -100                 +100     +200      +300      +400
                        Basis     Basis    Basis     Basis       No      Basis     Basis     Basis     Basis
                        Points    Points   Points    Points     Change   Points    Points    Points    Points
                       -------   -------  -------   --------  -------   -------  --------  --------  --------
                                                          (In thousands)
<S>                      <C>       <C>       <C>       <C>       <C>      <C>        <C>       <C>       <C>
ASSETS
Mortgage loans and
 securities.............  $141,425   $139,608   $138,104   $137,132   $136,347   $135,310   $133,653   $131,203   $128,307
Non-mortgage loans......    13,156     13,104     13,053     13,003     12,954     12,906     12,860     12,814     12,769
Cash, deposits and
 securities.............    17,209     17,158     17,107     17,056     17,006     16,956     16,906     16,856     16,807
Premises and
 equipment..............     3,721      3,721      3,721      3,721      3,721      3,721      3,721      3,721      3,721
Other assets........... 	    1,217      1,476      1,729      2,619      3,692      4,922      6,081      7,172      8,206
                          ---------  ---------  --------  ---------  ---------   --------   --------   ---------  --------
TOTAL...................  $176,728   $175,067   $173,714   $173,531   $173,720   $173,815   $173,221   $171,766   $169,810
                          =========  =========  =========  ========   ========   ========   ========   =========  =========

LIABILITIES
Deposits................  $145,429   $144,811   $144,204   $143,612   $143,034   $142,466   $141,910   $141,364   $140,831
Borrowings..............     6,754      6,665      6,578      6,493      6,411      6,330      6,251      6,173      6,098
Other liabilities.......       664        664        663        663        663        662        662        662        662
                          --------   --------   --------   --------   --------   --------   --------   --------   --------
TOTAL...................  $152,847   $152,140   $151,445   $150,768   $150,108   $149,458   $148,823   $148,199   $147,591
                          ========   ========   ========   ========   ========   ========   ========   ========   ========


MARKET VALUE OF
 PORTFOLIO EQUITY.........$ 23,881   $ 22,927   $ 22,269   $ 22,763   $ 23,612   $ 24,357   $ 24,398   $ 23,567   $ 22,219
                          ========   ========   ========   ========   ========   ========   ========   ========   ========
</TABLE>
                                                            6
</page>



Lending Activities

     General.  The principal lending activity of the Savings Bank is 
the origination of conventional mortgage loans for the purpose of 
purchasing, constructing or refinancing single-family owner occupied 
homes within its primary market area.  In an attempt to diversify its
lending portfolio, however, the Savings Bank also originates
nonresidential real estate loans, consumer loans, mobile home loans, 
home improvement loans, commercial loans, business loans, student 
loans, and loans secured by savings accounts.  In addition to loans 
within the Savings Bank's primary market area, the Savings Bank also 
has originated 19 single-family loans, one condominium loan and two 
land loans in Kansas, Texas, Tennessee, Arkansas, California and 
Colorado.  The aggregate balance of these 22 loans at June 30, 1998 
was $1.9 million and all were performing according to their terms at 
that date.  

     At June 30, 1998, the Savings Bank's net loans receivable 
totaled approximately $146.4 million representing approximately 
85.02% of consolidated total assets.  Since 1973, the Savings Bank 
has primarily originated ARM loan products.  At June 30, 1998, ARM 
loans accounted for $131.6 million or 87.47% of the total loan 
portfolio.  The Savings Bank focuses on serving the needs of its 
local community and strongly believes in a lending philosophy that 
stresses individual customer service and flexibility in meeting the 
needs of its customers.

                                       7
</page>



     Loan Portfolio Analysis.  The following table sets forth the 
composition of the Savings Bank's loan portfolio by type of loan 
and type of security as of the dates indicated. Construction loans 
are included in the residential and commercial loan types.  The 
Savings Bank does not account for construction loans separate from 
residential and commercial loans.
<TABLE>
<CAPTION>
					     	           													   
                                                                           At June 30, 
                              -----------------------------------------------------------------------------------------------------
                                     1998                 1997                 1996                 1995                 1994      
                               -----------------    -----------------    -----------------    -----------------   -----------------
                                Amount   Percent     Amount   Percent     Amount   Percent     Amount   Percent    Amount   Percent
                              ---------  -------    --------  -------    --------  -------    --------  -------    --------  -------
                                                                     (Dollars in thousands)
<S>                              <C>       <C>         <C>       <C>        <C>      <C>        <C>       <C>         <C>      <C>
Type of Loan:
------------

 Residential.................  $112,404   74.74%    $105,700   76.82%    $ 95,534   77.44%    $ 82,891   79.12%   $ 70,320   80.17%
 Commercial..................    11,615    7.72       10,876    7.90        9,159    7.42        7,074    6.75       5,497    6.27
 Land........................     8,727    5.80        6,828    4.97        5,781    4.69        4,272    4.08       3,464    3.95
 Second mortgage loans.......     4,910    3.27        4,278    3.11        3,727    3.02        2,731    2.60       1,812    2.07
                               --------   -----     --------   -----     --------  ------    ---------   ------   --------   -----
   Total mortgage loans......   137,656   91.53      127,682   92.80      114,201   92.57       96,968   92.55      81,093   92.46
                               --------   -----     --------   -----     --------  ------    ---------   -----    --------   -----

Other Loans:
 Automobile loans............     5,724    3.81        4,334    3.15        4,184    3.39        3,084    2.95       2,685    3.06
 Savings account loans.......     1,662    1.10        1,301    0.94        1,282    1.04        1,145    1.09         941    1.08
 Mobile home loans...........     1,135    0.75          743    0.54          745    0.60          622    0.59         583    0.66
 Other consumer..............     1,847    1.23        1,373    1.00          916    0.75          811    0.78         947    1.08
 Commercial business.........     2,372    1.58        2,162    1.57        2,035    1.65        2,142    2.04       1,460    1.66
                               --------   -----     --------  ------      -------  ------     --------  ------    --------  ------
   Total other loans.........    12,740    8.47        9,913    7.20        9,162    7.43        7,804    7.45       6,616    7.54
                               --------   -----     --------  ------      -------  ------     --------  -------   --------  ------

   Total loans...............   150,396  100.00%     137,595  100.00%     123,363  100.00%     104,772  100.00%     87,709  100.00%
                               --------  =======    --------  =======     -------  =======     -------  =======   --------  ======

Add:

 Unamortized deferred loan costs,
  net of origination fees....       167                  107                   70                   46                 21

Less:

 Undisbursed loans in process     3,629                3,117                 4,133               2,945             1,474
 Unamortized loan origination fees,
  net of direct costs........       --                   --                    --                   --               --
 Allowance for possible loan 
   losses....................       528                  481                   520                 442               479
                               --------             --------               -------             -------           -------

Total loans receivable, net..  $146,406             $134,104              $118,780            $101,431           $85,777
                               ========             ========              ========             =======           =======

</TABLE>
                                                                              8
</page>




<TABLE>
<CAPTION>
			     	           													   
                                                                     At June 30,  
                             ------------------------------------------------------------------------------------------------
                                   1998               1997                 1996                 1995               1994     
                             ----------------    ----------------     ----------------     ----------------   ----------------
                              Amount  Percent     Amount  Percent      Amount  Percent      Amount  Percent     Amount  Percent
                             -------  -------    -------  -------     -------  -------     -------  -------   --------  -------
                                                                 (Dollars in thousands)


Type of Security:
<S>                                <C>     <C>         <C>     <C>           <C>    <C>          <C>      <C>        <C>     <C>
Residential real estate
  Second mortgage loans......  $  3,884   2.58%     $  3,805   2.77%     $  3,356   2.72%     $  2,355   2.25%    $  1,812   2.07%
  One-to-four family.........   112,404  74.74       105,700  76.82        95,534  77.44        82,891  79.12       70,320  80.17
  Multi-family...............     1,085   0.72         1,119   0.81         1,190   0.97         1,391   1.33        1,267   1.45
Commercial or industrial real 
    estate...................    11,422   7.60        10,123   7.36         8,283   6.71         5,977   5.70        4,230   4.82
Land.........................     8,861   5.89         6,935   5.04         5,838   4.73         4,354   4.15        3,464   3.95
Commercial or industrial assets   2,372   1.58         2,162   1.57         2,035   1.65         2,142   2.04        1,460   1.66
Automobile...................     5,724   3.81         4,334   3.15         4,184   3.39         3,084   2.95        2,685   3.06
Savings accounts.............     1,662   1.10         1,301   0.94         1,282   1.04         1,145   1.09          941   1.08
Mobile homes.................     1,135   0.75           743   0.54           745   0.60           622   0.59          583   0.66
Other........................     1,847   1.23         1,373   1.00           916   0.75           811   0.78          947   1.08
                               --------  -----       -------  -----        ------  -----        ------  -----      -------  -----

   Total.....................   150,396 100.00%      137,595 100.00%      123,363 100.00%      104,772 100.00%      87,709 100.00%
                                        =======              =======              =======              =======             =======

Add:

 Unamortized deferred loan costs,
 net of origination fees.....       167                  107                   70                   46                  21

Less:
 Undisbursed loans in process     1,514                1,185                1,535                  841                  20
 Due to borrowers on construction 
   loans.....................     2,115                1,932                2,598                2,104               1,454
 Allowance for possible loan losses 528                  481                  520                  442                 479
                               --------             --------             --------              -------             --------

 Total loans receivable, net.  $146,406             $134,104             $118,780             $101,431             $85,777
                               ========             ========             ========              =======              =======
</TABLE>
                                                            9
</page>


     One- to Four-Family Residential Loans. The primary lending 
activity of the Savings Bank has been the origination of mortgage 
loans to enable borrowers to purchase existing homes, to construct 
new single-family homes or refinance existing debt on their homes.  
Management believes that this policy of focusing on single-family 
residential mortgage loans has been successful in contributing to 
interest income while keeping delinquencies and losses at a minimum.
At June 30, 1998, approximately $112.4 million, or 74.74% of the 
Savings Bank's gross loan portfolio, consisted of loans secured by 
one- to four-family residential real estate.  

     The Savings Bank presently originates ARM loans secured by one- 
to four-family properties with loan terms of 10 to 30 years.  Since 
1973, the Savings Bank has originated almost exclusively ARM loan 
products. Initially, ARM loans were indexed to the Savings Bank's 
cost of money.  In 1979, the Savings Bank discontinued the use of 
the indexed ARM loans and changed to its current policy of non-
indexed ARMs, which generally allows, but does not require, the 
Savings Bank to adjust the interest rate once a year, up or down, 
not to exceed 1% per year.  Loans of this nature originated after 
1988 generally are limited to a 6% maximum increase over the life of 
the loan.

     The Savings Bank does not charge points on ARM loans.  In 
addition, the Savings Bank does not charge appraisal fees.  It 
quotes an interest rate, or base rate, with no points and gives 
the borrower the option, if desired, to pay a 1% fee, but obtain the
loan at 1% below the Savings Bank's base rate for the first year of 
the loan.  Construction borrowers can pay a 2% fee and receive a 2% 
reduction in the initial interest rate for the first year of the 
loan.  The Savings Bank funds most of its loan commitments in a 
relatively short period of time.  If a commitment expires, the 
Savings Bank will generally renew the commitment upon request.

     The Savings Bank underwrites ARMs based on an assumed 1% per 
year interest rate increase.  The Savings Bank's policy to adjust 
the interest rate once a year within 1% is a self-imposed limit by 
the Savings Bank. The Savings Bank's experience has been that most 
of its borrowers can manage an increased payment resulting from a 1% 
increase; however, an increase of over 1% may put a strain on the 
borrowers' ability to repay.  As a result, the potential for a 
substantial increase in interest payments on the Savings Bank's ARM 
loans is lessened as is the likelihood of delinquencies and defaults.

     The Savings Bank's lending policies generally limit the maximum 
loan-to-value ratio on adjustable rate residential mortgage loans to 
85% of the lesser of the appraised value or purchase price of the 
underlying residential property.  The Savings Bank requires title 
insurance or an abstract extension and attorney's opinion, fire and 
casualty coverage and a flood zone determination on all mortgage 
loans originated or purchased.  All of the Savings Bank's real 
estate loans contain "due on sale" clauses.  The Savings Bank 
personnel prepare all property evaluations at no expense to the 
borrower unless the property is outside its normal lending territory,
 in which event, independent appraisers are utilized.  At June 30, 
1998, the maximum loan-to-value ratio on loans to local borrowers 
was generally 85%.

     At June 30, 1998, the Savings Bank had $5.9 million in interim
 construction loans in its portfolio with maximum loan to value 
ratios of 80% to 85%.  Most of these loans are residential 
construction loans for single- or multi-family dwelling units.  All 
of these loans automatically convert into permanent residential real 
estate loans.

     Multi-Family Residential Loans.  At June 30, 1998, approximately
$1.1 million, or .72% of the Savings Bank's gross loan portfolio 
consisted of nine loans secured by multi-family residential real 
estate.  Multi-family real estate loans are generally originated at 
80% of the appraised value of the property or selling price, 
whichever is less, and carry adjustable rate mortgages with the 
principal amortized over 10 to 30 years.  Loans secured by 
multi-family real estate are generally larger and involve a 
greater degree of risk than one- to four- family residential 
loans.  In addition, multi-family real estate loans carry risks 
similar to those associated with commercial real estate lending.  
See " -- Consumer and Commercial Business Loans."  

     At June 30, 1998, the Savings Bank's largest multi-family 
residential loan was a $226,000 loan secured by five separate 
properties with a total of 12 rental units in Harrison, Arkansas 
and a 400 acre farm in Douglas County, Missouri.  At June 30, 1998, 

                                       10
</page>

the Savings Bank had two multi-family residential loans that the 
Savings Bank originated that were delinquent 60 days or more.  See 
"-- Non-Performing Assets and Delinquencies."

     Land and Commercial Real Estate Loans.  The Savings Bank had 
land and commercial real estate loans outstanding of $20.3 million 
at June 30, 1998.  The commercial real estate loans originated by 
the Savings Bank are primarily secured by commercial buildings. 
Land loans on property located primarily in the Savings Bank's 
primary market area amounted to $8.9 million or 5.89% of the total 
loan portfolio at June 30, 1998.  The Savings Bank's land loans 
generally are secured by farm land and involve the risks associated 
with general agricultural conditions.

     The Savings Bank does not actively solicit or originate 
commercial real estate loans.  At June 30, 1998, the Savings Bank's 
largest commercial real estate loan was a $521,000 loan secured by an
 automobile dealership building located in its market area which was 
performing according to its terms.  Of primary concern in commercial 
real estate lending is the borrower's creditworthiness and the 
feasibility and cash flow potential of the property.  Loans secured 
by income properties are generally larger and involve greater risks 
than residential mortgage loans because payments on loans secured by 
income properties are often dependent on successful operation or 
management of the properties.  As a result, repayment of such loans 
may be subject, to a greater extent than residential real estate 
loans, to supply and demand in the market in the type of property 
securing the loan and therefore, may be subject to adverse conditions
in the real estate market or the economy.  If the cash flow from the 
project is reduced, the borrowers' ability to repay the loan may be 
impaired.

     Consumer and Commercial Business Loans.  The Savings Bank's 
consumer loans consist of car loans, appliance dealer loans, mobile 
home loans, savings account loans, and various other consumer loans.
At June 30, 1998, the Savings Bank's consumer loans totaled 
approximately $10.4 million, or 6.89% of the Savings Bank's total 
loans.  Subject to market conditions, management expects to continue 
to market and originate consumer loans as part of its strategy to 
provide a wide range of personal financial services to its 
depository customer base and as a means to enhance the interest 
rate sensitivity of the Savings Bank's interest-earning assets and 
its interest rate spread.

     In May 1994, the Savings Bank purchased a pool of car loans 
totaling $250,000 through a private placement. Principal and interest
payments are made on the loans monthly and paid to the Savings Bank.  
At June 30, 1998, the balance of these loans, after write-offs of 
$25,000, totaled $24,000.  Based on information from the loan 
servicer concerning delinquencies, repossessions and individual 
balances written-off, the Savings Bank has established a reserve of 
$24,000 at June 30, 1998 for the remaining loans.

     The Savings Bank also purchases consumer loans from two local 
appliance dealers.  Such loans are made by the appliance dealers to 
the dealer's customers.  At June 30, 1998, such loans amounted to 
$158,000.  Reserves for losses maintained by the dealers at June 30, 
1998 totaled $10,000.  These loans are originated by the dealers and 
are assigned, with recourse, to the Savings Bank.  Payments are made 
directly to the dealers by the borrower and any losses are borne by 
the dealer rather than the Savings Bank.  The Savings Bank obtains 
and reviews regularly updated financial statements of the appliance 
dealers and monitors the individual loans purchased.

     The Savings Bank's procedures for underwriting consumer loans 
include an assessment of the applicant's payment history on other 
debts and ability to meet existing obligations and payments on the 
proposed loan.  Although the borrower's creditworthiness is a primary
 consideration, the underwriting process also includes a comparison 
of the value of the security, if any, to the proposed loan amount.  

                                       11
</page>

     Consumer loans entail greater risk than do residential mortgage 
loans, particularly in the case of consumer loans which are unsecured
or secured by rapidly depreciating assets such as automobiles, mobile 
homes, boats and recreational vehicles.  In such cases, any 
repossessed collateral for a defaulted consumer loan may not provide 
an adequate source of repayment of the outstanding loan balance as a 
result of the greater likelihood of damage, loss or depreciation.  
The remaining deficiency often does not warrant further substantial 
collection efforts against the borrower beyond obtaining a 
deficiency judgment.  In addition, consumer loan collections are 
dependent on the borrower's continuing financial stability, and thus 
are more likely to be adversely affected by job loss, divorce, 
illness or personal bankruptcy.  Furthermore, the application of 
various federal and state laws, including federal and state 
bankruptcy and insolvency laws, may limit the amount which can be 
recovered on such loans.  Such loans may also give rise to claims 
and defenses by a consumer loan borrower against an assignee of such 
loans such as the Savings Bank, and a borrower may be able to assert 
against such assignee claims and defenses that it has against the 
seller of the underlying collateral.  Historically, the Savings Bank 
has had a low level of delinquencies on its consumer loans.  See
"-- Non-Performing Assets and Delinquencies."  At June 30, 1998, only
$255,000 of the Savings Bank's consumer loan portfolio was 90 days or
more past due.

     Other loans consist of commercial loans with no real estate as 
security, business equipment loans, farm equipment loans and cattle 
loans.  As of June 30, 1998, 1997 and 1996, these loans totaled $2.4 
million, $2.2 million and $2.0 million, respectively.  Not only did 
the dollar amount of other loans remain stable, the ratio of other 
loans as a percent of total loans likewise remained relatively 
constant during the three years ended June 30, 1998 at 1.58%, 1.57% 
and 1.65%, respectively.  These ratios are an indication that the 
Savings Bank does not particularly emphasize loans of this type, but 
may make such loans for well qualified customers.  There have been no 
losses from the "other loans" category in the past three fiscal years.

     Second Mortgage Loans.  The Savings Bank offers adjustable rate 
second mortgage loans that are usually made on the security of the 
borrower's residence.  Loans normally do not exceed 80% to 85% of 
the appraised value of the residence, less the outstanding principal 
of the first mortgage, and have terms of up to 20 to 25 years 
requiring monthly payments of principal and interest.  At June 30, 
1998, second mortgage loans amounted to $4.9 million, or 3.27% of 
total loans of the Savings Bank.

                                       12
</page>


Loan Maturity and Repricing

     The following table sets forth certain information at June 30, 
1998 regarding the dollar amount of loans maturing in the Savings 
Bank's portfolio based on their contractual terms to maturity, but 
does not include scheduled payments or potential prepayments.  Demand
loans, loans having no stated schedule of repayments and no stated 
maturity, are reported as due in one year or less.  Mortgage loans 
which have adjustable rates are shown as maturing at their next 
repricing date.  Loan balances do not include undisbursed loan 
proceeds, unearned discounts, unearned income and allowance for loan 
losses.
<TABLE>
<CAPTION>

                                            After One Year   After 3 Years    After 5 Years
                          Within One Year  Through 3 Years  Through 5 Years  Through 10 Years  Beyond 10 Years     Total
                          ---------------  ---------------  ---------------  ----------------  ---------------   ---------
                                                     (Dollars in thousands)
<S>                              <C>            <C>              <C>                <C>              <C>            <C>
Real estate mortgage.........  $115,073        $   85           $   15            $   301          $   814       $116,288
Commercial real estate.......    12,110           372               --                 --               25         12,507
Land.........................     8,829            32               --                 --               --          8,861
Mobile home..................     1,015            42               12                 31               35          1,135
Automobile...................     5,252           398               57                 17               --          5,724
Savings account loans........     1,571            38               53                 --               --          1,662
Other consumer...............     1,488           354                5                 --               --          1,847
Commercial business..........     2,170           149               44                 --                9          2,372
                               --------         -----            ------            -------         -------      ---------
     Total loans.............  $147,508       $ 1,470            $  186           $   349          $   883       $150,396
                               ========       =======            ======           ========         ========      ========
</TABLE>


     The following table sets forth the dollar amount of all loans 
due one year after June 30, 1998, all of which have fixed interest 
rates.

<TABLE>
<CAPTION>
                                   Fixed
                                   Rates 
                                  -------
                               (In thousands)
<S>                                  <C>
Real estate mortgage.........     $1,215
Commercial real estate.......        397
Land.........................         32
Mobile home..................        120
Automobile...................        472
Savings account loans........         91
Other consumer...............        359
Commercial business..........        202
                                  ------
     Total                        $2,888
                                  ======
</TABLE>
                                                                         13
</page>

     The following table sets forth scheduled contractual 
amortization of loans and mortgage-backed securities at June 30, 
1998 and the dollar amount of such loans and mortgage-backed 
securities at the date which are scheduled to mature after one 
year which have fixed or adjustable interest rates.  Demand loans, 
loans having no stated schedule of repayments and no stated maturity
are reported as due in one year or less.

<TABLE>
<CAPTION>
                                           At June 30, 1998               
                              -----------------------------------------------------
                                                     Commercial           Mortgage-
                              Mortgage    Consumer    Business     Total    Backed
                               Loans       Loans       Loans       Loans  Securities
                              --------    --------   ----------   ------  ----------
                                                  (In thousands)
<S>                             <C>         <C>          <C>        <C>       <C>

Amounts due:
 Within one year...........  $  5,080     $3,443      $1,543      $ 10,066    $ --
 After one year
  through three years......     1,806      3,354         394         5,554      --
 After three years
  through five years.......     2,375      2,297         175         4,847      --
 After five years..........   128,395      1,274         260       129,929     703
                             --------     ------      ------      --------   -----
     Total.................  	$137,656    $10,368      $2,372      $150,396   $703
                             ========     ======      ======      ========    ====

Interest rate terms
 on amounts due after 
 one year:
   Fixed...................  $  1,644     $1,042      $  202      $  2,888    $152
   Adjustable..............   130,932      5,883         627       137,442     551
                             -------     ------      ------       --------    ----
      Total................  $132,576     $6,925      $  829      $140,330    $703
                             ========     ======      ======      ========    ====
</TABLE>


     Mortgage Loan Solicitation and Processing.  The Savings Bank's 
main source of loans is from referrals from current or prior 
borrowers, limited walk-ins and contact and relationships with real 
estate agents.   Once a mortgage loan application is received, a 
credit and property analysis is completed including obtaining a 
credit report from local reporting agencies, verification of income 
and deposits through mail or direct contact, asset and liability 
verification as required and an evaluation of the property offered 
as collateral.  Real estate evaluations are completed by board 
approved staff personnel.  The application is then submitted for 
underwriting by designated staff members and forwarded to a loan 
officer for review and action along with the underwriter's 
recommendations.  Decisions are generally made within a week.  Loans
in excess of $100,000 are approved by the Board of Directors and 
loans less than that amount are approved by authorized officers or 
a loan officer of the Savings Bank.

     Loan Originations, Purchases and Sales.  Loans are originated 
to meet or exceed the applicable underwriting requirements of the 
Savings Bank.  The Savings Bank has never sold loans in the 
secondary market.

     The Savings Bank has occasionally purchased loans from 
other financial institutions or three local appliance dealers, 
as discussed above.  See "-- Consumer and Commercial Business 
Loans."  The Savings Bank did not purchase any whole mortgage 
loans during 1998 other than in connection with the Crane and 
Galena purchase.  

                                    14
</page>

The following table shows total mortgage loans originated, purchased,
sold and repaid during the periods indicated.

<TABLE>
<CAPTION>
                                                                 Years Ended June 30,
                                                      --------------------------------------
                                                        1998            1997           1996 
                                                      --------        --------       -------
                                                             (In thousands)
<S>                                                     <C>             <C>            <C>
Total mortgage loans at beginning of period........  	$127,682       $114,201       $ 96,968
Loans originated:                                     --------       --------       --------
 One-to-four family residential.....................    34,141         33,414         32,452
 Multi-family residential and commercial real estate     3,977          4,539          4,254
 Land...............................................     3,769          2,622          3,528
                                                      --------       --------       --------
   Total loans originated...........................    41,887         40,575         40,234

Loans purchased:
 One-to-four family residential.....................     2,115             --            358
 Multi-family residential and commercial real estate       590             --             --
 Land                                                       71             --             --
 Participation loans................................        --             --             --
                                                       -------         ------        -------
   Total loans purchased............................     2,776             --            358

Loans sold..........................................        --             --             --

Mortgage loan principal repayments..................    34,643          26,870        23,359
                                                      --------        --------      --------

Other-loans charged off or
 transferred to other real estate(1)................        46             224           --
                                                      --------         --------     -------
   Total other activity.............................        46             224           --
                                                      --------         --------     -------

Total gross mortgage loans at end of period.........  $137,656        $127,682     $114,201
                                                      ========        ========      =======

Total mortgage-backed certificates at beginning of
 period.............................................  $    828        $  2,831      $ 3,134
Mortgage-backed purchased...........................        --              --           --
Mortgage-backed sold................................        --          (2,000)          --
Principal repayments................................      (123)           (128)        (265)
Amortization of premiums............................        --              --           (3)
Adjustment to market value..........................        (2)            125          (35)
                                                      --------        --------      -------
Total mortgage-backed at end of period..............  $    703        $    828      $ 2,831
                                                      ========        ========      ========
</TABLE>
-------------   
(1)   Loans transferred to other real estate amounted to $41,000, 
$114,000 and $0 in 1998, 1997 and 1996, respectively.  Mortgage loans charged 
off amounted to $5,000, $110,000 and $0 in 1998, 1997 and 1996, 
respectively.

                                       15
</page>

     Loan Commitments.  The Savings Bank issues commitments for 
adjustable rate one- to four-family residential mortgage loans that 
are honored for up to a maximum of 30 days from approval.  If the 
commitment expires, it is generally renewed upon request without 
penalty or expense to the borrower at the current market rate.  
The Savings Bank had outstanding net loan commitments of 
approximately $1.1 million at June 30, 1998.  See Note 15 of the 
Notes to the Consolidated Financial Statements.

     Loan Origination and Other Fees.  The Savings Bank does not 
charge points on ARM mortgage loans.  Instead, it quotes an interest 
rate, or base rate, with no points and gives the borrower the option,
if desired, to pay a 1% fee, but obtain the loan at 1% below the 
Savings Bank's base rate at the time the loan is issued.  Subsequent 
increases or decreases in the loan's interest rate are based upon the reduced
rate rather than the base rate.  Construction borrowers can pay a 2% fee 
and receive a 2% reduction in the initial rate.  Current accounting 
standards require fees received (net of certain loan origination 
costs) for originating loans to be deferred and amortized into 
interest income over the contractual life of the loan.  While the Savings
Bank has sold no loans, if any were sold the net deferred fees associated 
with loans that are sold would be recognized as income at the time of sale.  
The Savings Bank had $167,000 net deferred loan costs at June 30, 1998.

     Non-Performing Assets and Delinquencies.  When a mortgage loan 
borrower fails to make a required payment by the end of the month in 
which the payment is due, the Savings Bank generally institutes 
collection procedures.  The first notice is generally mailed to the 
borrower, or a phone call made, within 10 days of the end of the 
month, and if necessary, a second notice follows at the end of the 
next two week period.  In most cases, delinquencies are cured 
promptly; however, if the Savings Bank is unable to make contact 
with the borrower to obtain full payment, or, if that is not 
possible, work out a repayment schedule, a notice to commence 
foreclosure may be mailed to the borrower.  The Savings Bank makes 
every reasonable effort, however, to work with delinquent borrowers.
Understanding that borrowers sometimes cannot make payments because 
of illness, loss of employment, etc., the Savings Bank will attempt 
to work with delinquent borrowers who are communicating and 
cooperating with the Savings Bank.

     The Savings Bank institutes the same collection procedures 
for non-mortgage loans.


     The Board of Directors is informed on a monthly basis as to 
the status of all mortgage and non-mortgage loans that are 
delinquent 60 days or more, as well as the status on all loans 
currently in foreclosure or owned by the Savings Bank through 
foreclosure.

     The table below sets forth the amounts and categories of 
non-performing assets in the Savings Bank's loan portfolio at 
the dates indicated.  Loans are placed on non-accrual status only 
when the Savings Bank determines there is little, if any, 
likelihood they will be repaid.  The loans are fully reserved at 
that time, through appropriate loss reserves and are kept on the 
books as long as some principal is being repaid.  The Savings Bank 
has no reserves for uncollected interest and does not accrue interest
on the non-accrual loans.  The Savings Bank would have recorded 
interest income of $4,300, $4,300 and $4,300 on non-accrual loans 
during the years ended June 30, 1998, 1997 and 1996, respectively, 
if such loans had been performing during such periods.  The Savings 
Bank did not recognize interest income on loans after being placed 
on a non-accrual basis during the years ended June 30, 1998, 1997 
and 1996.  

     While accruing loans contractually past due 90 days or more have 
increased significantly over the past year, management is not unduly
concerned.  The vast majority of the loans are well secured, and the 
borrowers are making payments and working with Bank personnel to bring
their loans current.  Since June 30, 1998, residential loans totaling
$421,000 and $90,000 of commercial business loans have been brought
current.

                                       16
</page>

     The following table sets forth information with respect to the 
Savings Bank's non-performing assets at the dates indicated.  At the 
dates shown, the Savings Bank had no restructured loans within the 
meaning of SFAS 15.
<TABLE>
<CAPTION>
                                                    At June 30, 
                                     ------------------------------------------
                                      1998     1997     1996     1995     1994
                                     ------   ------   ------   ------   ------
                                               (Dollars in thousands)
<S>                                    <C>      <C>      <C>      <C>      <C>
Loans accounted for on
 a nonaccrual basis:
  Real estate: 
   Residential....................  $   --    $   --   $   --   $   --   $ --
   Commercial.....................      --        --       --       --     --
  Commercial business.............      48        48      121       40     40
  Consumer........................       9         9        9       11     12
                                    ------    ------   ------   ------   ----
      Total.......................  $   57    $   57   $  130   $   51   $ 52
                                    ======    ======   ======   ======   ====

Accruing loans which are contractually
 past due 90 days or more:
  Real estate: 
   Residential....................  $1,321    $  461   $  548   $  295   $ 355
   Commercial.....................     306       152        4      106      26
  Commercial business.............     201        12       29       44      23
  Consumer........................     255       122      108       93     161
                                    ------    ------   ------   ------    ----

       Total......................  $2,083    $  747   $  689   $  538   $ 565
                                    ======    ======   ======   ======   =====
  Total of nonaccrual and
   90 days past due loans.........  $2,140    $  804   $  819   $  589   $ 617

Real estate owned.................      --       114       --       48      47

Other non-performing assets.......      --        --       --       --      --
Slow home loans (60 to 90 days
 delinquent)......................     700       602      446      349     309
                                    ------    ------   ------    -----    ----
   Total non-performing assets....  $2,840    $1,520   $1,265   $  986   $ 973
                                    ======   =======   ======   ======   =====
Total loans delinquent 90 days
  or more to net loans............   1.46%     0.56%    0.58%    0.53%    0.66%

Total loans delinquent 90 days
  or more to total consolidated
  assets..........................   1.24      0.46     0.48     0.42     0.48

Total non-performing assets
 to total consolidated
  assets..........................   1.65      0.93     0.88     0.77     0.82
</TABLE>
                                       17
</page>

     Asset Classification.  The OTS has adopted various regulations 
regarding problem assets of savings institutions.  The regulations 
require that each insured institution review and classify its assets 
on a regular basis.  In addition, in connection with examinations of 
insured institutions, OTS examiners have authority to identify 
problem assets and, if appropriate, require them to be classified.  
There are three classifications for problem assets: substandard, 
doubtful and loss.  Substandard assets must have one or more defined 
weaknesses and are characterized by the distinct possibility that the
insured institution will sustain some loss if the deficiencies are 
not corrected.  Doubtful assets have the weaknesses of substandard 
assets with the additional characteristic that the weaknesses make 
collection or liquidation in full on the basis of currently existing
facts, conditions and values questionable, and there is a high 
possibility of loss.  An asset classified loss is considered 
uncollectible and of such little value that continuance as an asset 
of the institution is not warranted.  If an asset or portion thereof 
is classified loss, the insured institution must either establish 
specific allowances for loan losses for the full amount of the 
portion of the asset classified as loss or charge off such amount.  
All or a portion of general loan loss allowances established to 
cover possible losses related to assets classified substandard or 
doubtful may be included in determining an institution's regulatory 
capital, while specific valuation allowances for loan losses 
generally do not qualify as regulatory capital.

     At June 30, 1998 and 1997 the aggregate amounts of the Savings 
Bank's classified assets as determined by the Savings Bank, and of 
the Savings Bank's general and specific loss allowances and charge-
offs, were as follows:
<TABLE>
<CAPTION>
                                               At June 30,           
                                       ----------------------
                                          1998          1997
                                        -------     ---------
                                            (In thousands)
<S>                                       <C>           <C>

Loss...........................          $   73      $    82
Doubtful.......................              55           75
Substandard assets.............           1,419        1,726
                                         -------      -------
  Total classified assets......          $1,547       $1,883
                                         ======       ======

General loss allowances........          $  242       $  209
Specific loss allowances.......             286	         273
                                         ------       ------
   Total allowances                      $  528       $  482
                                         ======       ======
Charge-offs.. ..................         $   32       $  114
                                         ======       ======
</TABLE>

     The Savings Bank does not use a special mention category in 
its loan classification process.  Loans classified as substandard, 
therefore, include all loans for which any perceived weakness occurs
even if no possibility has arisen that a loss will occur if the 
weakness is not corrected.  The Savings Bank's policy is to classify 
as substandard, for example, any loan, irrespective of payment record 
or collateral value, when a bankruptcy filing occurs, a divorce 
petition is filed, the pay record becomes erratic (i.e., miss one 
monthly payment, but make a double payment the next month), a 
borrower moves from the area, a major illness occurs, or a loan 
becomes contractually delinquent by two monthly payments.

     The Savings Bank's further policy is not to remove a loan 
from a substandard classification, again, irrespective of pay 
record or collateral value, until those perceived weaknesses are 
cured.  Because of this stringent classification policy, the June 
30, 1998 substandard classification totals included $479,000 of 
loans that were current in their payment obligations.  As of 
June 30, 1997, loans classified substandard included $700,000 of 
current loans.  

     The following is a discussion of the Savings Bank's major 
substandard loan at June 30, 1998:
The borrower obtained a residential construction loan in 
March of 1996.  At June 30, 1998, the balance of the loan was 
$122,000.  The loan is classified due to the fact the borrower 
exceeded his initial loan amount and had to borrow additional 


                                       18
</page>


proceeds to complete the construction of the house.  To date, all 
principal and interest payments made by the borrower have been made 
timely. 

     Real Estate Owned.  Real estate acquired by the Savings Bank as 
a result of foreclosure or by deed in lieu of foreclosure is 
classified as real estate owned until it is sold.  When property 
is acquired, the unpaid principal balance of the related loan 
plus foreclosure costs are compared to the property's appraised 
value.  The property is then directly written down to the lower of 
cost or fair value.  Subsequently, the property is carried at the 
lower of cost or net realizable value with any adjustments made 
through the establishment of a specific reserve.  At June 30, 1998 
and 1997, no property was held as real estate owned.

Reserve for Loan Losses

     The Savings Bank's loan personnel, at least monthly, evaluate 
the need to establish reserves for losses on loans based on 
estimated losses on specific loans when a finding is made that a 
decline in value has occurred.  Such evaluation includes a review of 
all loans for which full collectibility may not be reasonably assured 
and considers, among other matters, historical loss experience, the
level and trend of delinquent and classified loans, current and
anticipated economic; and real estate conditions and the composition 
of the loan portfolio. These provisions for losses are charged 
against earnings in the year they are established.   The Savings 
Bank had reserves for loan losses at June 30, 1998, 1997 and 1996 of
approximately $528,000, $482,000 and $520,000, respectively.  
Management believes that loan loss reserves were adequate at 
June 30, 1998.  However, if the underlying facts and circumstances 
of the loan portfolio change in the future, the adequacy of the 
allowance for loan losses will be addressed and, if need be, 
adjusted accordingly.

     While the Savings Bank believes it has established its existing 
allowance for loan losses in accordance with GAAP, there can be no 
assurance that regulators, in reviewing the Savings Bank's loan 
portfolio, will not request the Savings Bank to significantly 
increase its allowance for loan losses.  Any material increase in 
reserves may adversely affect the Savings Bank's financial condition 
and earnings.

                                       19
</page>

     The following table sets forth an analysis of the Savings Bank's
gross reserve for possible loan losses for the periods indicated.  
Where specific loan loss reserves have been established, any 
difference between the loss reserve and the amount of loss realized 
has been charged or credited to current income. 
<TABLE>
<CAPTION>
                                                          Years Ended June 30,
                                             ---------------------------------------------
                                               1998      1997     1996      1995      1994
                                             ------     -----    -----      -----    -----
                                                        (Dollars in thousands)
<S>                                           <C>         <C>      <C>        <C>      <C>
Allowance at beginning of period...........    $482      $520     $442       $479     $470
Provision for loan losses..................      66        71       79        (27)      23
Recoveries:
 Residential real estate...................      12        --       --         --       --
 Commercial real estate....................      --        --       --         --       --
 Consumer..................................      --         5       --          2        8
 Commercial business.......................      --        --       --         --       --
                                               ----     -----     ----      -----     ----
   Total recoveries........................      12         5       --          2        8
                                               ----     -----     ----      -----     ----
  
Charge offs:
 Residential real estate...................       5         8       --          3        3
 Commercial real estate....................      --        --       --         --       --
 Consumer..................................      27        31        1          9        8
 Commercial business.......................      --        75       --         --       11
                                              -----      ----     ----       ----     ----
   Total charge offs.......................      32       114        1         12       22
                                              -----      ----     ----       ----     ----
   Net charge offs.........................      20       109        1         10       14
                                              -----      ----     ----       ----     ----
    Allowance at end of period.............    $528      $482     $520       $442     $479
                                               ====      ====     ====       ====     ====
Ratio of allowance to total loans
 outstanding at the end of the period......   0.35%     0.35%    0.42%      0.42%      0.54%
Ratio of net charge offs to average loans
 outstanding during the period.............   0.01%     0.09%      --       0.01%      0.02%

                                       20
</page>

Allowance for Loan Losses by Category

</TABLE>
<TABLE>
<CAPTION>
                                                                     At June 30,   
                          -------------------------------------------------------------------------------------------------
                                       1998                1997                   1996                   1995           
                          -----------------------  -----------------------  ---------------------  -----------------------
                                              %                       %                        %                       %
                                    %      of Gross         %      of Gross         %      of Gross         %      of Gross
                                  of Out-  Loans in       of Out-  Loans in       of Out-  Loans in       of Out-  Loans in
                                 standing  Category      standing  Category      standing  Category      standing  Category
                                 Loans in  to Gross      Loans in  to Gross      Loans in  to Gross      Loans in  to Gross
                           Amount Category Loans   Amount Category Loans   Amount Category Loans   Amount Category Loans   
                           ------ -------- -----   ------ -------- -----  ------- -------- -----   ------ -------- -------
                                                                (Dollars in thousands)
<S>                         <C>      <C>    <C>     <C>     <C>     <C>      <C>     <C>     <C>    <C>     <C>      <C>
					
Real estate -- mortgage:
  Residential........... $  195  0.17%   74.74%    $174  0.16%   76.82%    $179  0.19%   77.44%    $186  0.22%   79.12%
  Commercial............     69  0.59     7.72       60  0.55     7.90       61  0.67     7.42       58  0.82     6.75
  Land..................     20  0.23     5.80       15  0.22     4.97        9  0.16     4.69        7  0.16     4.08
  Second mortgage loans.     12  0.24     3.27        9  0.21     3.11        8  0.21     3.02        4  0.15     2.60
Consumer................    161  1.55     6.89      156  2.01     5.63      159  2.23     5.78      146  2.58     5.41
Commercial business.....     71  2.99     1.58       68  3.15     1.57      104  5.11     1.65       41  1.91     2.04
                         ------         -------   -----         -------   -----         ------    -----         ------

   Total allowance for 
      loan losses        $  528  0.35%  100.00%    $482  0.35%  100.00%    $520  0.42%  100.00%    $442  0.42%   100.00%
                         ======         =======    =====        ======     =====        =======    =====         =======
</TABLE>

<TABLE>
<CAPTION>
                             At June 30,
                                1994
                      ------------------------
                                           %
                                  %     of Gross
                               of Out-  Loans in
                              standing  Category
                              Loans in  To Gross
                      Amount  Category  Loans
                      ------  --------  -------
<S>                     <C>      <C>      <C>
Real estate--mortgage:
  Residential......  $ 201     0.29%    79.86%
  Commercial.......     53     0.96      6.24
  Land                   5     0.14      3.93
  Second mortgage loans  3     0.17      2.06
Consumer               172     3.12      6.25
Commercial business     45     3.08      1.66
                     -----             ------
  Total allowance for
    loan losses     $ 479     0.54%   100.00%
                   ======             =======
</TABLE>

                                                       21
</page>

Investment Activities

     Savings and loan associations have authority to invest in 
various types of liquid assets, including United States Treasury 
obligations, securities of various Federal agencies and of state and 
municipal governments, deposits at the FHLB-Des Moines, certificates 
of deposit of federally insured institutions, certain bankers' 
acceptances and federal funds.  Subject to various restrictions, 
savings institutions may also invest a portion of their assets in 
commercial paper, corporate debt securities and mutual funds, the 
assets of which conform to the investments that federally chartered 
savings institutions are otherwise authorized to make directly.  
Savings institutions are also required to maintain minimum levels 
of liquid assets which vary from time to time.  See "REGULATION OF 
FIRST HOME -- Federal Home Loan Bank System."  The Savings Bank may 
decide to increase its liquidity above the required levels depending 
upon the availability of funds and comparative yields on investments 
in relation to return on loans.

     The Savings Bank is required under federal regulations to 
maintain a minimum amount of liquid assets and is also permitted 
to make certain other securities investments.  See "REGULATION OF 
FIRST HOME" herein and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and 
Capital Resources" in the Annual Report.  The balance of the Savings 
Bank's investments in short-term securities in excess of regulatory
requirements reflects management's response to the significant 
percentage of deposits with short maturities.  At June 30, 1998, 
the Savings Bank's regulatory liquidity was 16.3% which is 
significantly in excess of the required 5%.  It is the intention of 
management to hold securities with short maturities in the Savings 
Bank's investment portfolio in order to enable the Savings Bank to 
match more closely the interest-rate sensitivities of its assets and
liabilities. 

     The Savings Bank purchased one pool of car loans through a 
private placement in fiscal 1992 totaling $250,000.  Principal and 
interest payments are made on the loans monthly and paid to the 
Savings Bank. The loans have a five year stated maturity.    
In October 1993, the Savings Bank was advised by the trustee that an 
audit of these loans disclosed evidence of possible fraudulent 
activity in connection with the borrowers' payments.  On July 10, 
1995, the pool of loans was downgraded from B to CCC.  Monthly 
principal and interest payments are not currently being received.  
Based on information it received, the Savings Bank wrote down this 
investment by $96,000 to its estimated net realizable value because, 
in the opinion of management, the decline in market value was 
considered to be other than temporary.  At June 30, 1998, the 
estimated net realizable value of this investment was $14,000.

     Routine short-term investment decisions are made by the 
President and Chief Executive Officer, who acts within policies 
established by the Board of Directors, and are reported monthly to 
the Board.  Those investments include federally insured certificates 
of deposit, FHLB term time obligations, bankers acceptances, treasury
obligations and U.S. Government agencies.  All other investments 
including, but not limited to, mortgage-backed securities, bank 
qualifying municipal tax exempt bonds, corporate bonds or other 
longer term obligations require prior Board approval.  Securities 
are purchased for investment purposes and are to be held until 
maturity.  The goals of the Savings Bank's investment policy are to 
select investments based on safety first, flexibility second and
diversification third.  In addition, as a result of the concern with 
interest rate risk exposure, there has been a focus on short-term 
investments.  At June 30, 1998, the Company's and the Savings Bank's 
securities investment portfolio totaled $4.9 million and consisted 
primarily of federal agency obligations securities, mutual funds, 
and municipal bonds.  For further information 
concerning the Savings Bank's investment and mortgage-backed 
securities portfolio, see Notes  3, 4 and 5 of the Notes to the 
Consolidated Financial Statements.

                                       22
</page>

Investment Securities Analysis

     The following table sets forth the Company's and the Savings 
Bank's investment securities portfolio at carrying value at the 
dates indicated.
<TABLE>
<CAPTION>
                                                     At June 30,   
                                  --------------------------------------------------------
                                         1998             1997             1996            
                                  -----------------  -----------------  -------------------
                                    Book  Percent of  Book   Percent of  Book    Percent of
                                  Value(1) Portfolio Value(1) Portfolio  Value(1) Portfolio 
                                  -------  --------- -------- ---------  -------  ---------
                                                  (Dollars in thousands)
<S>                                <C>        <C>      <C>        <C>     <C>       <C>
Debt securities:
Domestic corporate bonds.........$     --      --%   $   150     0.88%   $  155    1.23%
U.S. government treasury and
  obligations of U.S.
  government agencies............   1,699   34.87     13,127    76.78     8,009   63.56
Auto and student loan pools......      63    1.30        112     0.65       158    1.25
State and political subdivision..	   1,050   21.55      1,492     8.73     2,075   16.47
                                 --------  ------    -------  -------   -------  ------
  Total debt securities..........   2,812   57.72     14,881    87.04    10,397   82.51
                                 --------   -----     ------    -----    ------   -----
Equity securities:
Federal Home Loan Bank
  stock..........................   1,058   21.71      1,264     7.39       890    7.06
Other............................   1,002   20.57        951     5.57     1,314   10.43
                                  -------   -----    -------   ------    -------   ----
  Total equity securities........   2,060   42.28      2,215    12.96     2,204   17.49
                                  -------  ------    -------   ------    -------  -----
Total investment securities       $ 4,872  100.00%   $17,096   100.00%  $12,601  100.00%
                                  =======  =======   =======   =======  =======  =======
</TABLE>                
(1)  The market value of the Company's and the Savings Bank's 
     investment securities portfolio amounted to $4.89 million, 
     $17.12 million and $12.62 million at June 30, 1998, 1997 and 
     1996, respectively.  At June 30, 1998, the market value of the 
     principal components of the Company's and the Savings Bank's 
     investment securities portfolio which were obligations of U.S. 
     Government securities was $1.70 million.

     The following table sets forth the maturities and weighted 
     average yields of the debt securities in the Company's and the 
     Savings Bank's investment securities portfolio at June 30, 1998.

<TABLE>
<CAPTION>

                                      Less Than          One to       Five to           Over Ten
                                      One Year         Five Years     Ten Years           Years      
                                   --------------   --------------   --------------   --------------
                                    Amount  Yield    Amount  Yield    Amount  Yield    Amount  Yield
                                   -------  -----   -------  -----   -------  -----   -------  -----
                                                         (Dollars in thousands)
<S>                                   <C>    <C>      <C>     <C>      <C>     <C>       <C>    <C>

U.S. government treasury and
  obligations of U.S.
  government agencies.............  $  300  5.70        900   6.34        499  6.42         --   --

Auto and student loan pools.......      14  7.00         49   7.00         --   --          --   --

State and political subdivisions..     515  5.68        395   5.69        140  5.18         --   --
                                    ------            -----              -----             -----
   Total..........................  $  829  5.71     $1,344   6.17       $639  6.15     $   --   --
                                     -----            -----              -----             ------
</TABLE>

                                       23
</page>
 
     At June 30, 1998, the Savings Bank held no security which 
had an aggregate book value in excess of 10% of the 
Company's stockholders' equity:

     Mortgage-Backed Securities.  To supplement lending activities 
in previous periods of deposit growth and/or declining loan demand, 
the Savings Bank has invested in residential mortgage-backed 
securities.  Because of strong local loan demand, however, no 
mortgage-backed securities have been purchased in the past six 
years.  Although such securities are held for investment, they can 
serve as collateral for borrowings and, through repayments, as a 
source of liquidity.  For information regarding the carrying and 
market values of the Savings Bank's mortgage-backed securities 
portfolio, see Note 5 of the Notes to Consolidated Financial 
Statements.  The Savings Bank has invested in federal agency 
securities issued by Federal Home Loan Mortgage Corporation 
("FHLMC"), Federal National Mortgage Association ("FNMA") and 
Government National Mortgage Association ("GNMA").  As of 
June 30, 1998, 79% of the outstanding balance of the mortgage-
backed securities had adjustable rates of interest.  

     As of June 30, 1998, the Savings Bank's portfolio included 
$700,000 of mortgage-backed securities purchased as investments 
to supplement the Savings Bank's mortgage lending activities.

     The FHLMC, FNMA and GNMA certificates are modified pass-
through mortgage-backed securities that represent undivided 
interests in underlying pools of fixed-rate, or certain types of 
adjustable-rate, single-family residential mortgages issued by 
these government-sponsored entities.  As a result, the interest 
rate risk characteristics of the underlying pool of mortgages, such 
as fixed- or adjustable-rate, as well a prepayment risk, are passed 
on to the certificate holder.  FHLMC and FNMA provide the certificate
holder a guarantee of timely payments of interest and ultimate 
collection of principal, whether or not they have been collected.  
GNMA's guarantee to the holder of timely payments of principal and 
interest is backed by the full faith and credit of the U.S. 
government.  Mortgage-backed securities generally yield less than 
the loans that underlie such securities, because of the cost of 
payment guarantees or credit enhancements that reduce credit risk.  
In addition, mortgage-backed securities are more liquid than 
individual mortgage loans and may be used to collateralize 
obligations of the Savings Bank.
	
     The Savings Bank has incorporated into its investment 
policy the regulatory requirements set forth in the OTS TB 52, 
which deals with the selection of securities dealers, securities 
policies, unsuitable investment practices and mortgage derivative 
products.

Deposit Activities and Other Sources of Funds

     General.  Deposits and loan repayments are the major source of 
the Savings Bank's funds for lending and other investment purposes.  
Loan repayments are a relatively stable source of funds, while 
deposit inflows and outflows and loan prepayments are significantly 
influenced by general interest rates and money market conditions.  
Borrowings may be used on a short-term basis to compensate for 
reductions in the availability of funds from other sources.  They 
may also be used on a longer term basis for general business 
purposes. 

     Deposit Accounts.  Deposits are attracted from within the 
Savings Bank's primary market area through the offering of a 
broad selection of deposit instruments, including negotiable order 
of withdrawal ("NOW") accounts, money market accounts, regular 
savings accounts, certificates of deposit and retirement savings 
plans.  Deposit account terms vary according to the minimum balance 
required, the time periods the funds must remain on deposit and the 
interest rate, among other factors.  In determining the terms of 
its deposit accounts, the Savings Bank considers the rates offered 
by its competition, profitability to the Savings Bank, matching 
deposit and loan products and its customer preferences and concerns.
The Savings Bank generally reviews its deposit mix and pricing 
weekly, and adjusts it as necessitated by liquidity needs, the gap 
position and competition.  Management believes deposits have remained
relatively stable to increasing slightly, net of interest credited, 
despite withdrawals as depositors sought increased yields on 
alternative investments in the marketplace.

                                       24
</page>

     The following table sets forth information concerning the 
Savings Bank's time deposits and other interest-bearing deposits 
at June 30, 1998.

<TABLE>
<CAPTION>
Weighted
Average                                                                        Percentage
Interest                                              Minimum                   of Total
 Rate           Term      Category                     Amount      Balance      Deposits   
--------      --------    -------------              ---------    ---------    ----------
                                                               (In thousands)
<S>              <C>          <C>                       <C>         <C>           <C>
0.00%           None      Non-interest bearing        $  --       $ 4,463         3.17%
2.14%           None      NOW accounts                   25        15,135        10.73
3.77%           None      Super Saver accounts            1        17,550        12.44
2.73%           None      Super NOW accounts            300         6,833         4.85
3.00%           None      Savings accounts               --         8,113         5.75

                Certificates of Deposit
                -----------------------
4.86%           3 months  Fixed term, fixed rate        500         1,795         1.27
5.06%           6 months  Fixed term, fixed rate        500        16,322        11.57
5.32%          12 months  Fixed term, fixed rate        500        19,643        13.93
5.62%          18 months  Fixed term, fixed rate        500         3,482         2.47
5.72%          24 months  Fixed term, fixed rate        500         5,831         4.13
5.73%          30 months  Fixed term, fixed rate        500         1,938         1.37
5.83%          36 months  Fixed term, fixed rate        500         2,937         2.08
6.22%          48 months  Fixed term, fixed rate        500         1,147         0.81
6.34%          60 months  Fixed term, fixed rate        500         7,480         5.30
6.09%          72 months  Fixed term, fixed rate        500            90         0.06
7.49%          120 months Fixed term, fixed rate        500            64         0.05
various        various    Fixed term, adjust rate       500        13,672         9.69
various        various    Jumbo certificates        100,000        14,564        10.33
                                                                 --------       -------
                          TOTAL                                  $141,059       100.00%
                                                                 ========       =======
</TABLE>

     The following table indicates the amount of the Savings Bank's 
jumbo certificates of deposit by time remaining until maturity as of 
June 30, 1998.  Jumbo certificates of deposit require minimum 
deposits of $100,000 and rates paid on such accounts are negotiable.
<TABLE>
<CAPTION>
                                          Jumbo
                                      Certificates
Maturity Period                        of Deposits 
---------------                       -------------
                                      (In thousands)
<S>                                        <C>
Three months or less                     $3,088
Three through six months                  2,881
Six through twelve months                 4,468
Over twelve months                        4,127
                                        -------

     Total                              $14,564
                                        =======
</TABLE>
                                                              25
</page>



Time Deposits by Rates

    The following table sets forth the time deposits in the Savings 
Bank classified by rates as of the dates indicated.

<TABLE>
<CAPTION>

                                     At June 30,         
                       ------------------------------------
                         1998         1997           1996
                       ---------  ------------   ----------
                                 (In thousands)		
<S>                       <C>          <C>            <C>
2.00 - 4.49%..........	$   785      $     --       $   240
4.50 - 5.49%..........  41,051        27,382        34,324
5.50 - 6.49%..........  36,970        41,547        25,510
6.50 - 7.49%..........   9,896        10,377        10,261
Over   7.49%..........     263           238           739
                       -------      --------       -------
Total................. $88,965       $79,544       $71,074
                       =======       =======       =======
</TABLE>

    The following table sets forth the amount and maturities of time 
deposits at June 30, 1998.
<TABLE>
<CAPTION>
                                                 Amount Due        
                          --------------------------------------------------
                                                                                          Percent
                                                                                          of Total
                          Less Than     1-2      2-3       3-4        After              Certificate
                           One Year    Years    Years     Years      4 Years     Total     Accounts
                          ---------   -------  --------  --------    --------   --------  ---------
                                                 (In thousands)
<S>                           <C>        <C>       <C>      <C>        <C>        <C>        <C>
2.00 - 4.49%               $   769   $     14  $      2  $    --    $   --      $   785      0.88%
4.50 - 5.49%.............   35,920      3,748       757      211       415       41,051     46.14
5.50 - 6.49%.............   21,638      5,980     4,027    4,374       951       36,970     41.56
6.50 - 7.49%.............    5,344      3,620        23      862        47        9,896     11.12
Over 7.49%...............       53        210        --       --        --          263      0.30
                           -------   --------  --------  -------    ------      -------    ------
Total....................  $63,724    $13,572    $4,809   $5,447    $1,413      $88,965    100.00%
                           =======    =======    ======   ======   =======      =======    =======
</TABLE>
                                                              26
</page>
                         	

Deposit Flow

     The following table sets forth the balances of savings deposits
in the various types of savings accounts offered by the Savings Bank 
at the dates indicated.
<TABLE>
<CAPTION>

                                                                            At June 30,        
                                     -----------------------------------------------------------------------------------
                                                  1998                           1997                       1996        
                                     ----------------------------    -----------------------------    -----------------
                                                Percent                         Percent                         Percent
                                                   of     Increase                 of    Increase                  of 
                                        Amount    Total  (Decrease)     Amount    Total  (Decrease)     Amount    Total
                                      --------  -------  ---------    ---------  ------  ---------     --------  ------
                                                                               (Dollars in thousands)
<S>                                      <C>       <C>       <C>          <C>       <C>      <C>          <C>       <C>
Non-interest bearing...............   $  4,463     3.17%   $ 1,192     $  3,271   2.78%   $   781       $ 2,490    2.35%
NOW checking.......................     15,135    10.73      7,163        7,972   6.78      2,575         5,397    5.09
Regular savings accounts...........      8,113     5.75      2,525        5,588   4.75       (193)        5,781    5.46
Super Saver accounts...............     17,550    12.44      2,672       14,878  12.64        702        14,176   13.38
Super NOW accounts.................      6,833     4.85        401        6,432   5.47       (610)        7,042    6.65
Fixed-rate certificates which
 mature (1):
  Within 1 year....................     57,920    41.06     11,866       46,054  39.13      3,122        42,932   40.52
  After 1 year, but within 2 years.     10,961     7.77        613       10,348   8.79      4,387         5,961    5.62
  After 2 years, but within 5 years      6,385     4.53     (2,032)       8,417   7.15        (78)        8,495    8.02
  Thereafter.......................         27     0.01        (20)          47   0.04         47           --      -- 
 Adjustable rate certificates......     13,672     9.69     (1,006)      14,678  12.47	        992        13,686   12.91
                                      --------   ------     ------     --------  -----     --------    --------  -------
Total certificates.................     88,965    63.06      9,421       79,544  67.58      8,470        71,074   67.07
                                      --------   ------     ------     --------  -----     --------    --------  ------
     Total.........................   $141,059   100.00%   $23,374     $117,685 100.00%   $11,725      $105,960  100.00%
                                      ========   =======   ========    ======== =======    ========    ========  =======
</TABLE>

________________	
(1)  At June 30, 1998, 1997 and 1996, jumbo certificates of deposit 
amounted to $14.6 million, $14.0 million and $11.8 million, 
respectively, and IRAs equaled $15.8 million, $14.1 million and $12.6
million at those dates, respectively.

                                                                        27
</page>

     The following table sets forth the savings activities of the 
Savings Bank for the periods indicated.
<TABLE>
<CAPTION>                       
                                       Years Ended June 30,     
                               ---------------------------------
                                  1998        1997        1996
                               ---------    --------    --------
                                        (In thousands)
<S>                                 <C>         <C>         <C>
Beginning balance............  $117,685     $105,960    $ 98,389
                               --------     --------    --------

Net increase before
 interest credited...........    19,089        7,415       3,590

Interest credited............     4,285        4,310       3,981
                               --------     --------    --------

Net increase in 
 savings deposits............    23,374       11,725       7,571
                               --------     --------    --------

Ending balance...............  $141,059     $117,685    $105,960
                               ========     ========     =======
</TABLE>


     In the unlikely event the Savings Bank is liquidated, depositors
will be entitled to full payment of their deposit accounts prior to 
any payment being made to the stockholders of the Savings Bank.  
Substantially all of the Savings Bank's depositors are residents of 
the State of Missouri.

     Borrowings.  Savings deposits are the primary source of funds 
for the Savings Bank's lending and investment activities and for its 
general business purposes.  The Savings Bank may rely upon advances 
from the FHLB-Des Moines to supplement its supply of lendable funds 
and to meet deposit withdrawal requirements.  The FHLB-Des Moines 
has served as the Savings Bank's primary borrowing source.  Advances 
from the FHLB-Des Moines are typically secured by the Savings Bank's 
first mortgage loans.  These advances require monthly payments of 
interest only  with principal due at maturity and have fixed rates.  
These advances were obtained in response to the Savings Bank's 
recent strong loan demand and limited deposit growth.  The Savings 
Bank also has available a $7.0 million open line of credit with the 
FHLB.  At June 30, 1998, no funds were drawn.

     The following tables set forth certain information concerning 
the Savings Bank's borrowings at the dates and for the periods 
indicated.

<TABLE>
<CAPTION>
                                              At June 30,    
                                            -----------------
                                            1998         1997
                                            -----       ------
<S>                                         <C>           <C>
Weighted average rate paid on 
     FHLB advances........................  5.89%        5.84%


                                           Years Ended June 30,   
                                           --------------------
                                             1998          1997
                                           --------       ------
                                           (Dollars in thousands)
Maximum amounts of FHLB advances
   outstanding at any month end...........  $23,500      $23,500
Approximate average FHLB advances
   outstanding............................   16,398       18,956
Approximate weighted average rate paid
   on FHLB advances.......................    6.08%        5.87%
</TABLE>

                                       28
</page>

     The FHLB-Des Moines functions as a central reserve bank 
providing credit for savings and loan associations and certain 
other member financial institutions.  As a member, the Savings 
Bank is required to own capital stock in the FHLB-Des Moines and is 
authorized to apply for advances on the security of such stock and 
certain of its mortgage loans and other assets (principally 
securities which are obligations of,  or guaranteed by, the United 
States) provided certain standards related to creditworthiness have 
been met.  Advances are made pursuant to several different programs.
Each credit program has its own interest rate and range of maturities.
Depending on the program, limitations on the amount of advances are 
based either on a fixed percentage of an institution's retained 
earnings or on the FHLB's assessment of the institution's 
creditworthiness.  The FHLB-Des Moines determines specific lines of 
credit for each member institution.

Subsidiary Activities 

     Fybar Service Corporation ("Fybar") is a Missouri corporation 
wholly owned by the Savings Bank.  Fybar owns four rental 
properties.  One is an office building in Mountain Grove, Missouri 
called "The Shannon Centre" which is adjacent to the Savings Bank's 
drive-in and is currently approximately 90% occupied.  The second 
property is in Ava, Missouri and consists of an older home which 
has been remodeled into apartments and a duplex.  That rental 
property is 100% occupied.  The third is a duplex in Ozark, Missouri 
which is 100% occupied.  The fourth property is a single family 
residence in Gainesville, Missouri which is currently occupied.

     Fybar serves as Trustee on all the Savings Bank's deeds of 
trust, is a registered agent and receives limited income from credit 
life and accident and health policies written in conjunction with the
Savings Bank's loans.

     Fybar acquired Lawson & Lawson Insurance Agency in December 1991.  
Lawson & Lawson is a general insurance agency.  Its business was transacted 
off site in a building currently rented from Fybar.  In August 1997, 
the assets relating to Lawson & Lawson were sold for $90,000, 
generating a $51,000 pre-tax profit.  At June 30, 1998, the Savings 
Bank had an investment in Fybar of $352,000.


     South Central Missouri Title, Inc., which began doing business in
late 1997, is a Missouri corporation wholly owned by First Bancshares, Inc.  
South Central is a licensed agent to sell title insurance and also provides 
real estate closing services.

                          REGULATION OF FIRST HOME

     As a Missouri-chartered and federally insured savings and 
loan association, First Home is subject to extensive regulation.  
Lending activities and other investments must comply with various 
statutory and regulatory capital requirements.  The Savings Bank is 
regularly examined by its state and federal regulators and files 
periodic reports concerning the Savings Bank's activities and 
financial condition.  The Savings Bank's relationship with its 
depositors and borrowers is also regulated to a great extent by 
federal and state laws, especially in such matters as the ownership 
of savings accounts and the form and content of the Savings Bank's 
mortgage documents.

Missouri Savings and Loan Law

     General.  As a Missouri-chartered savings and loan association, 
First Home derives its authority from, and is governed by, the 
provisions of the Missouri Savings and Loan Law ("Missouri Law") and
regulations of the Missouri Division of Finance ("Division").  The 
Director of the Missouri Division of Finance ("Director") proposes 
regulations which must then be approved, amended, modified or 
disapproved by the State Savings and Loan Commission ("Commission").
Missouri Law and the resulting regulations are administered by the 
Director.

     Investments and Accounts.  Missouri Law and regulations impose
restrictions on the types of investments and loans that may be made 
by a Missouri-chartered institution, generally bringing these 
restrictions into parity with the regulation of federally chartered
institutions.  The manner of establishing accounts and evidencing the 
same is prescribed, as are the obligations of the institution with 
respect to withdrawals from accounts and redemption of accounts.  The 
Director may also impose or grant the same restrictions, duties and 
powers concerning deposits as are applicable to federal institutions 
under federal rules and regulations.  

     Branch Offices.  Under Missouri Law, no institution may 
establish a branch office or agency without the prior written 
approval of the Director.  The Director reviews the proposed 
location, the functions to be performed at the office, the estimated 
volume of business, the estimated annual expense of the office and 
the mode of payments.  Decisions of the Director may be appealed to 

                                       29
</page>

the Commission.  The relocation or closing of any office is subject 
to additional regulation and in certain circumstances may require 
prior approval.

     Merger or Consolidation.  Missouri Law permits the merger or
consolidation of savings institutions, subject to the approval by 
the Director, when the Director finds that such merger or 
consolidation is equitable to the members or account holders of the
institutions and will not impair the usefulness and success of other
properly conducted institutions in the community.  Mergers or 
consolidations of mutual institutions must also be approved by a 
majority of the members of each institution.  Stock institutions 
must obtain shareholder approval pursuant to the Missouri statutes 
relating to general and business corporations. 

     Holding Companies.  Missouri Law requires a savings and loan 
holding company and its subsidiaries to register with the Director 
within 60 days of becoming a savings and loan holding company.  
Following registration it is subject to examination by the Division 
and thereafter must file certain reports with the Director.  A 
savings and loan holding company may acquire control of an 
institution of another savings and loan holding company upon 
application and prior written approval of the Director.  The 
Director, in reviewing the application, must determine if such 
acquisition is consistent with the interests of maintaining a sound 
financial system and that the acquisition does not afford a basis for
supervisory objection. 

     Examination.  Periodic reports to the Division must be made by 
each Missouri-chartered institution.  The Division conducts and 
supervises the examination of state-chartered institutions.

     Supervision.  The Director has general supervisory authority 
over Missouri-chartered institutions and upon the Director's finding 
that an institution is violating the provisions of its articles of
incorporation, its bylaws or any law of the state, or is conducting 
business in an unsafe or injurious manner, the Director may order the
institution to discontinue such violation or practice, and to conform
with all the requirements of law.  The Director may demand and take 
possession of the institution, if the institution fails to comply 
with the Director's order, if the Director determines that the 
institution is insolvent, in an unsafe condition or conducting 
business in an unsafe manner, or if the institution refuses to 
submit to examination or inspection by the Division.

Federal Regulation of Savings Banks

     The OTS has extensive authority over the operations of all 
insured savings associations.  As part of this authority, First 
Home is required to file periodic reports with the OTS District 
Director and is subject to periodic examinations by the OTS and 
the FDIC.  When these examinations are conducted by the OTS or the 
FDIC, the examiners may require the Savings Bank to provide for 
higher general or specific loan loss reserves.  Financial 
institutions in various regions of the United States have been 
called upon by examiners to write down assets and to establish 
increased levels of reserves, primarily as a result of perceived 
weaknesses in real estate values and a more restrictive regulatory 
climate.

     The OTS has established a schedule for the assessment of fees 
upon all savings associations to fund the operations of the OTS.  
A schedule of fees has also been established for the various types 
of applications and filings made by savings associations with the 
OTS.  The general assessment, to be paid on a semi-annual basis, is 
computed upon the savings association's total assets, including 
consolidated subsidiaries, as reported in the association's latest 
quarterly thrift financial report.  Savings associations that 
(unlike the Savings Bank) are classified as "troubled" (i.e., 
having a supervisory rating of "4" or "5" or subject to a 
conservatorship) are required to pay a 50% premium over the 
standard assessment.  For the first half of 1998, the Savings 
Bank's assessment under the semi-annual assessment procedure was 
$24,000.  Based on the current assessment rates published by the 
OTS and First Home's total assets of approximately $170.7 million 
at June 30, 1998, First Home will be required to pay a semi-annual 
assessment of approximately $26,000 for the second half of calendar 
year 1998.

     In addition, the investment and lending authority of the Savings
Bank is prescribed by federal laws and regulations, and the Savings 
Bank is prohibited from engaging in any activities not permitted by 
such laws and regulations.  These laws and regulations generally are
applicable to all federally chartered savings associations and many 
also apply to state-chartered savings associations.  

                                       30
</page>

     Among other things, OTS regulations provide that no savings 
association may invest in corporate debt securities not rated in 
one of the four highest rating categories by a nationally recognized 
rating organization.  In addition, the HOLA provides that loans 
secured by nonresidential real property may not exceed 400% of 
regulatory capital, subject to increase by the OTS on a case-by-case 
basis.

     First Home is subject to limitations on the aggregate amount of 
loans that it can make to any one borrower, including related 
entities.  Applicable regulations generally do not permit loans-to-
one borrower to exceed 15% of unimpaired capital and surplus, 
provided that loans in an amount equal to an additional 10% of 
unimpaired capital and surplus also may be made to a borrower if 
the loans are fully secured by readily marketable securities.  The 
OTS by regulation has amended the loans-to-one borrower rule to 
permit savings associations meeting certain requirements, including 
fully phased-in capital requirements, to extend loans-to-one 
borrower in additional amounts under circumstances limited 
essentially to loans to develop or complete residential housing 
units.  At June 30, 1998, First Home was in compliance with 
applicable loans-to-one borrower limitations.

Potential Operational Restrictions Associated with Regulatory Oversight

     The Savings Bank is subject to extensive regulation, supervision 
and examination by the OTS, as its chartering authority and primary 
federal regulator, and by the FDIC, which insures its deposits up to
applicable limits.  The Savings Bank is a member for the FHLB System 
and is subject to certain limited regulations promulgated by the 
Board of Governors of the Federal Reserve System ("Federal Reserve").
As the holding company of the Savings Bank, the Company also is 
subject to regulation and oversight by the OTS.  Such regulation and
supervision govern the activities in which an institution can engage 
and is intended primarily for the protection of the insurance fund 
and depositors.  Regulatory authorities have been granted extensive 
discretion in connection with their supervisory and enforcement 
activities which are intended to strengthen the financial condition 
of the banking industry, including the imposition of restrictions on 
the operation of an institution, the classification of assets by the
institution and the adequacy of an institution's allowance for loan 
losses.  Any change in such regulation and oversight, whether by the 
OTS, the FDIC or Congress, could have a material impact on the 
Company, the Savings Bank and their respective operations.  
Legislation proposing a comprehensive reform of the banking and 
thrift industries has recently been discussed in the United States 
Congress.  Under such legislation, (I) the BIF and SAIF would be 
merged, at which time thrifts and banks would pay the same deposit 
insurance premiums, (ii) federal savings associations would be 
required to convert to a national bank or state-chartered bank or 
thrift, (iii) all savings and loan holding companies would become 
bank holding companies and (iv) the OTS would be merged with the 
Office of the Comptroller of the Currency.  It is uncertain when or 
if such legislation may be passed and, if passed, in what form such
legislation may be passed.

 Office of Thrift Supervision

     The OTS is an office in the Department of the Treasury subject 
to the general oversight of the Secretary of the Treasury.  The OTS 
generally possesses the supervisory and regulatory duties and 
responsibilities formerly vested in the Federal Home Loan Bank Board.
Among other functions, the OTS issues and enforces regulations 
affecting federally-insured savings associations and regularly 
examines these institutions. 

Federal Deposit Insurance Corporation 

     The FDIC is an independent federal agency established originally
to insure the deposits, up to prescribed statutory limits, of 
federally insured banks and to preserve the safety and soundness of 
the banking industry.  The FDIC maintains two separate insurance 
funds:  the BIF and the SAIF.  As insurer of deposits, the FDIC has
examination, supervisory and enforcement authority over all savings
associations.

                                       31
</page>

     The Savings Bank's accounts are insured by the FDIC under the 
SAIF to the maximum extent permitted by law.  The Savings Bank 
currently pays deposit insurance premiums to the FDIC based on a 
risk-based assessment system established by the FDIC for all SAIF-
member institutions.  Under applicable regulations, institutions are 
assigned to one of three capital groups that are based solely on the 
level of an institution's capital -- "well capitalized," "adequately
capitalized," or "undercapitalized"-- which are defined in the same 
manner as the regulations establishing the prompt corrective action 
system under the FDIA, as discussed below.  The Savings Bank's 
assessments expensed for the year ended June 30, 1998, totaled 
$75,000.

     Pursuant to the Deposit Insurance Funds Act ("DIF Act"), which 
was enacted on September 30, 1996, the FDIC imposed a special 
assessment on each depository institution with SAIF-assessable 
deposits which resulted in the SAIF achieving its designated 
reserve ratio.  In connection therewith, the FDIC reduced the 
assessment schedule for SAIF members, effective January 1, 1997, to 
a range of 0% to 0.27%, with most institutions, including the 
Savings Bank, paying 0%.  This assessment schedule is the same as 
that for the BIF, which reached its designated reserve ratio in 1995.
In addition, since January 1, 1997, SAIF members are charged an 
assessment of 0.065% of SAIF-assessable deposits for the purpose of 
paying interest on the obligations issued by the Financing 
Corporation ("FICO") in the 1980s to help fund the thrift industry 
cleanup.  BIF-assessable deposits will be charged an assessment to 
help pay interest on the FICO bonds at a rate of approximately .013% 
until the earlier of December 31, 1999 or the date upon which the 
last savings association ceases to exist, after which time the 
assessment will be the same for all insured deposits.

     The DIF Act provides for the merger of the BIF and the SAIF 
into the Deposit Insurance Fund on January 1, 1999, but only if no 
insured depository institution is a savings association on that date.
The DIF Act contemplates the development of a common charter for all 
federally chartered depository institutions and the abolition of 
separate charters for national banks and federal savings 
associations.  It is not known what form the common charter may take 
and what effect, if any, the adoption of a new charter would have on 
the operation of the Savings Bank.

     The FDIC may terminate the deposit insurance of any insured 
depository institution if it determines after a hearing that the 
institution has engaged or is engaging in unsafe or unsound 
practices, is in an unsafe or unsound condition to continue 
operations, or has violated any applicable law, regulation, order 
or any condition imposed by an agreement with the FDIC.  It also 
may suspend deposit insurance temporarily during the hearing 
process for the permanent termination of insurance, if the 
institution has no tangible capital.  If insurance of accounts is 
terminated, the accounts at the institution at the time of 
termination, less subsequent withdrawals, shall continue to be 
insured for a period of six months to two years, as determined by 
the FDIC.  Management is aware of no existing circumstances that 
could result in termination of the deposit insurance of the Savings 
Bank. 

Federal Home Loan Bank System 

     The FHLB System, consisting of 12 FHLBs, is under the 
jurisdiction of the Federal Housing Finance Board ("FHFB").  
The designated duties of the FHFB are to:  supervise the FHLBs; 
ensure that the FHLBs carry out their housing finance mission; 
ensure that the FHLBs remain adequately capitalized and able to 
raise funds in the capital markets; and ensure that the FHLBs 
operate in a safe and sound manner.

     First Home, as a member of the FHLB-Des Moines, is required to 
acquire and hold shares of capital stock in the FHLB-Des Moines 
equal to the greater of (i) 1.0% of the aggregate outstanding 
principal amount of residential mortgage loans, home purchase 
contracts and similar obligations at the beginning of each year, 
or (ii) 1/20 of its advances (borrowings) from the FHLB-Des Moines.  
First Home complied with this requirement with an investment in FHLB-
Des Moines stock of $1.1 million at June 30, 1998.

     Among other benefits, the FHLB provides a central credit 
facility primarily for member institutions.  It is funded primarily 
from proceeds derived from the sale of consolidated obligations of 
the FHLB System.  It makes advances to members in accordance with 
policies and procedures established by the FHFB and the Board of 

                                       32
</page>

Directors of the FHLB-Des Moines.  At June 30, 1998, the Savings 
Bank had $5.7 million of advances from the FHLB-Des Moines.

Liquidity Requirements

     Under OTS regulations, a member thrift institution is required 
to maintain an average daily balance of liquid assets (cash, certain 
time deposits and savings accounts, bankers' acceptances, and 
specified U.S. government, state or federal agency obligations and 
certain other investments) equal to a monthly average of not less 
than a specified percentage of its net withdrawable accounts plus 
short-term borrowings.  This liquidity requirement, which is 
currently 4.0% may be changed from time to time by the OTS  
depending upon economic conditions and the deposit flows of 
member associations.  Monetary penalties may be imposed for 
failure to meet liquidity requirements.  The liquidity ratio of First 
Home at June 30, 1998 was 16.3%.

Prompt Corrective Action

     Each federal banking agency is required to implement a system 
of prompt corrective action for institutions which it regulates.  
The federal banking agencies have promulgated substantially similar
regulations to implement this system of prompt corrective action.  
Under the regulations, an institution shall be deemed to be (i) 
"well capitalized" if it has a total risk-based capital ratio of 
10.0% or more, has a Tier I risk-based capital ratio of 6.0% or 
more, has a leverage capital ratio of 5.0% or more and is not 
subject to specified requirements to meet and maintain as specific 
capital level for any capital measure:  (ii) "adequately capitalized"
if it has a total risk-based capital ratio of 8.0% or more, a Tier I 
risk-based capital ratio of 4.0% or more and a leverage capital 
ratio of 4.0% or more (3.0% under certain circumstances) and does 
not meet the definition of "well capitalized," (iii) 
"undercapitalized" if it has a total risk-based capital ratio that 
is less than 8.0%, a Tier I risk-based capital ratio that is less 
than 4.0% or a leverage capital ratio that is less than 4.0% (3.0% 
under certain circumstances), (iv) "significantly undercapitalized" 
if it has a total risk-based capital ratio that is less than 6.0%, a 
Tier I risk-based capital ratio that is less than 3.0% or a Tier I 
leverage capital ratio that is less than 3.0% and (v) "critically
undercapitalized" if it has a ratio of tangible equity to total 
assets that is equal to or less than 2.0%

     A federal banking agency may, after notice and an opportunity 
for a hearing, reclassify a well capitalized institution as 
adequately capitalized an may require an adequately capitalized 
institution or an undercapitalized institution to comply with 
supervisory actions as if it were in the next lower category if the
 institution is in an unsafe or unsound condition or engaging in an 
unsafe or unsound practice.  (The FDIC may not, however, reclassify 
a significantly undercapitalized institution as critically 
undercapitalized.)

     An institution generally must file a written capital 
restoration plan which meets specified requirement, as well as a 
performance guaranty by each company that controls the institution, 
with the appropriate federal banking agency within 45 days of the 
date that the institution receives notice or is deemed to have notice
that it is undercapitalized, significantly undercapitalized or 
critically undercapitalized.  Immediately upon becoming 
undercapitalized, an institution shall become subject to the 
provisions of Section 38 of the FDIA, which sets forth various 
mandatory and discretionary restrictions on its operations.

     At June 30, 1998, First Home was a "well capitalized" 
institution under the prompt corrective action regulations of the 
OTS.

     Standards for Safety and Soundness.  Federal law requires the 
federal banking regulatory agencies to prescribe, by regulation or 
guideline, standards for all insured depository institutions and 
depository institution holding companies relating to:  (i) internal 
controls, information systems and internal audit systems;  (ii) loan
documentation;  (iii) credit underwriting;  (iv) interest rate risk 
exposure;  (v) asset growth;  and (vi) compensation, fees and 
benefits.  The federal banking agencies have adopted final 
regulations and Interagency Guidelines Prescribing Standards for 
Safety and Soundness ("Guidelines").    The Guidelines set forth 
the safety and soundness standards that the federal banking agencies 
use to identify and address problems at insured depository 
institutions before capital becomes impaired.  Any institution which

                                      33
</page>

fails to comply with these standards must submit a compliance plan.  
A failure to submit a compliance plan or to comply with an approved 
compliance plan will result in further enforcement action against the
institution.  Savings and loan holding companies are also required to 
ensure that transactions and relationship with their subsidiary 
savings associations do not have a detrimental effect on the safe 
and sound operation of the association.
		
Qualified Thrift Lender Test

     All savings associations are required to meet a QTL test  to 
avoid certain restrictions on their operations.  A savings 
institution that fails to become or remain a QTL shall either 
become a national bank or be subject to the following restrictions 
on its operations:  (1) the association may not make any new 
investment or engaging in activities that would not be permissible 
for national banks; (2) the association may not establish any new 
branch office where a national bank located in the savings 
institution's home state would not be able to establish a branch 
office; (3) the association shall not be eligible to obtain new 
advances from any FHLB; and (4) the payment of dividends by the 
association shall be subject to the rules regarding the statutory 
and regulatory dividend restrictions applicable to national banks.
Also, beginning three years after the date on which the savings 
institution ceases to be a qualified thrift lender, the savings 
institution would be prohibited from retaining any investment or 
engaging in any activity not permissible for a national bank and 
would be required to repay any outstanding advances to any FHLB.  
In addition, within one year of the date on which a savings 
association controlled by a company ceases to be a QTL, the company 
must register as a bank holding company and becomes subject to the 
rules applicable to such companies.  A savings institution may 
requalify as a qualified thrift lender if it thereafter complies 
with the QTL test.

     Currently, the QTL test requires that 65% of an institution's 
"portfolio assets" (as defined) consist of certain housing and 
consumer-related assets on a monthly average basis in nine out of 
every 12 months.  Assets that qualify without limit for inclusion as 
part of the 65% requirement are loans made to purchase, refinance, 
construct, improve or repair domestic residential housing and 
manufactured housing; home equity loans; mortgage-backed securities 
(where the mortgages are secured by domestic residential housing or
 manufactured housing);FHLB stock; and direct or indirect obligations
of the FDIC; and loans for educational purposes, loans to small 
businesses and loans made through credit cards.  In addition, the 
following assets, among others, may be included in meeting the test 
subject to an overall limit of 20% of the savings institution's 
portfolio assets:  50% of residential mortgage loans originated and 
sold within 90 days of origination; 100% of consumer loans; and stock
issued by the FHLMC or the FNMA.  Portfolio assets consist of total 
assets minus the sum of (i) goodwill and other intangible assets, 
(ii) property used by the savings institution to conduct its 
business, and (iii) liquid assets up to 20% of the institutions 
total assets.  At June 30, 1998, the qualified thrift investments 
of First Home were approximately 77.17% of its portfolio assets.

Capital Requirements

     Under OTS regulations a savings association must satisfy three 
minimum capital requirements: core capital, tangible capital and 
risk-based capital.  Savings associations must meet all of the 
standards in order to comply with the capital requirements.

     OTS capital regulations establish a 3% core capital ratio 
(defined as the ratio of core capital to adjusted total assets).  
Core capital is defined to include common stockholders' equity, 
noncumulative perpetual preferred stock and any related surplus, and 
minority interests in equity accounts of consolidated subsidiaries, 
less (i) any intangible assets, except for certain qualifying 
intangible assets; (ii) certain mortgage servicing rights; and 
(iii) equity and debt investments in subsidiaries that are not 
"includable subsidiaries," which is defined as subsidiaries engaged 
solely in activities not impermissible for a national bank, engaged 
in activities impermissible for a national bank but only as an agent 
for its customers, or engaged solely in mortgage-banking activities.  
In calculating adjusted total assets, adjustments are made to total 
assets to give effect to the exclusion of certain assets from capital
and to appropriately account for the investments in and assets of 
both includable and nonincludable subsidiaries.  Institutions that 
fail to meet the core capital requirement would be required to file 
with the OTS a capital plan that details the steps they will take to 
reach compliance.  In addition, the OTS prompt corrective action 
regulation provides that a savings institution that has a core 
capital leverage ratio of less than 4% (3% for institutions 

                                       34
</page>

receiving the highest CAMEL examination rating) will be deemed 
to be "undercapitalized" and may be subject to certain restrictions.
See "-- Prompt Corrective Action."

     Savings associations also must maintain "tangible capital" not 
less than 1.5% of the Savings Bank's adjusted total assets. "Tangible
capital" is defined, generally, as core capital minus any "intangible 
assets."
 
     Each savings institution must maintain total capital equal to 
at least 8% of risk-weighted assets.  Total capital consists of the 
sum of core and supplementary capital, provided that supplementary 
capital cannot exceed core capital, as previously defined.  
Supplementary capital includes (i) permanent capital instruments 
such as cumulative perpetual preferred stock, perpetual 
subordinated debt, and mandatory convertible subordinated debt, 
(ii) maturing capital instruments such as subordinated debt, 
intermediate-term preferred stock and mandatory redeemable 
preferred stock, subject to an amortization schedule, and 
(iii) general valuation loan and lease loss allowances up to 1.25% 
of risk-weighted assets.

     The risk-based capital regulation assigns each balance sheet 
asset held by a savings institution to one of four risk categories 
based on the amount of credit risk associated with that particular 
class of assets.  Assets not included for purposes of calculating 
capital are not included in calculating risk-weighted assets.  The 
categories range from 0% for cash and securities that are backed by 
the full faith and credit of the U.S. government to 100% for 
repossessed assets or assets more than 90 days past due.  Qualifying
residential mortgage loans (including multi-family mortgage loans) 
are assigned a 50% risk weight.  Consumer, commercial, home equity 
and residential construction loans are assigned a 100% risk weight, 
as are nonqualifying residential mortgage loans and that portion of 
land loans and nonresidential construction loans which do not exceed
an 80% loan-to-value ratio.  The book value of assets in each 
category is multiplied by the weighing factor (from 0% to 100% 
assigned to that category.  These products are then totaled to arrive
at total risk-weighted assets.  Off-balance sheet items are included 
in risk-weighted assets by converting them to an approximate balance 
sheet "credit equivalent amount" based on a conversion schedule.  
These credit equivalent amounts are then assigned to risk categories 
in the same manner as balance sheet assets and included risk-weighted
assets.

     The OTS has incorporated an interest rate risk component into 
its regulatory capital rule.  Under the rule, savings associations 
with an "above normal" interest rate risk exposure would be subject 
to a deduction from total capital for purposes of calculating their 
risk-based capital requirements.  A savings association's interest 
rate risk is measured by the decline in the net portfolio value of 
its assets (i.e., the difference between incoming and outgoing 
discounted cash flows from assets, liabilities and off-balance sheet
contracts) that would result from a hypothetical 200 basis point 
increase or decrease in market interest rates divided by the 
estimated economic value of the association's assets, as calculated 
in accordance with guidelines set forth by the OTS.  A savings 
association whose measured interest rate risk exposure exceeds 2% 
must deduct an interest rate risk component in calculating its total 
capital under the risk-based capital rule.  The interest rate risk 
component is an amount equal to one-half of the difference between 
the institution's measured interest rate risk and 2%, multiplied by 
the economic value of the associations assets.  That dollar amount 
is deducted from an association's total capital in calculating 
compliance with its risk-based capital requirement.  Under the rule, 
there is a two quarter lag between the reporting date of an 
institution's financial data and the effective date for the new 
capital requirement based on that data.  A savings association with 
assets of less than $300 million and risk-based capital ratios in 
excess of 12% is not subject to the interest rate risk component, 
unless the OTS determines otherwise.  The rule also provides that 
the Director of the OTS may waive or defer an association's 
interest rate risk component on a case-by-case basis.  Under 
certain circumstances, a savings association may request an 
adjustment to its interest rate risk component if it believes that
the OTS-calculated interest rate risk component overstates its 
interest rate risk exposure.  In addition, certain "well-capitalized"
institutions may obtain authorization to use their own interest rate 
risk model to calculate their interest rate risk component in lieu of 
the OTS-calculated amount.  The OTS has recently postponed the date 
that the component will first be deducted from an institution's 
total capital until an appeals process is developed for the 
measurement of an institution's interest rate risk.  

                                       35
</page>

	
     The following table presents the Savings Bank's capital levels 
as of June 30, 1998.
<TABLE>
<CAPTION>

                                 At June 30, 1998  
                               -------------------        
                                          Percent of
                                Amount      Assets  
                               --------   ---------
                              (Dollars in thousands)
<S>                             <C>           <C>

Tangible capital.............  $18,862       11.2%     
Minimum required
 tangible capital............    2,537        1.5
                               -------      ------
Excess.......................  $16,325        9.7%
                               =======      ======

Core capital.................  $18,862       11.2%
Minimum required core
 capital.....................    6,765        4.0%
                               -------       -----
Excess.......................  $12,097        7.2%
                               =======       =====

Risk-based capital...........  $19,070       16.3%
Minimum risk-based
 capital requirement.........    9,356        8.0
                               -------       -----
Excess.......................  $ 9,714        8.3%
                               =======       =====
</TABLE>

Dividend Limitations

     OTS regulations impose uniform limitations on the ability of 
all savings associations to engage in various distributions of 
capital such as dividends, stock repurchases and cash-out mergers.  
In addition, OTS regulations require the Savings Bank to give the 
OTS 30 days' advance notice of any proposed declaration of dividends 
to the Company, and the OTS has the authority under its supervisory 
powers to prohibit the payment of dividends to the Company.  In 
addition, the Savings Bank may not declare or pay a cash dividend 
on its capital stock if the effect thereof would be to reduce the 
regulatory capital of the Savings Bank below the amount required 
for the liquidation account established in connection with the 
mutual to stock conversion.  The regulation utilizes a three-tiered 
approach which permits various levels of distributions based 
primarily upon a savings association's capital level.

     A Tier 1 savings association generally has capital in excess of
its fully phased-in capital requirement (both before and after the 
proposed capital distribution).  A Tier 1 savings association may 
make (without application but upon prior notice to, and no objection 
made by, the OTS) capital distributions during a calendar year up to 
100% of its net income to date during the calendar year plus one-
half its surplus capital ratio (i.e., the amount of capital in excess 
of its fully phased-in requirement) at the beginning of the calendar 
year or the amount authorized for a Tier 2 association.  Capital 
distributions in excess of such amount require advance approval from 
the OTS.  A Tier 2 savings association has capital equal to or in 
excess of its minimum capital requirement but below its fully 
phased-in capital requirement (both before and after the proposed 
capital distribution).  Such an association may make (without 
application) capital distributions up to an amount equal to 75% of 
its net income during the previous four quarters depending on how 
close the association is to meeting its fully phased-in capital 
requirement.  Capital distributions exceeding this amount require 
prior OTS approval.  A Tier 3 savings association may not make any 
capital distributions without prior approval from the OTS.

     At June 30, 1998, the Savings Bank met the criteria to be 
designated a Tier 1 association and, consequently, could at its 
option (after prior notice to, and no objection made by, the OTS) 
distribute up to 100% of its net income during the calendar year 
plus 50% of its surplus capital ratio at the beginning of the 
calendar year less any distributions previously paid during the year.

                                       36
</page>
	
Investment Rules

     Under the HOLA, savings institutions are generally subject to 
the national bank limit on loans to one borrower.  Generally, this 
limit is 15% of the Savings Bank's unimpaired capital and surplus, 
plus an additional 10% of unimpaired capital and surplus, if such 
loan is secured by readily-marketable collateral, which is defined 
to include certain financial instruments and bullion.  The OTS by 
regulation has amended the loans to one borrower rule to permit 
savings associations meeting certain requirements, including capital
requirements, to extend loans to one borrower in additional amounts 
under circumstances limited essentially to loans to develop or 
complete residential housing units.  At June 30, 1998, the largest 
loans by the Savings Bank outstanding to any one borrower, including 
related entities, was $890,000 which were secured primarily by 
single-family rental properties in and around Mountain Grove, 
Missouri.  These loans were performing in accordance with their terms
at that date. 


Activities of Savings Associations and Their Subsidiaries

     When a savings association establishes or acquires a subsidiary
or elects to conduct any new activity through a subsidiary that the
 association controls, the savings association shall notify the FDIC
and the OTS 30 days in advance and provide the information each 
agency may, by regulation, require.  Savings associations also must 
conduct the activities of subsidiaries in accordance with existing 
regulations and orders.

     The OTS may determine that the continuation by a savings 
association of its ownership control of, or its relationship to, the
subsidiary constitutes a serious risk to the safety, soundness or 
stability of the association or is inconsistent with sound banking 
practices or with the purposes of the FDIA.  Based upon that 
determination, the FDIC or the OTS has the authority to order the 
savings association to divest itself of control of the subsidiary.  
The FDIC also may determine by regulation or order that any specific 
activity poses a serious threat to the SAIF.  If so, it may require 
that no SAIF member engage in that activity directly.

Accounting and Regulatory Standards  

     An OTS policy statement applicable to all savings associations 
clarifies and re-emphasizes that the investment activities of a 
savings association must be in compliance with approved and 
documented investment policies and strategies, and must be accounted 
for in accordance with generally accepted account principles.  Under 
the policy statement, management must support its classification of 
an accounting for loans and securities (i.e., whether held for 
investment, sale or trading) with appropriate documentation.  First 
Home is in compliance with these amended rules.

     The OTS has adopted an amendment to its accounting regulations, 
which may be made more stringent than generally accepted accounting 
principles by the OTS, to require that transactions be reported in a 
manner that best reflects their underlying economic substance and 
inherent risk and that financial reports must incorporate any other 
accounting regulations or orders prescribed by the OTS.

Investment Portfolio Policy

     OTS supervisory policy requires that securities owned by thrift
institutions must be classified and reported in accordance with GAAP
consistent with the institution's intent to trade, available-for-sale
or held-to-maturity.  Trading securities are acquired principally for
the purpose of near term sales.  Such securities are reported at fair
value and unrealized gains and losses are included in income.  
Securities which are designated as held-to-maturity are designated as 
such because the investor has the ability to hold these securities to
maturity.  Such securities are reported at amortized cost.

     All other securities are designated as available-for-sale, a 
designation which provides the investor with certain flexibility in 
managing its investment portfolio.  Such securities are reported at fair

                                       37
</page>

value; net unrealized gains and losses are excluded from income and 
reported net of applicable income taxes as a separate component of
stockholders' equity.  The Savings Bank has adopted a reporting 
policy that complies with these OTS requirements.

Transactions with Affiliates

     Savings associations must comply with Sections 23A and 23B of 
the Federal Reserve Act ("Sections 23A and 23B") relative to 
transactions with affiliates in the same manner and to the same 
extent as if the savings association were a Federal Reserve member 
bank.  Generally, Sections 23A and 23B:  (i) limit the extent to 
which the insured association or its subsidiaries may engage in 
certain covered transactions with an affiliate to an amount equal 
to 10% of such institution's capital and surplus and place an 
aggregate limit on all such transactions with affiliates to an 
amount equal to 20% of such capital and surplus, and (ii) require 
that all such transactions be on terms substantially the same, or 
at least as favorable to the institution or subsidiary, as those 
provided to a non-affiliate.  The term "covered transaction" 
includes the making of loans, purchase of assets, issuance of a 
guaranty and similar other types of transactions.

     Three additional rules apply to savings associations:  (i) a 
savings association may not make any loan or other extension of 
credit to an affiliate unless that affiliate is engaged only in 
activities permissible for bank holding companies;  (ii) a savings 
association may not purchase or invest in securities issued by an 
affiliate (other than securities of a subsidiary); and (iii) the OTS 
may, for reasons of safety and soundness, impose more stringent 
restrictions on savings associations but may not exempt transactions 
from or otherwise abridge Section 23A or 23B.  Exemptions from 
Section 23A or 23B may be granted only by the Federal Reserve Board, 
as is currently the case with respect to all FDIC-insured banks.  
The Savings Bank has not been significantly affected by the rules 
regarding transactions with affiliates.

                        REGULATION OF FIRST BANCSHARES

     First Bancshares is a unitary savings and loan holding company 
within the meaning of the Home Owners' Loan Act of 1933, as amended 
("HOLA").  As such, the Company is registered with the OTS and 
subject to OTS regulations, examinations, supervision and reporting
requirements.  The Company is required to file certain reports with,
and otherwise comply with the regulations of, the OTS and the 
Securities and Exchange Commission.  As a subsidiary of a savings 
and loan holding company, the Savings Bank is subject to certain 
restrictions in its dealings with the Company and with other 
companies affiliated with the Company and also are subject to 
regulatory requirements and provisions as federal institutions.

Holding Company Acquisitions

     The HOLA and OTS regulations issued thereunder generally 
prohibit a savings and loan holding company, without prior OTS 
approval, from acquiring more than 5% of the voting stock of any 
other savings association or savings and loan holding company or 
controlling the assets thereof.  They also prohibit, among other 
things, any director or officer of a savings and loan holding 
company, or any individual who owns or controls more than 25% of 
the voting shares of such holding company, from acquiring control 
of any savings association not a subsidiary of such savings and 
loan holding company, unless the acquisition is approved by the OTS.

Holding Company Activities

     As a unitary savings and loan holding company, the Company 
generally is not subject to activity restrictions.  If the Company 
acquires control of another savings association as a separate 
subsidiary, it would become a multiple savings and loan holding 
company, and the activities of the Company and any of its 
subsidiaries (other than the Savings Bank or any other SAIF-insured 
savings association) would become subject to such restrictions 
unless such other associations each qualify as a qualified thrift 
lender ("QTL") and were acquired in a supervisory acquisition.

     If the Savings Bank fails the QTL test, the Company must obtain 
the approval of the OTS prior to continuing after such failure, 
directly or through its other subsidiaries, any business activity 
other than those approved for multiple savings and loan holding 
companies or their subsidiaries.  In addition, within one year of 
such failure the Company must register as, and will become subject 
to, the restrictions applicable to bank holding companies.  The 
activities authorized for a bank holding company are more limited 
than are the activities authorized for a unitary or multiple savings 
and loan holding company.  See "-- Qualified Thrift Lender Test."

                                       38
</page>

     The Company must obtain approval from the OTS before acquiring 
control of more than 5% of the voting shares of any other SAIF-
insured association.  Such acquisitions generally are prohibited if 
they result in a multiple savings and loan holding company 
controlling savings associations in more than one state.  However, 
such interstate acquisitions are permitted based on specific state
authorization or in a supervisory acquisition of a failing savings
association.

Affiliate Restrictions

     The affiliate restrictions contained in Sections 23A and 23B of 
the Federal Reserve Act apply to all federally insured savings 
associations and any such "affiliate."  A savings and loan holding 
company, its subsidiaries and any other company under common control 
are considered affiliates of the subsidiary savings association 
under the HOLA.  Generally, Sections 23A and 23B:  (i) limit the 
extent to which the insured association or its subsidiaries may 
engage in certain covered transactions with an affiliate to an amount
equal to 10% of such institution's capital and surplus, and contain 
an aggregate limit on all such transactions with all affiliates to 
20% of such capital and surplus, and (ii) require that all such 
transactions be on terms substantially the same, or at least as 
favorable to the institution or subsidiary, as those provided to a 
non-affiliate.  The term "covered transaction" includes the making 
of loans, purchase of assets, issuance of a guarantee and similar 
other types of transactions.  Also, a savings association may not 
make any loan to an affiliate unless the affiliate is engaged only 
in activities permissible for bank holding companies.  Only the 
Federal Reserve may grant exemptions from the restrictions of 
Sections 23A and 23B.  The OTS, however, may impose more stringent
restrictions on savings associations for reasons of safety and 
soundness.

Qualified Thrift Lender Test

     The HOLA requires any savings and loan holding company that 
controls a savings association that fails the QTL test, as explained 
under "REGULATION OF FIRST HOME -- Qualified Thrift Lender Test," 
must, within one year after the date on which the association ceases 
to be a QTL, register as and be deemed a bank holding company subject 
to all applicable laws and regulations.

                                    TAXATION
Federal Taxation

     General.  The Corporation and the Savings Bank report their 
income on a fiscal year basis using the accrual method of accounting
and will be subject to federal income taxation in the same manner 
as other corporations with some exceptions, including particularly 
the Savings Bank's reserve for bad debts discussed below.  The 
following discussion of tax matters is intended only as a summary and
does not purport to be a comprehensive description of the tax rules 
applicable to the Savings Bank or the Corporation.

     Bad Debt Reserve.  Historically, savings institutions such as 
the Savings Bank which met certain definitional tests primarily 
related to their assets and the nature of their business ("qualifying
thrift") were permitted to establish a reserve for bad debts and to 
made annual additions thereto, which may have been deducted in 
arriving at their taxable income.  The Savings Bank's deductions 
with respect to "qualifying real property loans," which are generally
loans secured by certain interest in real property, were computed 
using an amount based on the Savings Bank's actual loss experience, 
or a percentage equal to 8% of the Savings Bank's taxable income, 
computed with certain modifications and reduced by the amount of any 
permitted additions to the non-qualifying reserve.  Due to the 
Savings Bank's loss experience, the Savings Bank generally 
recognized a bad debt deduction equal to 8% of taxable income.

     In August 1996, the provisions repealing the current thrift 
bad debt rules were passed by Congress as part of  "The Small 
Business Job Protection Act of 1996."  The new rules eliminate the 
8% of taxable income method for deducting additions to the tax bad 
debt reserves for all thrifts for tax years beginning after December 
31, 1995.  These rules also require that all institutions recapture 
all or a portion of their bad debt reserves added since the base 
year (last taxable year beginning before January 1, 1988).  The 
Savings Bank has previously recorded a deferred tax liability equal
to the bad debt recapture and as such the new rules will have no 
effect on the net income or federal income tax expense.  For taxable 
years beginning after December 31, 1995, the Savings Bank's bad debt 
deduction will be determined under the experience method using a 
formula based on actual bad debt experience over a period of years 

                                       39
</page>

or, if the Savings Bank is a "large" association (assets in excess 
of $500 million) on the basis of net charge-offs during the taxable 
year.  The new rules allow an institution to suspend bad debt reserve
recapture for the 1996 and 1997 tax years if the institution's 
lending activity for those years is equal to or greater than the 
institutions average mortgage lending activity for the six taxable 
years preceding 1996 adjusted for inflation.  For this purpose, only 
home purchase or home improvement loans are included and the 
institution can elect to have the tax years with the highest and 
lowest lending activity removed from the average calculation.  If an
institution is permitted to postpone the reserve recapture, it must 
begin its six year recapture no later than the 1998 tax year.  The
 unrecaptured base year reserves will not be subject to recapture as 
long as the institution continues to carry on the business of banking.
In addition, the balance of the pre-1988 bad debt reserves continue 
to be subject to provisions of present law referred to below that 
require recapture in the case of certain excess distributions to 
shareholders.
 
     Distributions.  To the extent that the Savings Bank makes 
"nondividend distributions" to the Corporation that are considered as 
made:  (I) from the reserve for losses on qualifying real property 
loans, to the extent the reserve for such losses exceeds the amount 
that would have been allowed under the experience method; or (ii)  
from the supplemental reserve for losses on loans ("Excess 
Distributions"), then an amount based on the amount distributed 
will be included in the Savings Bank's taxable income.  Nondividend
distributions include distributions in excess of the Savings Bank's 
current and accumulated earnings and profits, distributions in 
redemption of stock, and distributions in partial or complete 
liquidation.  However, dividends paid out of the Savings Bank's 
current or accumulated earnings and profits, as calculated for 
federal income tax purposes, will not be considered to result in 
a distribution from the Savings Bank's bad debt reserve.  Thus, any 
dividends to the Corporations that would reduce amounts appropriated 
to the Savings Bank's bad debt reserve and deducted for federal income 
tax purposes would create a tax liability for the Savings Bank.  The 
amount of additional taxable income attributable to an Excess 
Distribution is an amount that, when reduced by the tax attributable 
to the income, is equal to the amount of the distribution.  Thus, 
if, the Savings Bank makes a "nondividend distribution,' then 
approximately one and one-half times the amount so used would be 
includable in gross income for federal income tax purposes, assuming 
a 35% corporate income tax rate (exclusive of state and local taxes).
See "REGULATION" for limits on the payment of dividends by the 
Savings Bank.  The Savings Bank does not intend to pay dividends 
that would result in a recapture of any portion of its tax bad debt 
reserve.

     Corporate Alternative Minimum Tax.  The Code imposes a tax on 
alternative minimum taxable income ("AMTI") at a rate of 20%.  The 
excess of the tax bad debt reserve deduction using the percentage of 
taxable income method over the deduction that would have been 
allowable under the experience method is treated as a preference 
item for purposes of computing the AMTI.  In addition, only 90% of 
the AMTI can be offset by net operating loss carryovers.  AMTI is 
increased by an amount equal to 75% of the amount by which the 
Savings Bank's adjusted current earnings exceeds its AMTI 
(determined without regard to this preference and prior to reduction 
for net operating losses).  For taxable years beginning after 
December 31, 1986, and before January 1, 1996, an environmental tax 
of .12% of the excess of AMTI (with certain modification) over $2.0 
million was imposed on corporations, including the Savings Bank, 
whether or not an Alternative Minimum Tax ("AMT") was paid.

     Dividends-Received Deduction and Other Matters.  The Corporation 
may exclude from its income 100% of dividends received from the 
Savings Bank as a member of the same affiliated group of corporations.
The corporate dividends-received deduction is generally 70% in the 
case of dividends received from unaffiliated corporations with which 
the Corporation and the Savings Bank will not file a consolidated tax 
return, except that if the Corporation or the Savings Bank owns more 
than 20% of the stock of a corporation distributing a dividend, then 
80% of any dividends received may be deducted.

     Other Federal Tax Matter.  Other recent changes in the federal 
tax system could also affect the business of the Savings Bank.  
These changes include limitations on the deduction for personal 
interest paid or accrued by individual taxpayers, limitations on 
the deductibility of losses attributable to investment in certain 
passive activities and limitations on the deductibility of 
contributions to individual retirement accounts.  The Savings Bank 
does not believe these changes will have a material effect on its 
operations.

     There have not been any IRS audits of the Savings Bank's Federal
income tax returns during the past five years.

                                       40
</page>

Missouri Taxation

     Missouri-based thrift institutions, such as the Savings Bank, 
are subject to a special financial institutions tax, based on net 
income without regard to net operating loss carryforwards, at the 
rate of 7% of net income.  This tax is in lieu of certain other 
state taxes on thrift institutions, on their property, capital or 
income, except taxes on tangible personal property owned by the 
Savings Bank and held for lease or rental to others and on real 
estate, contributions paid pursuant to the Unemployment 
Compensation Law of Missouri, social security taxes, sales taxes 
and use taxes.  In addition, First Home is entitled to credit 
against this tax all taxes paid to the State of Missouri or any 
political subdivision except taxes on tangible personal property 
owned by the Savings Bank and held for lease or rental to others 
and on real estate, contributions paid pursuant to the Unemployment
Compensation Law of Missouri, social security taxes, sales and use 
taxes, and taxes imposed by the Missouri Financial Institutions Tax 
Law.  Missouri thrift institutions are not subject to the regular 
state corporate income tax.

     There have not been any audits of the Savings Bank's state 
income tax returns during the past five years.

     For additional information regarding taxation, see Notes 1 
and 11 of the Notes to the Consolidated Financial Statements.

Competition

     The Savings Bank has been, and continues to be, a 
community-oriented savings institution offering a variety of 
financial resources to meet the needs of Wright, Webster, Douglas, 
Ozark , Christian and Stone counties, Missouri.  The Savings Bank also 
transacts a significant amount of business in Texas and Greene 
counties, Missouri.  The Savings Bank's deposit gathering 
and lending activities are concentrated in these market areas.  
The Savings Bank's offices are located in Mountain Grove, 
Marshfield, Ava, Gainesville, Sparta, Theodosia, Crane and Galena, 
Missouri.

     The Savings Bank is the only thrift located in Wright County, 
Missouri.  The Savings Bank faces strong competition in the 
attraction of savings deposits and in the origination of loans.  
Its most direct competition for savings deposits and loans has 
historically come from other thrift institutions and from commercial
banks located in its primary market area, some with a state-wide or 
regional presence.  Additionally, the Savings Bank faces significant
competition from the FHA and Farm Credit System and other financial 
entities in lending.  The Savings Bank also competes with securities 
firms, credit unions, money market funds and mutual funds in raising 
deposits.  

     Management considers the Savings Bank's reputation for financial
strength and customer service as its major competitive advantage in 
attracting and retaining customers in its market area.  The Savings 
Bank also believes it benefits from its community orientation as 
well as its relatively high core deposit base.


Personnel

     As of June 30, 1998, the Savings Bank had 71 full-time employees
and nine part-time employees.  The Savings Bank believes that 
employees play a vital role in the success of a service company and 
that the Savings Bank's relationship with its employees is good.  
The employees are not represented by a collective bargaining unit. 

                                       41
</page>

Item 2.  Properties

     The following table sets forth information regarding the Savings Bank's
         offices as of June 30, 1998.
<TABLE>
<CAPTION>
                                                   Net         Land     Building
                                        Year    Book Value    Owned/     Owned/     Square
Location                     County    Opened  as of 6/30/98  Leased     Leased     Footage
---------------------       --------   ------   ----------    ------     ------     -------
   <S>                        <C>       <C>       <C>          <C>        <C>          <C>               
                                           (Dollars in thousands)
Main Office
-----------

142 East First Street        Wright      1911      $562        Owned     Owned        9,800
Mountain Grove, Missouri  65711	

Branch Offices
--------------

1208 N. Jefferson Street      Douglas     1978      247         Owned    Owned        2,800
Ava, Missouri  65608

103 South Clay Street         Webster     1974      225         Owned    Owned        2,600
Marshfield, Missouri  65706

Highway 5 and Highway 160     Ozark       1992      749         Owned   Owned        3,600
Gainesville, Missouri  65655

7164 Highway 14 East          Christian   1995      329         Owned   Owned        3,000
Sparta, Missouri  65753

Business Highway 160          Ozark        1997      90         Leased  Leased      1,200
Theodosia, Missouri  65761

123 Main Street
Crane, Missouri  65633       Stone        1998      298         Owned   Owned        3,800

South Side of Square
Galena, Missouri  65656      Stone        1998       80          Owned   Owned        1,600

Drive-in Facilities
--------------------

Route 60 and Oakland          Wright        1986    184          Owned  Owned       1,200
Mountain Grove, Missouri  65711	

223 West Washington           Webster       1993     206           Owned  Owned        1,100
Marshfield, Missouri  65706

</TABLE>
                                                              42
</page>


Item 3.  Legal Proceedings

     In the opinion of management, the Savings Bank is not a party 
to any pending claims or lawsuits that are expected to have a 
material adverse effect on the Savings Bank's financial condition or 
operations.  Periodically, there have been various claims and 
lawsuits involving the Savings Bank mainly as a defendant, such as 
claims to enforce liens, condemnation proceedings on properties in 
which the Savings Bank holds security interests, claims involving 
the making and servicing of real property loans and other issues 
incident to the Savings Bank's business.  Aside from such pending 
claims and lawsuits which are incident to the conduct of the Savings 
Bank's ordinary business, the Savings Bank is not a party to any 
material pending legal proceedings that would have a material adverse 
effect on the financial condition or operations of the Savings Bank. 

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

     No matters were submitted to a vote of security holders during 
the fourth quarter of the fiscal year ended June 30, 1998.

                                    PART II

Item 5.     Market for the Registrant's Common Equity and Related 
            Stockholder Matters

     The information contained in the section captioned "Common 
Stock Information" in the Annual Report is incorporated herein by 
reference.

Item 6.     Management's Discussion and Analysis of Financial 
            Condition and   Results of Operation

     The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of 
Operations" in the Annual Report is incorporated herein by reference.

Item 7.     Financial Statements

     Independent Auditors Report*
     (a)   Consolidated Statements of Financial Condition as of 
             June 30, 1998 and 1997*
     (b)   Consolidated Statements of Income For the Years Ended 
             June 30, 1998, 1997 and 1996*
     (c)   Consolidated Statements of Stockholders' Equity For the 
             Years Ended June 30, 1998, 1997 and 1996*
     (d)   Consolidated Statements of Cash Flows For the Years 
             Ended June 30, 1998, 1997 and 1996* 
     (e)   Notes to Consolidated Financial Statements*

     * Contained in the Annual Report to Stockholders filed as an 
       exhibit hereto and incorporated herein  by reference.  All 
       schedules have been omitted as the required information is 
       either inapplicable or  contained in the Consolidated 
       Financial Statements or related Notes contained in the Annual 
       Report to Stockholders.

Item 8.     Changes in and Disagreements With Accountants on 
            Accounting and Financial Disclosure

     No disagreement with the Company's independent accountants on 
accounting and financial disclosure has occurred during the past 
24 months.

                                       43
</page>

                                PART III

Item 9.     Directors, Executive Officers, Promoters and Control 
            Persons; Compliance with Section 16(a) of the Exchange Act

     The information contained under the section captioned "Proposal 
I -- Election of Directors" in the Proxy Statement is incorporated 
herein by reference.

     The following table sets forth certain information with respect 
to the executive officers of the Company, each of whom holds the same
positions with the Company and each of whom holds the same positions 
with the Savings Bank.

Name                  Age(1)    Position
--------             ------     --------

Stephen H. Romines     56       President and Chief Executive Officer
Peter M. Medlen        42       Executive Vice President
Susan J. Uchtman       35       Chief Financial Officer

_________________
(1)  As of June 30, 1998.

     The principal occupation of each executive officer of the 
Company is set forth below.  All of the officers listed above have 
held positions with or been employed by the Company for five years 
unless otherwise stated.  All executive officers reside in Mountain 
Grove, Missouri, unless otherwise stated.  There are no family 
relationships among or between the executive officers, unless 
otherwise stated.

     Stephen H. Romines joined the Savings Bank in 1973 and has 
served as Chairman of the Board, President and Chief Executive 
Officer of the Savings Bank since 1978.  Mr. Romines is the brother-
in-law of Mr. Medlen, Executive Vice President of First Home.  

     Peter M. Medlen has been employed by First Home since 1985 
and currently serves as Executive Vice President.  Mr. Medlen also 
serves as President of the Savings Bank's wholly owned subsidiary, 
Fybar Service Corp.  Mr. Medlen is a past President of the Mountain 
Grove Jaycees and past Treasurer of the Mountain Grove Central 
Business District.  He is a past Board member of the HI-FI-MO, a 
Missouri not-for-profit elderly housing association.  Mr. Medlen is 
married to Mr. Stephen H. Romines' sister. 

     Susan J. Uchtman has been employed by First Home since June of 
1994.  Mrs. Uchtman, a CPA, was previously employed by Kirkpatrick 
Phillips & Miller, CPAs, P.C., the Company's independent auditors, 
from September 1985 through May 1994.  

     The information contained under the section captioned 
"Compliance with Section 16(a) of the Exchange Act" in the 
Proxy Statement is incorporated herein by reference.

Item 10.  Executive Compensation

     The information contained under the section captioned "Proposal 
I -- Election of Directors" in the Proxy Statement is incorporated 
herein by reference.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     (a)   Security Ownership of Certain Beneficial Owners

                                       44
</page>

           Information required by this item is incorporated herein 
           by reference to the section captioned "Voting Securities 
           and Security Ownership of Certain Beneficial Owners and 
           Management" of the Proxy Statement.

     (b)   Security Ownership of Management

           Information required by this item is incorporated herein
           by reference to the sections captioned "Voting Securities 
           and Security Ownership of Certain Beneficial Owners and 
           Management" and "Proposal I - Election of Directors" of the 
           Proxy Statement.

     (c)   Changes in Control

           The Company is not aware of any arrangements, including 
           any pledge by any person of securities of the Company, the
           operation of which may at a subsequent date result in a 
           change in control of the Company.


Item 12.  Certain Relationships and Related Transactions

     The information required by this item is incorporated herein 
by reference to the section captioned "Proposal I  -- Election of 
Directors -- Certain Transactions."

                                   PART IV

Item 13.  Exhibits, List Reports on Form 8-K

     (a)     Exhibits

             3.1   Articles of Incorporation of First Bancshares, 
                     Inc.*

             3.2   Bylaws of First Bancshares, Inc.*

            10.1   Employment Agreement with Stephen H. Romines 
                   (incorporated by reference to the Form 10KSB 
                   filing for the fiscal year ended June 30, 1995)

            10.2   First Home Savings Bank 1994 Employee Stock 
                     Ownership Plan*

            10.3   First Bancshares, Inc. 1993 Stock Option Plan**

            10.4   First Home Savings Bank Management Recognition and
                     Development Plan**

            13.    Annual Report to Stockholders

            21.    Subsidiaries of the Registrant

            23.    Auditors' Consent

            27.    Financial Data Schedule

     (b)    Report on Form 8-K

            No Forms 8-K were filed during the quarter ended 
              June 30, 1998


                                       45
</page>


____________________________
*     Incorporated by reference to the Corporation's Registration 
        Statement on Form S-1 File No. 33-69886.

**    Incorporated by reference to the Corporation's 1994 Annual 
        Meeting Proxy Statement dated September 14, 1994.

                                       46
</page>

                                   SIGNATURES

     Pursuant to the requirements of section 13 or 15(d) 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.

                                      FIRST BANCSHARES, INC.


Date:  September 28, 1998             By: /s/ Stephen H. Romines  
                                         --------------------------  
                                         Stephen H. Romines
                                         Chairman of the Board, 
                                          President and Chief
                                          Executive Officer (Duly 
                                          Authorized Representative)

     Pursuant to the requirements of the Securities Exchange Act of 
1934, this report has been signed below by the following persons on 
behalf of the registrant and in the capacities and on the dates 
indicated.


By: /s/ Stephen H. Romines                 September 28, 1998
   -------------------------------
    Stephen H. Romines
    Chairman of the Board, President, Chief
    Executive Officer (Principal Executive Officer)

By:/s/ Susan J. Uchtman                     September 28, 1998
    -------------------------------
    Susan J. Uchtman
    Chief Financial Officer

By:                                                       1998
   ---------------------------------      
    Harold F. Glass
    Director


By:/s/ Almeta Hardebeck                     September 28, 1998
   ----------------------------------       
    Almeta Hardebeck
    Director


By:/s/ John G. Moody                        September 28, 1998
   -----------------------
    John G. Moody
    Director


By:                                                   , 1998
   -------------------------              --------- ---
    Dr. James F. Moore
    Director
</page>



















                                   Exhibit 13

                       Annual Report to Stockholders


</page>



                      (LOGO of FIRST BANCSHARES, INC.)

                         FIRST BANCSHARES, INC.



                            1998 ANNUAL REPORT


</page>


                              TABLE OF CONTENTS


                                                                Page
                                                                ----

             Letter to Stockholders................................1
             Business of the Corporation                           3
             Selected Consolidated Financial Information           4
             Management's Discussion and Analysis of Financial
                Condition and Results of Operations                6
             Independent Auditors' Report                         14
             Consolidated Financial Statements                    15
             Notes to Consolidated Financial Statements           20
             Common Stock Information                             45
             Directors and Officers                               46
             Corporate Information                                47

</page>

Dear Stockholder:
 
{Column graph of Earning per share:  1994-$0.34, 1995-$0.39, 
    1996-$0.48, 1997-$.65 and 1998-$.90}

     Any review of the performance for the fiscal year ended
June 30, 1998 must first begin with a reminder that a 100% stock
dividend was paid in January, 1998.  For comparisons to prior 
fiscal years to be meaningful, therefore, outstanding shares for
those prior fiscal years have been adjusted to reflect the stock
dividend.

{Column graph of book value per share:  1994-$8.25, 1995-$8.75,
    1996-$9.35, 1997-$10.17 and 1998-$11.01}

     First Bancshares, Inc., ended fiscal year 1998 with another
strong performance.  Net income, earnings per share, book value,
loans, deposits and assets continued their substantial growth
history maintained over the past 5 years.  We are particularly
pleased that basic earnings per share increased 38% from $.65
last year to $.90 this year.

     Stockholders' equity grew $2.2 million during the fiscal year.  
Options exercised by Bank employees, somewhat offset by a limited
amount of First Bancshares, Inc. stock repurchased, resulted in an
increase of 48,500 shares outstanding.  That combination produced an 
increase in book value per share from $10.17 to $11.01.

{Column graph of total assets:  1994-$118,460,000, 1995-$128,193,000,
   1996-$143,671,000, 1997-$163,973,000 and 1998-$172,173,000.}

     Net loan growth totaled $12.3 million and net deposit growth
totaled $23.4 million for the fiscal year.  Of those amounts, $4.8
million of loans and $17.4 million of deposits resulted from the 
purchase of the Crane and Galena NationsBank branches which was
completed in March of 1998.  Further, $11.0 million in cash 
received as part of that transaction was used to reduce borrowed
funds.

     The Crane and Galena branches have been a valuable addition to
our banking operations.  We are now the only bank in Galena, the 
county seat of Stone County, and one of two banks in Crane, a small
thriving community in northern Stone County.  Given Galena's 
proximity to Table Rock Lake and Crane's proximity to the rapidly 
expanding Springfield, Missouri market, we expect solid long-term
growth at each location.

     First Bancshares, Inc. paid its eighteenth quarterly dividend 
on June 30, 1998 and has announced its nineteenth quarterly dividend 
of $.03 per share to be paid on September 30, 1998.  In May 1998, a
stock repurchase program of 218,932 shares, originally approved in
1997 was extended for another year.  As of September 9, 1998, 
40,722 shares had been repurchased for $532,000.

{Column graph of customer deposit accounts:  1994-$85,904, 
   1995-$98,389, 1996-$105,960, 1997-$117,685 and 1998-$141,059
   and net loans receivable:  1994-$85,777, 1995-$101,431,
   1996-$118,780, 1997-$134,104 and 1998-$146,406}

     The computer upgrade, hardware and software, discussed in last
year's annual report was completed in February, 1998.  Further, a
complete Y2K software upgrade was installed in August, 1998 and
has successfully passed initial testing.  We anticipate all Y2K
testing should be completed by late this year and that our 
present computer system will take us will into the next
century.

     
</page>

     Negotiations with United States Postal Service to build a new
facility in Gainesvile have been ongoing during the entire fiscal
year.  Our architect is currently working on a set a plans that
will meet United States Post Office approval.  If all goes well,
we hope to reach an agreement to renovate the commercial space
immediately to the right of our Gainesville building, shown at
the top of the inside front cover, for that new post office facility
last this year.  If you ever thought the Post Office was slow in
delivering the mail, try negotiating a building project with them.

     In late 1997, First Bancshares, Inc. established a new wholly-
owned subsidiary, South Central Missouri Title, Inc.  As the name
would imply, South Central, a Missouri corporation, is licensed to
write title insurance, prepare title reports, certifies abstracts
and acts as a closing agent for various real estate transactions.
South Central initially opened for business in Hartville, Missouri,
the county seat of Wright County.  We have been very pleased with 
the business that office has generated.  A second office was opened
in August, 1998 in Ava, Missouri, the county seat of Douglas County.


     With the exception of the continued emphasis on Year 2000
implementation and testing and reaching an agreement to construct
a new Gainesville post office, First Bancshares, Inc. has no unique
nor special agenda for fiscal 1999.  We will, of course, continue
our efforts to improve profitability, promote stable growth and be
on the lookout for opportunities to enhance stockholder value and
better serve our bank customers.  As we strive to increase our 
growth, we would welcome referrals of your friends and 
acquaintances to any of our eight convenient locations.




                                       Sincerely,



                                       /s/ Stephen H. Romines
                                       Stephen H. Romines
                                       President




</page>

Business of the Corporation


     First Bancshares, Inc. (the "Holding Company" or the "Company"),
a Missouri corporation, was incorporated on September 30, 1993 for 
the purpose of becoming the holding company for First Home Savings 
Bank ("First Home" or the "Savings Bank") upon the conversion of 
First Home from a Missouri mutual to a Missouri stock savings and 
loan association.  That conversion was completed on December 22, 
1993.  At June 30, 1998, the Company had total consolidated assets of
$172.2 million and consolidated stockholders' equity of $24.4 million.

     The Company is not engaged in any significant business activity
other than holding the stock of First Home.  Accordingly, the
information set forth in the report, including financial statements 
and related data, applies primarily to First Home.

     First Home is a Missouri-chartered, federally-insured stock
savings bank organized in 1911.  The Savings Bank is regulated by
the Missouri Division of Finance and the Office of Thrift Supervision
("OTS") and its deposits are insured up to applicable limits by the
Savings Association Insurance Fund ("SAIF") of the Federal Deposit
Insurance Corporation.  First Home also is a member of the Federal
Home Loan Bank ("FHLB") System.

     First Home conduct its business from its home office in 
Mountain Grove and seven full service branch facilities in Marshfield,
Ava, Gainesville, Sparta, Theodosia, Crane and Galena, Missouri.  
First Home provides its customers with a full array of community 
banking services.  It is primarily engaged in the business of 
attracting deposits from, and making loans to, the general public.  It
emphasizes one-to-four family residential mortgage loans and, to a
 lesser extent, multi-family residential, consumer, commercial and 
home equity loans.  First Home also invests in mortgage-backed, U. S.
Government and agency securities and other assets.

     At June 30, 1998, First Home's total gross loans were $150.4
million, or 87.3% of total consolidated assets, including $112.4
million, or 74.7% of total gross loans secured by one-to-four family
properties and $25.3 million, or 16.8% of total gross loans secured 
by other real estate.  Of the loans secured by real estate, over 95.0%
are adjustable-rate loans.

                                  3
</page>


                  SELECTED CONSOLIDATED FINANCIAL INFORMATION

     The following table sets forth certain information concerning 
the consolidated financial position and operating results of the 
Company as of and for the dates indicated.  The Company is primarily
in the business of directing, planning and coordinating the business
activities of First Home. The consolidated data is derived
in part from, and should be read in conjunction with, the 
Consolidated Financial Statements of the Company and its subsidiaries
presented herein.
<TABLE>
<CAPTION>            
                                                        At June 30,          
                                   ---------------------------------------------------
                                     1998       1997       1996        1995      1994
                                   ---------   --------   -------    --------  --------   
<S>                                   <C>         <C>        <C>         <C>       <C>
                                                  (Dollars in thousands)          
FINANCIAL CONDITION DATA:            
            
Total assets                        $172,173   $163,973   $143,671   $128,193   $118,460
Loans receivable, net                146,406    134,104    118,780     101,431    85,777
Mortgage-backed certificates             703        828      2,831      3,134     3,420 
Cash, interest-bearing deposits  
  and investment securities           18,941     24,408     18,236     20,483    24,523 
Federal funds sold                        -          -          -          -     2,000 
Customer deposits                    141,059    117,685    105,960     98,389    85,904 
Borrowed funds                         5,700     23,555     13,555      5,055     8,055 
Stockholders' equity                  24,365     22,207     23,729     24,492    24,313 

<CAPTION> 
                                                      Year Ended June 30,           
                                    ----------------------------------------------------
                                       1998        1997      1996        1995     1994 
                                     --------    --------   -------    --------  -------
<S>                                     <C>          <C>       <C>         <C>      <C>
                                                    (Dollars in thousands)           
OPERATING DATA:            
            
Interest income                      $ 12,771    $ 11,695   $10,113     $ 8,390   $ 7,017 
Interest expense                        7,005       6,493     5,661       4,554     3,554 
                                     --------     -------    ------     -------    ------
Net interest income                     5,706       5,202     4,452       3,836     3,463 
Provision (credit) for loan losses         66          71        80         (27)       23 
                                     --------     -------     ------     -------   -------
Net interest income after provision  
  (credit) for loan losses              5,700       5,131      4,372      3,863     3,440 
Gains (losses) on investments and   
   mortgage-backed securities              11         187         (6)       (19)      (2)
Noninterest income, excluding gains            
  (losses) on securities                  755         527        465        317       259 
Noninterest expense                     3,729       3,648      3,045      2,514     2,216 
                                      -------     -------    -------    -------    ------
Income before taxes                     2,737       2,197      1,786      1,647     1,481 

Income taxes                              892         784        631        613       431 
                                       ------      ------     ------    -------     ------
Net income                           $  1,845    $  1,413   $  1,155   $  1,034   $ 1,050
                                     ========    ========   ========   ========   =======
Primary earnings per share             $ 0.90      $ 0.65     $ 0.48     $ 0.39     $ 0.34
                                     ========    ========   ========   ========    =======
  *Operating as a mutual.            
                                          4
</page> 

<CAPTION>
                                             At or For the Year Ended June 30,
                                     ----------------------------------------------------          
                                       1998        1997      1996        1995     1994 
KEY OPERATING RATIOS:                --------    --------  --------    --------  ------
<S>                                    <C>         <C>       <C>          <C>      <c.
Return on average assets               1.08%       0.91%     0.85%       0.85%    0.97%
Return on average equity               7.83        6.24      4.90        4.28     5.51 
Average equity to average assets      13.83       14.65     17.31       19.98    17.66 
Interest rate spread for period        2.98        2.85      2.60        2.45     2.74 
Net interest margin for period         3.58        3.53      3.40        3.30     3.36 
Non-interest expense to average assets 2.19        2.36      2.23        2.08     2.06
Average interest-earning assets to            
  interest-bearing liabilities       114.00      115.00    119.00      122.00   118.00 
Allowance for loan losses to total              
  loans at end of period               0.35        0.35      0.42        0.42     0.54 
Net charge-offs to average outstanding        
  loans during the period              0.02        0.09      0.01        0.01     0.02 
Ratio of non-performing assets to 
  total assets                         1.02        0.93      0.88        0.77     0.82 
Ratio of loan loss reserves to 
  non-performing assets               29.93       31.68     41.02       46.55    49.23 
            
Dividend payout ratio                 12.22       16.13     21.05       25.32       14.49
            
<CAPTION>     
                                                          At June 30,          
                                   -------------------------------------------------------
                                       1998        1997      1996        1995     1994 
                                    ---------   ---------  ---------   --------  -------
OTHER DATA:            
<S> 
Number of:
  Loans outstanding                    5,545       4,999      4,712      4,387      4,358
  Deposit account                     20,127      15,447     13,264     10,203     10,028
  Full service offices                     8           6          5          4           4
</page>            

                          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.  The 
information contained in this section should be read in conjunction 
with the Consolidated Financial Statements, the accompanying Notes to
Consolidated Financial Statements and the other sections contained in
this report.

Operating Strategy

     The primary goals of management are to minimize risk, improve 
profitability and promote growth.  Operating results depend primarily
on net interest income, which is the difference between the income 
earned on its interest-earning assets, such as loans and investments,
and the cost of its interest-bearing liabilities, consisting of 
deposits and borrowings.  Net income is also affected by, among 
other things, provisions for loan losses and operating expenses.  
Operating results are also significantly affected by general economic
and competitive conditions, primarily changes in market interest 
rates, governmental legislation and policies concerning monetary and
fiscal affairs and housing, as well as financial institutions and 
the attendant actions of the regulatory authorities.  Management's 
strategy is to strengthen First Home's presence in, and expand the 
boundaries of, its primary market area.

     Management has implemented various general strategies designed 
to continue profitability while maintaining safety and soundness.  
Primary among those strategies are emphasizing one-to-four family 
lending, maintaining asset quality and managing interest-rate risk.  
It is anticipated, subject to market conditions, that no changes will
be made in these strategies.

     Emphasizing One-to-Four Family Lending.  Historically, First 
Home has been predominantly a one-to-four family residential lender.
Single family residential loans constituted 69% of mortgage loans 
originated during fiscal 1998, 79% of 1997 mortgage loan originations 
and 78% of 1996 mortgage loan originations.  First Home has worked to 
achieve a reputation within its local lending territory for prompt, 
efficient and courteous service during both the loan origination and 
servicing processes.

     Maintaining Asset Quality.  First Home strongly emphasizes 
maintaining asset quality through sound underwriting, constant 
monitoring and effective collection techniques.  At June 30, 1998, 
First Home's ratio of non-performing assets to total assets was 1.02%.
That same ratio at June 30, 1997 was .93%.  During the year ended 
June 30, 1998, actual loan losses, net of recoveries, of loans 
originated by First Home were $19,400.  Actual loan losses, net 
of recoveries, of loans originated were $12,000 for the year ended 
June 30, 1997.  Additional charge-offs during the year ended June
30, 1997 were $25,000 for purchased auto loans and $73,000 for an 
overdraft of a commercial checking account.  Actual loan losses, net 
of recoveries, for the year ended June 30, 1996 were $1,000.

     Managing Interest-Rate Risk.  First Home relies primarily on 
adjustable interest rate loans to minimize the inherent risks of 
interest rate changes.  All long-term mortgage loans originated 
since 1973 have had adjustable rates rather than fixed rates.  
Further, with few exceptions, the majority of other loans including,
but not limited to, car loans, commercial loans, cattle loans and 
personal loans that have maturities exceeding two years also have 
adjustable rates rather than fixed rates.  All loans originated by 
First Home have been retained in its portfolio.  No loans have been 
sold in the secondary mortgage market.  To further minimize interest 
rate risk, First Home maintains a short-term investment portfolio.

                                  6
</page>
Year 2000 Issues

     For the previous two years, First Home has been addressing the 
potential Year 2000 problems.  As part of an awareness and assessment
process, First Home examined its computer system along with related
interfaces and data exchange processes with third parties, other 
equipment utilizing date sensitive technology, servicer and vendor
relationships and all daily business processing activities.  The 
plans developed by First Home for addressing Year 2000 problems has 
been examined and found satisfactory by the OTS.  The plans included
purchasing new mainframe hardware which occurred in January 1998.  
The Bank is currently on schedule with respect to the implementation
and testing of these plans.  The Bank's plan for full Year 2000 
compliance is scheduled to be complete by December 1998.  Estimated 
costs to bring the Bank up to Year 2000 compliance are approximately
$250,000 (most of which have already been incurred).

Fiscal Year Ended June 30, 1998 Compared to June 30, 1997

     Net Income.  Net income for the fiscal year ended June 30, 1998 
was $1,845,000, an increase of $432,000, or 30.6%, from $1,413,000 
for the fiscal year ended June 30, 1997.  Increases in interest 
income of $1,076,000 combined with a $52,000 increase in noninterest 
income and a $5,000 decrease in provision for loan losses were offset
by increases in interest expense of $512,000, noninterest expense 
of $81,000 and income taxes of $107,000.

     Net Interest Income.  Net interest income increased $564,000, 
or 10.8%, to $5,766,000 for the year ended June 30, 1998 compared to 
$5,202,000 for the year ended June 30, 1997.  A $1,076,000 
increase in interest income  was reduced by a $512,000 increase in 
interest expense.

     Interest Income.  Total interest income for the year ended 
June 30, 1998 increased $1,076,000, or 9.2%, to $12,771,000 from 
$11,695,000 for the year ended June 30, 1997.  Interest income from 
loans receivable increased $1,206,000. The increase in income from 
loans receivable that resulted from a $12,303,000 increase in net 
loans receivable was somewhat offset by a decrease in the annualized 
yield on loans from 8.23% for the year ended June 30, 1997 to 8.16% 
for the year ended June 30, 1998.  Interest rates were decreased 
during the year on existing loans pursuant to their adjustable rate 
features.   Interest income from investment securities decreased 
$155,000 as a large portion of securities held were called for early 
redemption.  Income from mortgage-backed and related securities 
decreased $109,000 due to the sale of one security during the year 
ended June 30, 1997 and principal repayments of the remaining 
balances.  A larger average balance in Federal funds sold and 
FHLB daily time savings resulted in a $135,000 increase in interest 
income.  Funds to maintain those higher balances were primarily 
acquired as part of the  purchase of the branches from NationsBank.

     Interest Expense.  Interest expense for the year ended June 
30, 1998 was $7,005,000, an increase of  $512,000, or 7.9%, from 
$6,493,000 for the year ended June 30, 1997. Interest expense on 
customer deposits increased $631,000 as the average balance of 
customer deposits increased.  This was partially offset by a 
decrease in the average deposit rates paid during the period.  FHLB 
advances were paid off at their respective maturity dates to create 
a $119,000 reduction in interest expense on borrowed funds.

     Provision for Loan Losses.  Provision for loan losses decreased 
$5,000, or 7.6%, to $66,000 for the year ended June 30, 1998 from 
$71,000 for the year ended June 30, 1997.  Actual loan charge-
offs, net of recoveries, of First Home originated loans were 
$19,000 for the year ended June 30, 1998 compared to $12,000 for 
the year ended June 30, 1997. 

     Noninterest Income.  Noninterest income increased $52,000 to 
$766,000 for the year ended June 30, 1998 from $714,000 for the year 
ended June 30, 1997.  The 7.2% increase included a $119,000, or 
30.7%, increase in service charges and other fee income from 
customer deposit accounts.  Two factors influenced the increase in 
service charges and other fee income.  The primary factor was the 
checking account program begun in July 1995 which has created a 
continued increase in customer deposit accounts.  The second 

                                7
</page>

factor was the acquisition of $6.7 million in demand accounts as 
part of the purchase of two branches from NationsBank completed 
in March 1998.  Gains of $58,000 on the sale of property and 
equipment for the year ended June 31, 1998 were an increase of 
$83,000 from the $25,000 loss recognized during the year ended 
June 30, 1997.   The gain for the year ended June 30, 1998 was 
primarily from the sale of the assets of Lawson & Lawson Insurance 
Agency.  

     Insurance commissions increased $16,000, or 25.0%, to $81,000 
for the year ended June 30, 1998 from $65,000 for the year ended 
June 30, 1997.  The decrease in insurance commissions, because 
Lawson & Lawson Insurance Agency was sold, were more than offset by 
title insurance commissions earned by South Central Missouri Title, 
Inc. which opened in November 1997.  Other increases in noninterest 
income were $5,000 from real estate operations and other income of 
$3,000.  

     Offsetting the increases described above was a $176,000 
reduction in gain on investment securities and mortgage-backed 
securities to $11,000 for the year ended June 30, 1998 from 
$187,000 for the year ended June 30, 1997.  Information regarding 
this reduction is provided under "-Gain (Loss) on Investments and 
Mortgage-backed Securities."  

     Noninterest Expense.  Noninterest expense increased $82,000, or 
2.2%, from $3,647,000 for the year ended June 30, 1997 to $3,729,000 
for the year ended June 30, 1998.  Compensation and employee 
benefit expense increased $457,000, or 25.1%, including $60,000 
attributable to salaries and related payroll taxes for staff at the 
Crane and Galena branches purchased, $38,000 for the hiring of two 
personnel to assist in the computer conversion and the downloading of 
the Crane and Galena data into First Home's computer system, an 
$18,500 bonus to all employees in December 1997 and $28,000 for 
the addition of personnel for South Central Missouri Title, Inc. 
The remaining $105,500 salaries and payroll taxes increase was 
attributable to hiring of additional personnel at other branches and 
annual payroll increases for existing personnel.  

     Due to the increase in the average fair market value of the 
Company's common stock, the expense for the Employee Stock Ownership 
Plan ("ESOP") increased $195,000.  This treatment is required by 
the American Institute of Certified Public Accountant's Statement of 
Position 93-6, "Employer's Accounting for Employee Stock Ownership 
Plans."  The Statement requires the recording of shares released from 
the ESOP to be recorded at the average fair market value for the period.  

     The remaining increase in compensation and employee benefit 
expense was $33,000 for group health insurance expense.  Addition of 
employees at Crane and Galena and existing personnel meeting 
the health plan requirements created the increase.  

     Occupancy and equipment expense was $491,000 for the year ended 
June 30, 1998 compared to $392,000 for the year ended June 30, 1997.  
Included in the $99,000, or 25.2%, increase was $44,000 in additional 
depreciation expense ($22,000 for the new computer system, 
$12,000 for the Gainesville building and furnishings placed in 
service in December 1996, $4,000 for the Crane and Galena buildings 
and equipment, and the remaining  depreciation expense for the 
replacement of fully depreciated equipment at existing locations).  
Also included in the $99,000 increase were $31,000 in maintenance 
expense ($13,000 on the old computer system, $5,000 for the addition 
of Crane and Galena branches and the remaining in upgrading 
alarm and security systems), $11,000 in items expensed primarily 
relating to the computer conversion, $8,000 in furniture, fixtures 
and equipment expense (mostly small items purchased for Crane and 
Galena branches), $5,000 increase in utilities, and $5,000 increase 
in real estate taxes.    

     Other noninterest expense rose to $711,000 for the year ended 
June 30, 1998 from $517,000 for the year ended June 30, 1997.  The 
majority of the $194,000, or 37.4%, increase was a $53,000 
increase in loss on checking accounts and an increase of $48,000 
for correspondent bank processing and service charges.  The increase 
for loss on checking accounts includes a provision of $34,000 to 
establish a reserve for items deposited with the correspondent bank 
for which First Home has not yet received credit.  In August 1998, 
the correspondent bank processing was moved to the FHLB.  

                                   8
</page>

     The remaining $93,000 increase, partially attributable to the 
Crane and Galena acquisition, was caused by increases in:  
postage - $19,000 (28.6%), telephone - $10,000 (19.9%), office 
supplies - $8,000 (13.3%), cost of checks for customers - $7,000 
(24.0%).  The branch acquisitions also resulted in $17,000 for 
amortization of the premium paid on the deposits assumed and the 
loans purchased, a $22,000 broker fee and $9,000 of filing fees 
for regulatory approval.

     Advertising and promotional expense increased $32,000, or 
44.3%.  Marketing expense, consisting of the cost of the gifts given 
to customers for opening new checking accounts or referring a new 
customer to open a checking account increased $18,000 as the 
number of checking accounts opened continued to increase.  Other 
advertising costs increased $14,000 to promote the Crane and 
Galena branch  acquisition.
 
     The above increases were offset by a decrease in deposit 
insurance premiums of $708,000.  During the year ended June 30, 
1997, a $640,000 one-time assessment to recapitalize the SAIF was 
paid and expensed.  The legislation mandating the assessment, however, 
also provided for reductions in future premiums.  

     Gain (Loss) on Investments and Mortgage-backed Securities.  As 
noted in "--Noninterest Income," gain on investment securities and 
mortgage-backed securities decreased $176,000 from the $187,000 
gain reported for the year ended June 30, 1997 to $11,000 for the 
year ended June 30, 1998.  Common and preferred stocks were sold 
during the year ended June 30, 1998 for $232,000 resulting in a 
pretax gain of $41,000.  The gain was offset by $30,000 in write-
downs on a pool of auto loans purchased.  During the year ended 
June 30, 1997, common and preferred stock were sold for $832,000 
resulting in a pretax gain of $223,000.  The gain was somewhat 
offset by a $20,000 loss on the sale of a collaterized mortgage 
obligation and $16,000 in write-downs on a pool of auto loans 
purchased.

     Income Taxes.  Income tax expense was $891,000 for the year 
ended June 30, 1998 compared to $784,000 for the year ended June 
30, 1997.  The increase of $107,000, or 13.7%, was attributable to 
the $539,000 increase in income before taxes.

     Net Interest Margin.  Net interest margin increased by .05% to 
3.58% for the year ended June 30, 1998 compared to 3.53% for the year 
ended June 30, 1997.  A decrease in the yield on loans due to the 
reduction in rates on adjustable-rate loans, was offset by an 
increase in the yield on investment securities for an overall steady 
yield on interest-earning assets.  A reduction in the cost of 
customer deposits created an increase in the actual net interest 
margin. 


Fiscal Year Ended June 30, 1997 Compared to June 30, 1996

     Net Income.  Net income increased $258,000, or 22.3%, to 
$1,413,000 for the fiscal year ended June 30, 1997 from $1,155,000 
for the fiscal year ended June 30, 1996.  An increase in interest 
income of $1,582,000 combined with an increase in noninterest income 
of $255,000 and a decrease in provision for loan losses of $9,000 
were offset by increases in interest expense of $832,000, noninterest
expense of $602,000 and income taxes of $153,000.

     Net Interest Income.  Net interest income was $5,202,000 for 
the year ended June 30, 1997, an increase of $750,000, or 16.8%, 
from $4,452,000 for the year ended June 30, 1996.  An increase in 
interest income of $1,582,000 was reduced by an increase in interest 
expense of $832,000.

     Interest Income.  Total interest income of $11,695,000 for the 
year ended June 30, 1997 increased $1,582,000, or 15.6%, from 
$10,113,000 for the year ended June 30, 1996.  An increase in net 
loans receivable of $15,324,000 resulted in an increase in interest 
income from loans of $1,474,000.  Interest income from investment 
securities increased $226,000 attributable to the purchase of 
additional securities.  Income from mortgage-backed and related 
securities decreased $40,000 due to the sale of one security and 

                                  9
</page>

principal repayments of the remaining balances.  A lower average 
outstanding balance in other interest-earnings assets caused a 
$78,000 decrease in the related income account.     

     Interest Expense.  Interest expense increased $832,000, or 
14.7%, from $5,661,000 for the year ended June 30, 1996 to $6,493,000
for the year ended June 30, 1997.  An increase in the average balance 
of customer deposits partially offset by a decrease in the average 
deposit rates paid during the period created a $333,000 increase in 
interest expense on customer deposits.  Additional FHLB advances 
accounted for a $499,000 increase in interest expense on borrowed funds.

     Provision (Credit) for Loan Losses.  Provision for loan losses 
of $71,000 for the year ended June 30, 1997 was a decrease of $9,000 
from $80,000 for the year ended June 30, 1996.  Actual loan 
charge-offs, net of recoveries, of First Home originated loans were 
$12,000 for the year ended June 30, 1997 compared to $1,000 for the 
year ended June 30, 1996.  Additional net charge-offs were $25,000 
for purchased auto loans and $73,000 for an overdraft of a commercial
checking account.  Included in the $80,000 of loan loss reserves at 
June 30, 1996 were $74,000 to increase specific reserves for the 
losses on purchased auto loans and the commercial checking account 
anticipated in fiscal 1997.

     Noninterest Income.  Noninterest income was $714,000 for the 
year ended June 30, 1997 compared to $459,000 for the year ended 
June 30, 1996.  Significantly contributing to the $255,000, or 55.6%,
increase were net gains on investments and mortgage-backed securities
of $187,000 for the year ended June 30, 1997 described under "--Gain 
(Loss) on Investments and Mortgage-backed Securities."

     The increase in noninterest income also included a $119,000, or 
44%, increase in service charges and other fee income from customer 
deposit accounts.  That increase was attributable to the checking 
account program begun in July 1995 which has created a continued 
increase in customer deposit accounts.  Loan origination and 
commitment fee income increased $5,000 from $3,000 for the year 
ended June 30, 1996 to $8,000 for the year ended June 30, 1997.  

     Offsetting the increases described above was a loss of $25,000
on the sale of property and equipment for the year ended June 30, 
1997, a decrease of $45,000 from the $20,000 gain recognized during 
the year ended June 30, 1996.  With completion and occupancy of the 
new Gainesville facility, the original modular building was no longer
needed and was sold in April of 1997 for a loss of $23,000.  Income 
from real estate operations decreased by $8,000 from $94,000 for the 
year ended June 30, 1996 to $86,000 for the year ended June 30, 1997.
Insurance commissions for the year ended June 30, 1997 were $65,000, 
also an $8,000 decrease from $73,000 for the year ended June 30, 1996.
The insurance agency was sold in August, 1997, generating a pre-tax 
profit of $51,000.  Other noninterest income decreased $1,000.

     Noninterest Expense.  Noninterest expense was $3,647,000 for the
year ended June 30, 1997, an increase of 602,000, or 19.8%, from 
$3,045,000 for the year ended June 30, 1996.  Deposit insurance 
premiums increased $554,000 due to a $640,000 one-time assessment 
to recapitalize the SAIF.  The legislation mandating the assessment, 
however, also provided for reductions in future premiums.  These 
reductions lowered the premiums for the following quarters to 
partially offset the assessment expense.  

     Compensation and employee benefit expense increased $128,000, 
or 7.5%.  The increase was attributable to salaries and related 
payroll taxes for additional staff for the Theodosia branch, opened 
in early 1997, and annual payroll increases for existing personnel.  
Occupany and equipment expense increased $27,000, or 7.4%, due to 
the opening of the Theodosia branch and additional depreciation 
expense for the new Gainesville building.  

     Other noninterest expense increased $23,000, or 4.7%.  The 
majority of the increase was caused by to the increase in customer 
checking accounts.  Increases included:  postage - $26,000 (52.0%), 
debit card expense - $7,000, customer and public relations  - $9,000
and losses on checking accounts of $8,000.  Those increases were 
somewhat offset by a $7,000 (63.6%) decrease in the cost of 

                                10
</page>

checking account supplies.  OTS and state regulatory assessments 
increased $12,000 (28.6%).  Decreases in insurance expense of 
$6,000 (11.3%) and other operating expense of $13,000 (54.2%) were 
also recorded.

     Advertising and promotional expense decreased $131,000, or 64%.
As described in the comparison for June 30, 1996 to June 30, 1995, 
advertising expenses for the year ended June 30, 1996 included 
non-recurring start-up expenses for the checking account program.

     Gain (Loss) on Investments and Mortgage-backed Securities.  As 
noted in "--Noninterest Income," there was a $187,000 net gain on 
securities for the year ended June 30, 1997.  This was an increase 
of $193,000 from the $6,000 loss reported for the year ended June 30,
1996.  Common and preferred stock were sold during the year ended 
June 30, 1997 for $832,000 resulting in a pretax gain of $223,000.
The gain was somewhat offset by a $20,000 loss on the sale of a 
collaterized mortgage obligation and $16,000 in write-downs on a 
pool of auto loans purchased.

     Income Taxes.  Income tax expense increased $153,000, or 24.2%,
from $631,000 for the year ended June 30, 1996 to $784,000 for the 
year ended June 30, 1997.  The increase was attributable to the 
$411,000 increase in income before taxes.

     Net Interest Margin.  Net interest margin increased to 3.53% 
for the year ended June 30, 1997 compared to 3.40% for the year 
ended June 30, 1996.  An increase in the yield on loans, primarily 
adjustable-rate loans, combined with decreases in the cost of 
customer deposits and borrowings were responsible for the overall 
increase in the margin. 


Financial Condition

     General.  During the year ended June 30, 1998, as in previous 
years, First Home continued its strategy of expanding its loan 
portfolio and increasing deposit market share within its primary
markets.  That strategy was enhanced by the decision late last year
to enlarge the market area with the acquisition of branches in Crane
and Galena.  Loan demand continued strong throughout fiscal year 1998 
with net loans receivable showing an increase of $12.3 million and 
deposits an increase of $23.4 million. 

     Total Assets.  Total assets increased $8.2 million, or 5.0%, to 
$172.2 million at June 30, 1998, from $164.0 million at June 30, 1997.  
The purchase of the Crane and Galena branches created the majority of 
the increase as $11.3 million in cash, $4.8 million in loans, and 
$300,000 of buildings and equipment were acquired.  Excluding the 
Crane and Galena purchase, net loans receivable increased $7.5 
million.  Those increases were partially offset by an $12.2 million 
decrease in investment securities.
  
     Cash and Cash Equivalents.  Cash and cash equivalents of $11.9 
million at June 30, 1998 increased $6.1 million from $5.8 million at 
June 30, 1997.  

     Certificates of Deposit.  Certificates of deposit purchased as 
investments were $2.2 million at June 30, 1998 compared to $1.5 
million at June 30, 1997, resulting in a $700,000 increase.

     Investment Securities.  Bonds that were called and regular 
scheduled maturities of  investment securities created a $12.2 
decrease from $17.1 million at June 30, 1997 to $4.9 million at 
June 30, 1998.    

     Mortgage-backed Securities.  Mortgage-backed securities 
decreased $100,000 to $700,000 at June 30, 1998 from $800,000 at 
June 30, 1997.  This decrease was the result of regular principal 
repayments.

     Loans Receivable.  Net loans receivable of $146.4 million at 
June 30, 1998 was an increase of $12.3 million, or 9.2%, from $134.1 
million at June 30, 1997.  The net loan increase not attributable to 
the Crane and Galena purchase was funded from the increase in 
customer deposits, proceeds from maturing investments and 
certificates of deposit, and cash received from the branch purchase.

                                 11
</page>

     Non-accrual Loans.  Non-accrual loans remained constant at 
$57,000 at June 30, 1997 and June 30, 1998. 

     Non-performing Assets.  Non-performing assets increased to 
$1.8 million at June 30, 1998, an increase of $300,000, or 20.0%, 
from $1.5 million at June 30, 1997.  Non-performing assets at June 
30, 1998 were comprised of 169 loans.  At least one monthly payment 
was received during the quarter ended June 30, 1998 on 124 of those 
loans which had ending balances totaling $1.6 million.

     Deposits and Borrowings.  Deposits increased $23.4 million, or 
19.9%, to $141.1 million at June 30, 1998 from $117.7 million at June 
30, 1997.  Of the total increase, $17.4 million were assumed with 
the Crane and Galena branch purchase and $6.0 million was attributed 
to growth at existing locations.  FHLB advances were reduced by $17.8 
million to $5.7 million at June 30, 1998 compared to $23.5 million at 
June 30, 1997.  Funds from calls of investment securities and from 
the branch purchase were used to make the repayments. 

     Stockholders' Equity.  Stockholders' equity was $24.4 million at 
June 30, 1998 compared to $22.2 million at June 30, 1997.  The $2.2 
million increase was comprised of net income of $1.8 million, 
$600,000 in unearned compensation adjustments and $300,000 from the 
exercise of stock options offset by $200,000 for the repurchase of 
treasury stock and $200,000 for payment of dividends.

     Liquidity and Capital Resources.  First Home's primary sources 
of funds are deposits, proceeds from principal and interest payments 
on loans, mortgage-backed securities, investment securities and net 
operating income.  Funds are also obtained from FHLB advances.  While
maturities and scheduled amortization of loans and mortgage-backed 
securities are a predictable source of funds, deposit flows and 
mortgage prepayments are greatly influenced by general interest 
rates, economic conditions and competition.

     The primary investing activity of First Home is the origination
of mortgage loans.  Mortgage loans originated by First Home have 
remained remarkably constant at $41.9 million, $40.6 million and 
$40.2 million for the years ended June 30, 1998, 1997 and 1996, 
respectively.  Other investing activities include the purchase of 
investment securities, which totaled $1.7 million, $6.6 million and 
$6.4 million for the years ended June 30, 1998, 1997 and 1996.  
These activities were funded primarily by deposit growth, principal 
repayments on loans, mortgage-backed securities, other investment 
securities, and advances.  

     OTS regulations require First Home to maintain an adequate 
level of liquidity to ensure the availability of sufficient funds to
support loan growth and deposit withdrawals, to satisfy financial 
commitments and to take advantage of investment opportunities.  
First Home's sources of funds include deposits and principal and 
interest payments from loans and mortgage-backed securities and 
investments, and FHLB advances.  During fiscal years 1998, 1997 and 
1996, First Home used its sources of funds primarily to fund loan 
commitments and to pay maturing savings certificates and deposit 
withdrawals.  At June 30, 1998, First Home had approved loan 
commitments totaling $1.1 million and undisbursed loans in process 
totaling $3.6 million.

     Liquid funds necessary for the normal daily operations of First
Home are maintained in three working checking accounts, a daily time 
account with the FHLB - Des Moines and in Federal funds.  It is the 
Savings Bank's current policy to maintain adequate collected balances
in those three checking accounts to meet daily operating expenses, 
customer withdrawals, and fund loan demand.  Funds received from 
daily operating activities are deposited, on a daily basis, in one 
of the working checking accounts and transferred, when appropriate 
to daily time or Federal funds to enhance interest income.

     At June 30, 1998, certificates of deposit amounted to $89.0 
million, or 63.1%, of First Home's total deposits, including $63.7 
million which were scheduled to mature by June 30, 1999.  
Historically, First Home has been able to retain a significant 
amount of its deposits as they mature.  Management of First Home 
believes it has adequate resources to fund all loan commitments by 
savings deposits and FHLB advances and that it can adjust the 
offering rates of savings certificates to retain deposits in changing
interest rate environments.

                                     12
</page>
     Currently, the OTS requires a savings institution to maintain 
an average daily balance of liquid assets (cash and eligible 
investments) equal to at least 5% of the average daily balance 
of its net withdrawable deposits and short-term borrowings.  In 
addition, short-term liquid assets currently must constitute 1% of 
the sum of net withdrawable deposit accounts plus short-term 
borrowings.  First Home's liquidity ratios were 16.3%, 15.8% and 
10.7% at June 30, 1998, 1997 and 1996, respectively  First Home 
consistently maintains liquidity levels in excess of regulatory 
requirements, and believes this is an appropriate strategy for 
proper asset and liability management.

     OTS regulations require First Home to maintain specific amounts 
of capital.  As of June 30, 1998, First Home was in compliance with 
all the regulatory capital requirements which were effective as of 
such date, with tangible, core and risk-based capital ratios of 
11.2%, 11.2% and 16.3%, respectively.  These ratios exceed the 
1.5%, 4.0% and 8.0% required by OTS regulations.  In addition, the 
OTS amended its capital regulations which require savings 
institutions to maintain specified amounts of regulatory capital 
based on the estimated effects of changes in market rates and which 
could further increase the amount of regulatory capital required to 
be maintained by the Savings Bank.  See Note 15 of the Notes to 
Consolidated Financial Statements.

     Impact of New Accounting Standards.  See Note 1 of the Notes to 
the Consolidated Financial Statements.

     Effect of Inflation and Changing Prices.  The Consolidated 
Financial Statements and related financial data presented herein 
have been prepared in accordance with generally accepted accounting 
principles, which require the measurement of financial position and 
operating results in terms of historical dollars, without 
considering the changes in relative purchasing power of money over 
time due to inflation.  The primary impact of inflation on 
operations of First Home is reflected in increased operating costs.  
Unlike most industrial companies, virtually all the assets and 
liabilities of a financial institution are monetary in nature.  As 
a result, interest rates generally have a more significant impact on 
a financial institution's performance than do general levels of 
inflation.  Interest rates do not necessarily move in the same 
direction or to the same extent as the prices of goods and services.
During the current interest rate environment, management believes 
that the liquidity and the maturity structure of First Home's assets 
and liabilities are critical to the maintenance of acceptable 
profitability.

                                       13
</page>


{LOGO OF KIRKPATRICK, PHILLIPS & MILLER, CPAs, A PROFESSIONAL \
    CORPORATION}


                      INDEPENDENT AUDITORS' REPORT
                      ----------------------------


 To the Board of Directors and Stockholders
First Bancshares, Inc. and Subsidiaries
Mountain Grove, Missouri

We have audited the accompanying consolidated statements of financial
condition of First Bancshares, Inc. and Subsidiaries as of June 30, 
1998 and 1997, and the related consolidated statements of income, 
stockholders' equity, and cash flows for each of the three years in 
the period ended June 30, 1998.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements based
on our audits.

We conducted our audits in accordance with generally accepted 
auditing standards.  Those standards require that we plan and perform
these audits to obtain reasonable assurance about whether the 
financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements.  An audit also includes 
assessing the accounting principles used and significant estimates 
made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to 
above present fairly, in all material respects, the financial 
position of First Bancshares, Inc. and Subsidiaries as of June 30, 
1998 and 1997, and the results of operations and its cash flows
for each of the three years in the period ended June 30, 1998, in
conformity with generally accepted accounting principles.


                          /s/ Kirkpatrick, Phillips & Miller
                          KIRKPATRICK, PHILLIPS & MILLER, CPAs, P.C.

Springfield, Missouri
August 21, 1998
</page>



</TABLE>
<TABLE>
<CAPTION>
                                  FIRST BANCSHARES, INC.  AND SUBSIDIARIES     
                              CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION     
                              - - - - - - - - - - - - - - - - - - - - - - - -
                                         June 30, 1998 and 1997    
                                                                               1998              1997
                                                                         -------------      -------------
ASSETS    
------
<S>                                                                           <C>                  <C>
Cash and cash equivalents, including interest-bearing accounts    
    of $5,898,306 in 1998 and $1,895,311 in 1997                           $   11,862,951      $   5,808,930 
Certificates of deposit                                                      2,205,000          1,504,000 
Investment securities available-for-sale, at fair value (Notes 1 and 3)      2,701,208         14,227,286 
Investment securities held-to-maturity (estimated fair value of    
    $1,125,763 in 1998 and $1,625,760 in 1997) (Notes 1 and 3)               1,113,907          1,604,665 
Investment in Federal Home Loan Bank stock, at cost (Note 4)                 1,057,600          1,263,800 
Mortgage-backed certificates available-for-sale,    
   at fair value (Notes 1 and 5)                                               702,722            827,547 
Loans receivable held-for-investment, net (Notes 1 and 6)                  146,406,343        134,103,537 
Accrued interest receivable (Note 7)                                           664,414        665,112 
Prepaid expenses                                                               126,373        117,511 
Commissions and other receivables                                                23,906          4,400 
Property and equipment, less accumulated depreciation    
   and valuation reserve (Notes 1 and 8)                                    4,297,515      3,693,891 
Intangible assets, less accumulated amortization (Notes 1 and 2)                1,003,216         31,354 
Real estate owned                                                                          -          113,776 
Other assets                                                                     7,725          7,165 
                                                                         -------------  -------------
    Total assets                                                         $ 172,172,880  $ 163,972,974
                                                                         =============  ============= 
    
  LIABILITIES AND STOCKHOLDERS' EQUITY    
---------------------------------------
Customer deposits (Note 9)                                               $ 141,058,748  $ 117,684,732 
Advances from Federal Home Loan Bank (Note 10)                               5,700,000     23,500,000 
Other borrowed funds                                                                -          55,000 
Income taxes payable - current (Note 11)                                         74,686          5,023 
Deferred income taxes, net (Notes 1 and 11)                                    269,434        272,718 
Accrued expenses                                                               705,342        248,857 
                                                                         -------------  -------------
    Total liabilities                                                      147,808,210    141,766,330 
                                                                         =============  =============    
Commitments and contingencies (Note 15)                                            -              -    
    
Preferred stock, $.01 par value; 2,000,000 shares authorized,    
   none issued                                                                     -              -    
Common stock, $.01 par value; 8,000,000 shares authorized,    
   issued 2,693,576 in 1998 and 1,558,530 in 1997, outstanding     
   2,213,600 in 1998 and 1,091,554 in 1997                                      26,936         15,585 
Paid-in capital                                                             15,838,295     15,250,480 
Retained earnings - substantially restricted (Note 16)                      16,823,131     15,211,828 
Treasury stock, at cost - 479,976 shares in 1998 and     
   466,976 shares in 1997                                                   (7,664,176)    (7,429,669)
Unearned compensation (Note 12)                                               (734,516)    (977,466)
Unrealized gain on securities available-for-sale,     
   net of applicable deferred income taxes                                     75,000        135,886
                                                                          ------------  -------------
    Total stockholders' equity                                              24,364,670     22,206,644
                                                                          ------------  ------------- 
    Total liabilities and stockholders' equity                           $ 172,172,880  $ 163,972,974 
                                                                         =============  =============
</TABLE>    
                            The accompanying notes are an integral part of the
                                     consolidated financial statements    
                                                     15    
</page>

                               FIRST BANCSHARES, INC.  AND SUBSIDIARIES       
                                   CONSOLIDATED STATEMENTS OF INCOME      
                                - - - - - - - - - - - - - - - - - - - -  
                               Years Ended June 30, 1998, 1997 and 1996      

<TABLE>
      
                                                       1998             1997           1996
                                                   ------------    ------------    -----------
<S>                                                    <C>             <C>             <C>
Interest Income:       
  Loans receivable                                 $ 11,626,193    $ 10,420,259    $ 8,945,961 
  Investment securities                                 873,623       1,028,922        802,995 
  Mortgage-backed and related securities                 51,100         160,580        200,611 
  Other interest-earning assets                         219,763          84,980        163,631 
                                                   ------------    ------------    -----------
      Total interest income                          12,770,679      11,694,741     10,113,198 
                                                   ------------    ------------    -----------
      
Interest Expense:      
  Customer deposits (Note 9)                          6,008,164       5,376,936      5,043,681 
  Borrowed funds (Note 10)                              996,913       1,115,838        617,749 
                                                    -----------     -----------    -----------
      Total interest expense                          7,005,077       6,492,774      5,661,430 
                                                    -----------     -----------    -----------
      
      Net interest income                             5,765,602       5,201,967      4,451,768 
      
Provision (credit) for loan losses                       65,955          71,361         79,500 
                                                    -----------      ----------    -----------
      Net interest income after      
        provision for loan losses                     5,699,647       5,130,606      4,372,268 
                                                    -----------     -----------    -----------
Noninterest Income:      
  Service charges and other fee income                  508,635         389,217        270,470 
  Gain/(loss) on investment securities and      
     mortgage-backed securities                          11,444         187,438        (6,330)
  Gain/(loss) on sale of property and equipment          55,269         (24,988)        20,243 
  Loan origination and commitment fees (Note 1)           6,905           7,737          3,184 
  Income from real estate operations                     95,115          86,157         93,678 
  Insurance commissions                                  81,458          65,144         73,457 
  Other                                                   6,995           3,536          4,099 
                                                    -----------     -----------     ----------
      Total noninterest income                          765,821         714,241        458,801 
                                                    -----------     -----------     ----------
Noninterest Expense:                            
  Compensation and employee benefits (Note 12)        2,281,341       1,823,972      1,695,707 
  Occupancy and equipment                               491,294         392,336        365,150 
  Deposit insurance premiums                             74,777         782,542        228,870 
  Advertising and promotional                           105,688          73,235        204,469 
  Professional fees                                      65,605          58,102         56,606 
  Other                                                 710,964         517,278        494,591 
                                                    -----------     -----------     ----------
     Total noninterest expense                        3,728,669       3,647,465      3,045,393 
                                                    -----------     -----------    -----------
      Income before taxes                             2,736,799       2,197,382      1,785,676 
       
Income Taxes (Note 11)                                  891,316         783,979        631,039 
                                                    -----------     -----------    -----------
      Net income                                    $ 1,845,483     $ 1,413,403    $ 1,154,637 
                                                    ===========     ===========    ===========
      Basic earnings per share (Note 1)             $     .90       $     .65      $     .48
                                                    ===========     ===========    ===========
      Diluted earnings per share (Note 1)           $     .85       $     .62      $     .46
                                                    ===========     ===========    ===========

</TABLE>
                         The accompanying notes are an integral part of the 
                                    consolidated financial statements      
                                                    16      
</page>


<TABLE>
                                                FIRST BANCSHARES, INC. AND SUBSIDIARIES                  
                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                 
                                       - - - - - - - - - - - - - - - - - - - - - - - - -                  
                                                    Years Ended June 30, 1998, 1997 and 1996                 
<CAPTION>                 
                                  Common                                                                Unrealized       Total 
                                   Stock           Paid-in       Retained     Treasury      Unearned  Gain/(Loss) on  Stockholders'
                              Shares     Amount     Capital       Earnings       Stock     Compensation   Securities    Equity 
                            ---------  --------  -----------  ------------  -----------   -------------  ----------  -----------
<S>                            <C>         <C>       <C>           <C>          <C>            <C>          <C>           <C>
Balance at June 30, 1995    1,400,178   $15,514  $14,921,768   $13,094,085  $(1,907,968)   $(1,460,736)   $171,068)  $24,491,595 
  Net income                       -         -            -      1,154,637           -              -           -      1,154,637 
  Proceeds from exercise of                 
     stock options              1,648        16       16,464            -            -              -           -         16,480 
  Cash dividends ($.20 per share)  -         -            -       (237,826)          -              -           -       (237,826)
  Purchase of treasury stock 
    at cost                  (133,140)       -            -             -    (2,215,113)            -           -     (2,215,113)
  Vesting of MRP stock             -         -            -             -            -          55,390          -         55,390 
  Release of ESOP shares           -         -       121,406            -            -         196,300          -        317,706 
  Net change in unrealized 
    loss on securities
    available-for-sale,
    net of applicable
    deferred income taxes           -        -            -             -           -               -      146,246       146,246 
                             ---------   ------   ----------    ----------   ----------     -----------    --------   ----------
Balance at June 30, 1996     1,268,686   15,530   15,059,638    14,010,896   (4,123,081)    (1,209,046)    (24,822)   23,729,115 
  Net income                        -        -            -      1,413,403           -              -           -      1,413,403 
  Proceeds from exercise of                 
     stock options               5,490       55       54,845             -           -              -           -         54,900 
  Cash dividends ($.20 per share)   -        -            -       (212,471)          -              -           -       (212,471)
  Purchase of treasury stock 
    at cost                  (182,622)       -            -             -    (3,306,588)            -           -     (3,306,588)
  Vesting of MRP stock             -         -            -             -            -          55,640          -         55,640 
  Release of ESOP shares           -         -       135,997            -            -         175,940          -        311,937 
  Net change in unrealized 
    gain (loss) on securities 
    available-for-sale, 
    net of applicable 
    deferred income taxes          -         -            -             -             -              -      160,708       160,708 
                            ---------  --------  -----------   -----------  ------------   ------------   ---------   -----------
Balance June 30, 1997       1,091,554  $ 15,585  $15,250,480   $15,211,828  $(7,429,669)   $  (977,466)   $ 135,886   $22,206,644 
Net income                        -        -            -      1,845,483           -              -           -      1,845,483 
  Proceeds from exercise of                 
     stock options              32,342      324      265,361             -           -              -           -        265,685 
  Cash dividends ($.11 per share)   -        -            -       (223,153)          -              -           -       (223,153)
100% stock dividend (Note 1)1,102,704    11,027           -        (11,027)          -              -           -             -
  Purchase of treasury stock 
    at cost                   (13,000)       -            -             -      (234,507)            -           -       (234,507)
  Vesting of MRP stock             -         -            -             -            -          55,250          -         55,250 
  Release of ESOP shares           -         -       322,454            -            -         187,700          -        510,154 
  Net change in unrealized 
    gain (loss) on securities 
    available-for-sale, 
    net of applicable 
    deferred income taxes          -         -            -             -             -              -      (60,886)      (60,886)
                            ---------  --------  -----------   -----------  ------------   ------------   ---------   -----------
Balance June 30, 1998       2,213,600  $ 26,936  $15,838,295   $16,823,131  $(7,664,176)   $  (734,516)   $  75,000   $24,364,670 
                      ======== ======= =========   ========= =========   =========   =======   =========
                 
              The accompanying notes are an integral part of the consolidated financial statements                 
</TABLE>
                                                 17                 
</page>
<TABLE>
                                FIRST BANCSHARES, INC. AND SUBSIDIARIES    
                                CONSOLIDATED STATEMENTS OF CASH FLOWS       
                                - - - - - - - - - - - - - - - - - - - 
                               Years Ended June 30, 1998, 1997 and 1996      
<CAPTION>      
                                                        1998            1997           1996
                                                   ------------    ------------   ------------
<S>                                                     <C>              <C>            <C>
Cash flows from operating activities:       
  Net income                                       $  1,845,483    $  1,413,403   $  1,154,637
  Adjustments to reconcile net income to net      
    cash provided by operating activities:      
      Depreciation                                      223,681         178,489        161,513 
      Amortization                                       18,183          11,159         15,765 
      Premiums and discounts on mortgage-backed       
        securities and investment securities             (9,690)         (1,353)         5,842 
      Loss (credit) on loans, net of recoveries          65,955          71,361         79,500 
      Unrealized loss on investment securities           30,000          16,000         33,000 
      Gain on sale of investment securities      
           and mortgage-backed securities               (41,444)       (203,438)       (26,670)
      (Gain)/ loss on sale of equipment                  (1,813)         24,988        (20,243)
      Gain on sale of intangible assets                 (49,829)             -              -
      Gain on sale of real estate owned                  (3,627)             -              -
      Income reinvested on investment securities      
        and Federal Home Loan Bank stock                     -               -         (31,391)
      Vesting of MRP shares                              55,250          55,658         55,431 
      Release of ESOP shares                            510,154         311,937        317,706 
      Net change in operating accounts:                 
        Accrued interest receivable and other assets     51,214        (207,527)       (35,816)
        Deferred loan costs                             (59,487)        (37,034)       (23,912)
        Accrued expenses                                391,485          53,235         32,185 
        Deferred income taxes                            29,963          39,759         16,064 
        Income taxes payable - current                   69,663         (87,146)        43,425 
                                                    ------------    ------------   ------------
          Net cash from operating activities          3,125,141       1,639,491      1,777,036 
                                                    ------------    ------------   ------------      
Cash flows from investing activities:       
  Purchase of investment securities 
    available-for-sale                               (1,644,900)     (6,224,000)    (5,645,800)
  Purchase of investment securities held-to-maturity   (105,000)             -        (685,000)
  Purchase of Federal Home Loan Bank stock                   -         (374,000        (90,300)
  Proceeds from maturities of investment securities      
    available-for-sale                               12,900,450       1,000,000      5,016,695 
  Proceeds from maturities of investment securities      
    held-to-maturity                                    563,759         610,542        445,872 
  Proceeds from sale of investment securities      
    available-for-sale                                  231,948         832,277      1,464,308 
  Proceeds from sale of Federal Home Loan Bank stock    206,200              -              -
  Net change in certificates of deposit                (701,000)        815,000      1,803,000 
  Net change in loans receivable                     (7,561,466)    (15,471,648)   (17,433,330)
  Proceeds from principal payments and maturities      
    of mortgage-backed certificates                     122,405         127,895        265,265 
  Proceeds from sales of mortgage-backed      
    certificates                                             -        1,980,000             - 
  Purchases of property and equipment                  (496,056)       (710,755)      (832,818)
  Proceeds from sale of property and equipment           11,761           7,500         32,800 
  Proceeds from sale of intangible assets                80,000              -              -
  Net proceeds from sale of real estate owned           158,461              -          29,112 
  Net cash received in acquisition of 
    branches (Note 2)                                11,274,501              -              -
                                                    ------------    ------------   ------------
       Net cash from (used in) investing activities  15,041,063     (17,407,189)   (15,630,196)
                                                    ------------    ------------   ------------8
                                                         17      
</page>

                                      FIRST BANCSHARES, INC. AND SUBSIDIARIES    
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)      
                                 - - - - - - - - - - - - - - - - - - - - - - - - - 
                                      Years Ended June 30, 1998, 1997 and 1996      
      
                                                       1998             1997          1996
                                                  -------------   -------------   ------------
Cash flows from financing activities:       
  Net change in demand deposits, savings accounts,      
    and certificates of deposit                    $  5,947,762    $ 11,724,505   $  7,571,221
  Payments on borrowed funds                        (18,055,000)     (3,500,000)            -  
  Proceeds from borrowed funds                          200,000      13,500,000      8,500,000 
  Proceeds from sale of common stock                    252,715          54,900         16,480 
  Cash dividends paid                                  (223,153)       (212,471)      (237,826)
  Purchase of treasury stock                           (234,507)     (3,306,588)    (2,215,113)
                                                   -------------   -------------   ------------
      Net cash from (used in) financing activities  (12,112,183)     18,260,346     13,634,762 
                                                   ------------    -------------   ------------
      
Net increase (decrease) in cash and cash equivalents  6,054,021       2,492,648       (218,398)
      
Cash and cash equivalents -        
  beginning of period                                 5,808,930       3,316,282      3,534,680 
                                                   ------------     -----------     -----------
Cash and cash equivalents -       
  end of period                                    $ 11,862,951    $  5,808,930   $  3,316,282 
                                                   ============    ============   =============      
      
Supplemental disclosures of cash flow information:       
      
  Cash paid during the year for:       
    Interest on deposits and       
      other borrowings                             $  6,541,148    $  6,462,776   $  5,658,063 
    Income taxes                                        798,195         831,149        567,602 
      
      
Supplemental schedule of non-cash investing and      
  financing activities:      
  Loans and other real estate       
    charged off to reserve                         $     19,414    $    109,863   $      1,117 
  Loans transferred to real estate       
    acquired in settlement of loans                      41,058         113,776         29,112 
      
</TABLE>      
      
      
      
      
                     The accompanying notes are an integral part of the      
                             consolidated financial statements      
                                            19      
</page>

                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     First Bancshares, Inc., a Missouri corporation, was organized
          on September 30, 1993 for the purpose of becoming a unitary
          savings and loan holding company for First Home Savings 
          Bank.  The Savings Bank is primarily engaged in providing 
          a full range of banking and mortgage services to individual
          and corporate customers in southern Missouri.  It also 
          provided insurance brokerage activities through a 
          subsidiary corporation until September 1997.  The Savings 
          Bank is subject to competition from other financial 
          institutions.  The Company and Savings Bank are also 
          subject to the regulation of certain federal agencies and 
          undergo periodic examinations by those regulatory 
          authorities.  In November of 1997, South Central Missouri
          Title, Inc. was formed as a subsidiary corporation of First
          Bancshares, Inc.  South Central is a licensed agent to sell
          title insurance and also provides real estate sales closing
          services.

     To assist the reader in evaluating the financial statements 
          of First Bancshares, Inc. and Subsidiaries, the significant 
          accounting policies are summarized below.

     Use of estimates - Management uses estimates and assumptions 
          in preparing these financial statements in accordance with 
          generally accepted accounting principles.  Those estimates 
          and assumptions affect the reported amounts of assets and 
          liabilities, the disclosure of contingent assets and 
          liabilities, and the reported revenues and expenses.  
          Actual results could vary from the estimates that were used

          Material estimates that are particularly susceptible to 
          significant change relate to the determination of the 
          allowance for loan losses and the valuation of real 
          estate acquired in connection with foreclosures or in 
          satisfaction of loans.

          While management uses available information to recognize 
          losses on loans and foreclosed real estate, future 
          additions to the allowances may be necessary based on 
          changes in local economic conditions.  In addition, 
          regulatory agencies, as an integral part of their 
          examination process, periodically review the Savings 
          Bank's allowances for loan losses and foreclosed real 
          estate.  Such agencies may require the Savings Bank to 
          recognize additions to the allowances based on their 
          judgments about information available to them at the time
          of their examination.

     Principles of consolidation - The accompanying consolidated 
          financial statements include the accounts of First 
          Bancshares, Inc. and its wholly-owned subsidiaries, the 
          Savings Bank and South Central Missouri Title, Inc., and 
          Fybar Service Corporation, a wholly-
          owned subsidiary of the Savings Bank.  In consolidation, 
          all significant intercompany balances and transactions 
          have been eliminated.

     Consolidated statements of cash flows - For purposes of the 
          consolidated statements of cash flows, cash consists of 
          cash on hand and deposits with other financial 
          institutions which are unrestricted as to withdrawal or 
          use.  Cash equivalents include highly-liquid instruments 
          with an original maturity of three months or less.


                               20
</page>

                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996
 
(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Investment securities and mortgage-backed certificates - 
          Securities are classified in accordance with Statement
          of Financial Accounting Standards ("SFAS") No. 115, 
          "Accounting for Certain Investments in Debt and Equity 
          Securities," which establishes three classifications of 
          investment securities:  held-to-maturity, trading and 
          available-for-sale.  Trading securities are acquired 
          principally for the purpose of near term sales.  Such 
          securities are reported at fair value and unrealized gains 
          and losses are included in income.  At June 30, 1998 and 
          1997, the Company had no securities designated as trading
          securities.  Securities which are designated as held-to-
          maturity are designated as such because the investor has 
          the ability to hold these securities to maturity.  Such 
          securities are reported at amortized cost.

          All other securities are designated as available-for-sale, 
          a designation which provides the investor with certain 
          flexibility in managing its investment portfolio.  Such 
          securities are reported at fair value; net unrealized 
          gains and losses are excluded from income and reported 
          net of applicable income taxes as a separate component of 
          stockholders' equity.  Gains or losses on sales of 
          securities are recognized in operations at the time of 
          sale and are determined by the difference between the net 
          sales proceeds and the cost of the securities using the 
          specific identification method, adjusted for any 
          unamortized premiums or discounts.  Premiums or discounts 
          are amortized or accreted to income using the interest 
          method over the period to maturity.

     Loans receivable - Loans receivable are stated at their 
          principal amount outstanding, net of deferred loan 
          origination and commitment fees and certain direct costs, 
          which are recognized over the contractual life of the loan 
          as an adjustment of the loan's yield.  Interest income on 
          loans is recognized on an accrual basis.

          The accrual of interest on impaired loans is discontinued
          when it is determined that the payment of interest or 
          principal is doubtful of collection, or when interest or 
          principal is past due 90 days or more, except when the loan
          is well secured and in the process of collection.  Any 
          accrued but uncollected interest previously recorded on 
          such loans is generally reversed in the current period and 
          interest income is subsequently recognized upon collection.
          Cash collections subsequently received are applied against 
          outstanding principal until the loan is considered fully 
          collectible, after which cash collections are recognized 
          as interest income.

          The Company reports the change in present value of the 
          expected future cash flows related to impaired loans as 
          an increase or decrease in bad debt expense.

                                       21
</page>

                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Property and equipment and related depreciation - Property and 
          equipment has been stated at cost except as discussed in
          Note (8).  Depreciation has been principally computed by 
          applying the following methods and estimated lives:

                   Category         	Estimated Life       Method       
          ---------------------       --------------       ----------
          Automobiles                    5 Years    Straight-line and
                                                    declining-balance
          Office furniture, fixtures                Straight-line and
             and equipment            3-10 Years	    declining-balance
          Buildings                  15-40 Years    Straight-line and
                                                    declining-balance
          Investment real estate     15-40 Years    Straight-line

          Maintenance and repairs are charged to expense.  
          Improvements which extend the lives of the respective 
          assets are capitalized.  When property or equipment is 
          sold or otherwise disposed of, the cost and related 
          accumulated depreciation are removed from the respective 
          accounts and the resulting gain or loss is reflected in 
          income.           

     Intangible assets - Intangible assets have been recorded by the 
          Savings Bank in connection with the acquisition of 
          two branches from NationsBank, which is discussed further
          in Note (2).  The premium paid by the Savings Bank for the
          branches is being amortized on a straight-line basis over
          fifteen years.  Amortization expense relating to this 
          premium was $17,000 in 1998.

          Intangible assets were also recorded by Fybar Service 
          Corporation in connection with the acquisiton of Lawson 
          and Lawson Insurance Agency, Inc. during October, 1991.  
          In September, 1997, the intangible assets of Lawson and
          Lawson were sold.  Amortization expense relating to these
          intangible assets were $1,183, $11,159 and $15,765 in 
          1998, 1997 and 1996, respectively.

     Income taxes - The Company files a consolidated federal income 
          tax return with its wholly-owned subsidiaries.  The income 
          tax effect of timing differences in reporting transactions 
          for financial reporting and income tax purposes is 
          reflected in the financial statements as deferred income 
          taxes.

          Income taxes are accounted for under the asset and 
          liability method in accordance with 
          SFAS No. 109, "Accounting for Income Taxes".  Under this 
          method, deferred income taxes are recognized for temporary 
          differences by applying enacted statutory rates applicable 
          to future years to differences between the financial 
          statement carrying amounts and the tax basis of existing 
          assets and liabilities.  The effect on deferred taxes of a 
          change in tax rates is recognized in income in the period 
          that includes the enactment date. 

                                 22
</page>

                        FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Allowance for loan losses - The Savings Bank maintains an 
          allowance for loan losses to absorb possible future 
          losses that may be realized on its loan portfolio.  In 
          conjunction with a review of the loan portfolio, the 
          allowance for loan losses is evaluated and adjusted at 
          least quarterly.  In evaluating the allowance for loan 
          losses, management considers various factors including 
          historical loss experience, the level and trend of 
          delinquent and classified loans, current and anticipated 
          economic, and real estate conditions, and the composition 
          of the loan portfolio.  Losses incurred upon initial 
          acquisition of real estate owned through foreclosure are 
          charged to the allowance for loan losses.

          Special reserves are established for any impaired loan for 
          which the recorded investment in the loan exceeds the 
          measured value of the loan.  The values of loans subject 
          to impairment valuation are determined based on the present
          value of expected future cash flows, the market price of 
          the loans, or the fair values of the underlying collateral 
          if the loan is collateral dependent.
	
     Real estate owned - Real estate acquired in the settlement of 
          loans, including in-substance foreclosures, is recorded at 
          the lower of the remaining balance or estimated fair value 
          less the estimated costs to sell the asset.  Any write 
          down at the time of foreclosure is charged against the 
          allowance for loan losses.  Subsequently, net expenses 
          related to holding the property and declines in the market
          value are charged against income.  Gains on sales are 
          determined on the specific identification method and are 
          credited to income when the property is sold.

     Loan origination fees and costs - Loan origination fees and
          costs are recorded in accordance with SFAS No. 91, 
          "Accounting for Nonrefundable Fees and Costs Associated 
          with Originating or Acquiring Loans and Initial Direct 
          Costs of Leases."  Under SFAS No. 91, loan origination 
          fees and certain direct loan origination costs are 
          deferred and recognized in interest income over the 
          contractual lives of the related loans using the interest 
          method.  When a loan is paid-off or sold, the unamortized 
          balance of these deferred fees and costs is recognized in 
          income. 

     Real estate held for investment - Real estate properties 
          held for investment are carried at the lower of cost, 
          including cost of improvements incurred subsequent to 
          acquisition, or net realizable value.  Costs relating to 
          the development and improvement of property are 
          capitalized, whereas costs relating to the holding of the 
          property are expensed.

     Advertising costs - The Company expenses non-direct response 
          advertising costs as they are incurred.

     Stock Dividend - On December 30, 1997, the Company's Board of
          Directors declared a two-for-one stock split (in the form
          of a 100% stock dividend) of First Bancshares, Inc. 
          common stock to stockholders of record on January 16, 1998,
          payable on January 30, 1998.  Common stock was increased
          and retained earnings was reduced for the aggregate par
          value of the shares issued.  The stated par value of each
          share was not changed from $.01.

         All per share amounts and average shares outstanding have
         been restated to reflect the aforementioned stock dividend.

                                     23
</page>

                      FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

     Earnings per share - In February 1997, the Financial Accounting 
          Standards Board ("FASB") issued SFAS No. 128, "Earnings 
          Per Share."  SFAS  No. 128 replaces the presentation of 
          primary earnings per share with a presentation of basic 
          and diluted earnings per share 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 earnings per share 
          computation.  The Company adopted SFAS No. 128 for the year 
          ended June 30, 1998, and prior periods were restated.  The 
          adoption of this standard did not have a material effect on 
          previously reported earnings per share. 

          Basic earnings per share excludes dilution and is computed 
          by dividing net income available to common stockholders by 
          the weighted average number of common shares outstanding 
          during the period.  Diluted earnings per share 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 Company.  Dilutive potential common shares 
          are added to weighted average shares used to compute basic 
          earnings per share.  The number of shares that would be 
          issued from the exercise of stock options has been reduced 
          by the number of shares that could have been purchased from 
          the proceeds at the average market price of the Company's 
          stock. 

     New accounting standards - In June 1997, FASB issued SFAS No. 
          130, "Reporting Comprehensive Income",  which establishes 
          standards for reporting and presenting of comprehensive 
          income and its components (revenues, expenses, gains and 
          losses) in a full set of general-purpose financial 
          statements.  It requires that all items that are required 
          to be recognized under accounting standards as components 
          of comprehensive income be reported in a financial 
          statement that is presented with the same prominence as 
          other financial statements.  SFAS No. 130 requires that 
          companies (i) classify items of other comprehensive income 
          by their nature in a financial statement and (ii) display 
          the accumulated balance of other comprehensive income 
          separately from retained earnings and additional paid-in 
          capital in the equity section of the statement of financial 
          condition.  SFAS No. 130 is effective for fiscal years 
          beginning after December 15, 1997.  Reclassification of 
          financial statements for earlier periods provided for 
          comparative purposes is required.  The Company's most 
          significant component of other comprehensive income is 
          the unrealized holding gains and losses on investment 
          securities classified as available-for-sale.

          In June 1997, FASB issued SFAS No. 131, "Disclosure About 
          Segments of an Enterprise and Related Information," which 
          established standards for disclosure about operating 
          segments in annual financial statements and selected 
          information in interim financial reports.  It also 
          establishes standards for related disclosures about 
          products and services, geographic areas, and major 
          customers.  SFAS No. 131 supersedes SFAS No. 14, "Financial 
          Reporting for Segments of a Business Enterprise".  SFAS No. 
          131 becomes effective for the Company's fiscal year ending 
          June 30, 1999, and requires that comparative information 
          from earlier years be restated to conform to its 
           requirements.  The adoption of the provisions of SFAS 
           No. 131 is not expected to have a material impact on the 
           Company. 

                                  24
</page>

                    FIRST BANCSHARES, INC AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                - - - - -  - - - - - - - - - - - - - - - - -
                   Years Ended June 30, 1998, 1997 and 1996


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)

          In February 1998, FASB issued SFAS No. 132, "Employers' 
          Disclosures about Pensions and Other Postretirement 
          Benefits," which standardizes the disclosure requirements 
          for pensions and other postretirement benefits and requires 
          additional information on changes in the benefit 
          obligations and fair values of plan assets that will 
          facilitate financial analysis.  SFAS No. 132 is effective 
          for years beginning after December 15, 1997, and requires 
          comparative information for earlier years to be restated, 
          unless such information is not readily available.  The 
          adoption of SFAS No. 132 is not expected to have a material 
          impact on the Company.

          In June 1998, FASB issued SFAS No. 133, "Accounting for 
          Derivative Instruments and Hedging Activities," which 
          establishes accounting and reporting standards for 
          derivative instruments, including certain derivative 
          instruments embedded in other contracts, (collectively 
          referred to as derivatives) and for hedging activities.  
          It requires that an entity recognize all derivatives as 
          either assets or liabilities in the Statement of Financial 
          Position and measure those instruments at fair value.  
          This Statement is effective for all fiscal quarters of 
          fiscal years beginning after June 15, 1999.  The adoption 
          of this standard is not expected to have a material impact 
          on the Company.

     Reclassifications - Certain accounts in the prior-years' 
          consolidated financial statements have been reclassified 
          for comparative purposes to conform with the presentation 
          in the current-year consolidated financial statements.

(2)  ACQUISITION

     In March 1998, the Savings Bank purchased two bank branch 
     offices from NationsBank.  The branches are located at Crane 
     and Galena, Missouri.  As part of the agreement, the Savings 
     Bank assumed customer deposits of $17,426,254 and other 
     liabilities of $65,000 in exchange for loans of $4,787,311, 
     premises and equipment of $341,197, cash of $11,274,501 and 
     other assets of $68,029.  The Savings Bank paid a premium of 
     $1,020,216 for the loans purchased and customer deposit 
     accounts assumed.  The acquisition was recorded using the 
     purchase method of accounting.  Results of operations of the 
     branches acquired are included in the accompanying financial 
     statements since the date of acquisition.

                               25
</page>


                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


(3)  INVESTMENT SECURITIES

     As discussed in Note (1), the Company has designated certain 
     securities as available-for-sale. 

     A summary of the investment securities available-for-sale at 
     June 30, 1998 is as follows:
<TABLE>
<CAPTION>
                                                                                Estimated 
                                        Amortized        Gross Unrealized          Fair 
                                           Cost         Gains       Losses         Value 
                                      ------------   ----------   ----------   --------------
<S>                                        <C>           <C>           <C>            <C>
     United States Government and        
       Federal Agencies obligations   $  1,700,000   $      750   $   (1,300)   $   1,699,450 
     Mutual funds                           34,098        3,410           -            37,508 
     Common and preferred stocks           848,000      116,250           -           964,250 
                                     -------------   ----------   -----------   -------------
         Total                        $  2,582,098   $  120,410   $   (1,300)   $   2,701,208 
                                      ============   ==========   ===========   =============
</TABLE>
        
     The amortized cost and estimated market value of debt securities 
     available-for-sale at June 30, 1998 are summarized below by 
     contractual terms to maturity.  Expected maturities will differ 
     from contractual maturities because borrowers may have the right 
     to call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
                                             Amortized        Estimated 
                                                Cost          Fair Value 
                                           -------------    -------------
<S>                                              <C>              <C>
     Due in one year or less               $     300,000    $     300,750 
     Due after one year through five years       900,000          899,700 
     Due after five years through ten years      500,000          499,000  
                                             ------------     ------------
          Total                             $  1,700,000     $  1,699,450 
                                            ============     ============    
</TABLE>
     Proceeds from the sales of common and preferred stock held as 
     available-for-sale during the year ended June 30, 1998 were 
     $231,948.  A gain of $41,444 was recognized on these sales.

     A summary of investment securities held-to-maturity at 
     June 30, 1998 is as follows:

<TABLE>
<CAPTION>

                                                                                  Estimated 
                                       Amortized         Gross Unrealized            Fair 
                                          Cost         Gains          Losses         Value 
                                      ------------    ---------     ----------    -----------
         <S>                             <C>            <C>            <C>             <C>
     Obligations of states and        
       political subdivisions          $ 1,050,443    $  11,856     $      -      $ 1,062,299
     Auto and student loan pools            63,464           -             -           63,464
                                       -----------    ---------     ----------    -----------
        Total                          $ 1,113,907    $  11,856     $      -      $ 1,125,763 
                                      ============    =========     ==========    ===========
</TABLE>
        
                                            26
</page>

                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


(3)  INVESTMENT SECURITIES - (CONTINUED)

     Auto and student loan pools are stated at net realizable value 
     in 1998, 1997 and 1996.  The auto loan pool was written down to 
     its estimated net realizable value because, in the opinion of 
     management, the decline in market value of that security is 
     considered to be other than temporary.  The amount of the 
     losses, $30,000, $16,000 and $33,000 for 1998, 
     1997 and 1996, respectively, have been charged to operations.

     The amortized cost and estimated market value of investment 
     securities held-to-maturity at June 30, 1998, by contractual 
     maturity, are shown below.  Expected maturities will differ 
     from contractual maturities because borrowers may have the 
     right to call or prepay obligations with or without call or 
     prepayment penalties.

<TABLE>
<CAPTION>

                                              Amortized        Estimated 
                                                 Cost          Fair Value 
                                            ------------     ------------
<S>                                               <C>              <C>
     Due in one year or less                 $   529,880      $   531,395 
     Due after one year through five years       444,027          451,897 
     Due after five years through ten years      140,000          142,471 
                                             -----------      -----------
         Total                               $ 1,113,907      $ 1,125,763 
                                             ===========      ===========
</TABLE>
    
     A summary of the investment securities available-for-sale at June 30, 1997
       is as follows:

<TABLE>
<CAPTION>
                                                                                  Estimated 
                                        Amortized       Gross Unrealized             Fair 
                                           Cost        Gains        Losses           Value 
                                       -----------   ----------  -----------     ------------
<S>                                        <C>           <C>          <C>              <C>
     United States Government and        
         Federal Agencies obligations  $13,041,337   $  105,037   $  (18,875)     $13,127,499 
     Domestic corporate obligations        150,075           -            (75)        150,000 
     Mutual funds                           34,548        2,512           -            37,060
     Common and preferred stocks           790,569      131,123       (8,965)         912,727 
                                       -----------   ----------   -----------     ------------
         Total                         $14,016,529   $  238,672   $  (27,915)     $14,227,286 
                                       ===========   ==========   ===========     ===========
</TABLE> 

     Proceeds from the sales of common and preferred stock held as 
     available-for-sale during the year ended June 30, 1997 were 
     $832,277.  A gain of $223,438 was recognized on these sales.

     Proceeds from the sales of four mutual funds, two U.S. Federal
     agency obligations and preferred stock held as available-for-
     sale during the year ended June 30, 1996 were $1,464,308.  A 
     gain of $26,670 was recognized on these sales.

     A summary of investment securities held-to-maturity at June 30, 
     1997 is as follows:
<TABLE>
<CAPTION>
                                                                                 Estimated 
                                        Amortized        Gross Unrealized           Fair 
                                           Cost        Gains         Losses         Value 
                                       -----------   ----------   -----------    ------------
<S>                                         <C>          <C>            <C>           <C>
     Obligations of states and         
       political subdivisions          $ 1,492,441    $  21,095    $      -       $ 1,513,536
     Auto and student loan pools           112,224           -            -           112,224
                                       -----------    ---------    ----------     -----------
        Total                          $ 1,604,665    $  21,095    $      -       $ 1,625,760 
                                       ===========    =========    ==========     ===========
</TABLE>
        
                                          27
</page>
                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(3)     INVESTMENT SECURITIES - (CONTINUED)


     The book value of securities pledged as collateral, to secure 
     public deposits was $1,392,427 at June 30, 1998 and $1,469,354 at 
     June 30, 1997.  The approximate fair value of pledged securities
     was $1,393,896 at June 30, 1998 and $1,477,332 at June 30, 1997. 

(4)  INVESTMENT IN FEDERAL HOME LOAN BANK STOCK
	
     Investment in stock of the Federal Home Loan Bank is required 
     by law of every Federally-insured savings institution.  No 
     ready market exists for this stock and it has no quoted market 
     value.  However, redemption of this stock has been at par value.

     The Savings Bank, as a member of the Federal Home Loan Bank of 
     Des Moines, is required to acquire and hold shares of capital 
     stock in the Federal Home Loan Bank of Des Moines in an amount 
     equal to the greater of (i) 1.0% of the aggregate outstanding 
     principal amount of residential mortgage loans, home purchase 
     contracts and similar obligations at the beginning of each year,
     or (ii) 1/20 of its advances (borrowings) from the Federal Home 
     Loan Bank of Des Moines.  The Savings Bank is in compliance with 
     this requirement with an investment in Federal Home Loan Bank of 
     Des Moines stock of $1,057,600 at June 30, 1998.

(5)  MORTGAGE-BACKED SECURITIES

     The amortized cost and estimated market values of mortgage-
     backed securities available-for-sale as of June 30, 1998 are
     summarized below:
<TABLE>
<CAPTION>
                                                                                   Estimated 
                                        Amortized        Gross Unrealized             Fair 
                                           Cost        Gains           Losses         Value 
                                        ----------    ---------     ---------     -----------
<S>                                          <C>          <C>           <C>            <C>
     FHLMC certificates                 $  276,499    $   1,887      $     -       $  278,386
     FNMA certificates                     338,824          285          (640)        338,469 
     GNMA certificates                      83,366        2,501            -           85,867 
                                        ----------    ----------     ---------     ----------
       Total                            $  698,689    $   4,673      $   (640)     $  702,722 
                                        ==========    =========      =========     ==========
</TABLE>

     The amortized cost and estimated market values of mortgage-
     backed securities available-for-sale as of June 30, 1997 are 
     summarized below:
<TABLE>
<CAPTION>
                                                                                   Estimated 
                                            Amortized       Gross Unrealized          Fair 
                                               Cost       Gains         Losses        Value 
                                           ----------   ---------     ----------   -----------
<S>                                            <C>          <C>          <C>            <C>
     FHLMC certificates                    $  333,791   $   3,336     $      -     $   337,127 
     FNMA certificates                        394,350          -         (1,185)       393,165 
     GNMA certificates                         92,954       4,301            -          97,255 
                                           ----------   ---------     ----------   -----------
       Total                              $   821,095   $   7,637    $   (1,185)   $   827,547 
                                          ===========   =========    ===========   ============
</TABLE>        

                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996
 
(5)  MORTGAGE-BACKED SECURITIES - (CONTINUED)

     Proceeds from the sale of a collateralized mortgage obligation 
     during the year ended June 30, 1997 was $1,980,000.  A loss of 
     $20,000 was recognized on this sale.


(6)  LOANS RECEIVABLE

     Loans receivable at June 30 consist of the following:
<TABLE>
<CAPTION>
                                                 1998            1997
                                           -------------   --------------
<S>                                             <C>               <C>
     First mortgage loans                  $ 132,745,973    $ 123,403,476 
     Loans to depositors, secured by 
       savings accounts                        1,662,078        1,300,921 
     Consumer and automobile loans             8,706,448        6,450,166 
     Second mortgage loans                     4,909,851        4,278,560 
     Other loans                               2,371,898        2,161,552 
                                             -----------    -------------
        Total gross loans                    150,396,248      137,594,675 
     Reserve for loan losses                    (528,084)        (481,543)
     Loans in process                         (3,628,736)      (3,117,023)
     Unamortized deferred loan costs, net    
       of origination fees                       166,915          107,428
                                            ------------     ------------
        Net loans receivable               $ 146,406,343    $ 134,103,537 
                                           =============    =============
</TABLE>

     Activity in the allowance for loan losses is summarized as 
     follows for the years ended June 30:
<TABLE>
<CAPTION>
                                                  1998             1997
                                              ----------        ---------
<S>                                                <c.              <C>
     Balance at beginning of year              $ 481,543        $ 520,045 
     Provision charged to income                  65,955           71,361 
     Charge-offs                                 (32,394)        (114,148)
     Recoveries                                   12,980            4,285 
                                              ----------        ---------
       Balance at end of year                  $ 528,084        $ 481,543 
                                               =========        =========
</TABLE>
     The Savings Bank primarily grants first mortgage loans to 
     customers throughout southern Missouri.  The loans are 
     typically secured by real estate or personal property.
 
     As of June 30, 1998 and 1997, the total recorded investment in 
     impaired loans was $81,120 and $97,438. Respectively, as 
     recognized in conformity with FASB Statement No. 114, as amended 
     by FASB Statement No. 118.  This amount was subject to 
     allowances for credit losses of $81,120 and $77,328, as of 
     June 30, 1998 and 1997, respectively.  During 1998 and 1997, the 
     average recorded investment in impaired loans was $86,579 and 
     $166,862, respectively.  Interest income recognized in 1998 and 
     1997 during the period in which the underlying loans were 
     considered impaired was $956 and $3,440, respectively.

                                29
</page>
    

                        FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(7)  ACCRUED INTEREST RECEIVABLE

     Accrued interest receivable at June 30 is summarized as follows:
<TABLE>
<CAPTION>
                                                  1998            1997
                                             -----------       ----------
<S>                                              <C>               <C>
     Investment securities                    $   45,168          210,558 
     Mortgage-backed securities                    8,799            8,799 
     Loans receivable                            610,447          445,755 
                                              ----------       ----------
          Total                               $  664,414       $  665,112 
                                              ==========       ==========
</TABLE>    

(8)  PROPERTY AND EQUIPMENT

     Property and equipment at June 30 consists of the following:
<TABLE>

<CAPTION>
                                                              1998      
                                       ------------------------------------------------------
                                                       Accum.       Valuation    
         Category                          Cost        Deprec.       Reserve          Net 
   ----------------------------        -----------   ----------     ---------     -----------
<S>                                         <C>          <C>            <C>             <C>
     Land                              $   448,777   $       -      $      -      $   285,759 
     Buildings                           2,893,596      755,364            -        1,949,196 
     Office furniture,        
       fixtures and equipment            1,739,449      894,827            -          458,932 
     Automobiles                           102,350       41,055            -           44,436 
     Investment real estate              1,420,618      155,491       271,147         955,568 
                                       -----------   ----------     ---------     -----------
         Total                         $ 6,604,790  $ 2,036,128     $ 271,147     $ 4,297,515
                                       ===========  ===========     =========     ===========
</TABLE>

<TABLE>
<CAPTION>
                                                              1997      
                                      ------------------------------------------------------
                                                      Accum.        Valuation    
           Category                       Cost        Deprec.        Reserve           Net 
     ------------------------          -----------  ----------      ---------    ------------
<S>                                         <C>          <C>             <C>            <C>
     Land                              $   285,759  $       -       $      -     $    285,759 
     Buildings                           2,704,560     755,364             -        1,949,196 
     Office furniture,        
       fixtures and equipment            1,353,759     894,827             -          458,932 
     Automobiles                            85,491      41,055             -           44,436 
     Investment real estate              1,382,206     155,491        271,147         955,568 
                                       -----------  ----------      ---------    ------------
         Total                         $ 5,811,775  $1,846,737      $ 271,147    $  3,693,891 
                                       ===========  ==========      =========    ============ 
</TABLE>

     Depreciation charges to operations for the years ended June 30,
     1998, 1997 and 1996 were $223,681, $178,489, and $161,513, 
     respectively.  The depreciation policies followed by the 
     Company are described in Note (1).

     A valuation reserve has been established for certain investment 
     real estate to adjust the property to its net realizable value 
     at June 30, 1998 and 1997.

                                  30
</page>


                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(9)  CUSTOMER DEPOSITS

     A summary of deposit accounts at June 30 is as follows:

<TABLE>
<CAPTION>
                                                       
                                                         1998                      1997 
                                                    Amount      %              Amount      %  
                                                ------------  ------     --------------  ------
<S>                                                  <C>        <C>            <C>         <C>
     Noninterest-bearing checking               $  4,462,915    3.2%     $   3,270,891    2.8%
     Interest-bearing checking                    21,967,908   15.6         14,403,732   12.2 
         
     Super Saver money market                     17,550,514   12.4         14,877,924  12.7 
            
     Savings                                       8,112,612    5.7          5,587,995   4.7 
     Certificates of Deposit                      88,964,799   63.1...................79,544,190  67.6
                                                ------------   ----       ------------  -----

          Total                                $ 141,058,748  100.0%     $ 117,684,732 100.0%
                                               =============  ======     ============= ======
</TABLE>  
     The aggregate amount of jumbo certificates of deposit with a 
     minimum denomination of $100,000 was $14,563,772 and $13,970,628
     at June 30, 1998 and 1997, respectively.

     At June 30, 1998, scheduled maturities of certificates of 
     deposit are as follows:

<TABLE>
<CAPTION>
              <S>                                     <C>            
           1999                                 $   63,724,663
           2000                                     13,571,359
           2001                                      4,809,618
           2002                                      5,446,418
           2003 and later                            1,412,741
                                     --------------
                                     $   88,964,799
                                     ==============

</TABLE>  
                                        31
</page>


                           FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


(10)  ADVANCES FROM FEDERAL HOME LOAN BANK AND OTHER BORROWED FUNDS

     The advances listed below were obtained from the Federal Home 
     Loan Bank of Des Moines and secured by Federal Home Loan Bank 
     stock, loans, investment securities and deposit accounts.  
     Interest is payable monthly.  Advances from the Federal Home 
     Loan Bank at June 30 are summarized as follows:
<TABLE>
caption>
                                                           1998             1997
                                                      ------------     ------------
<S>                                                        <C>               <C>
     Three year, 5.98% fixed;  matures June 1998      $         -      $  5,000,000
    
     Two year; 5.51% fixed; matures December 1997               -         3,000,000
    
     Five year; 5.78% fixed; paid in full                       -         2,000,000
    
     One year; 5.92% fixed; matures September 1997              -         4,500,000    
    
     One year; 5.46% fixed; matures November 1997               -         2,000,000    
    
     Two year; 5.74% fixed; matures November 1998        2,000,000        2,000,000    
    
     Three year; 5.85% fixed; matures November 1999      2,000,000        2,000,000    
    
     One year; 5.86% fixed; matures June 1998                   -         1,500,000    
    
     Two year; 6.19% fixed; matures June 1999            1,500,000        1,500,000   
     Two year; 5.90% fixed; matures January 2003           200,000               -

                                                      ------------     ------------ 
             Total                                    $  5,700,000     $ 23,500,000 
                                                      ============     ============
</TABLE>
    

     The fixed rate advances shown above shall be subject to a 
     prepayment fee equal to 100 percent of the present value of the
     monthly lost cash flow to the Federal Home Loan Bank based upon 
     the difference between the contract rate on the advance and the 
     rate on an alternative qualifying investment of the same 
     remaining maturity.  Advances may be prepaid without a 
     prepayment fee if the rate on an advance being prepaid is equal 
     to or below the current rate for an alternative qualifying 
     investment of the same remaining maturity.

     As of June 30, 1998, the Savings Bank had an open line of  
     credit with the Federal Home Loan Bank of Des Moines.  There 
     was no balance outstanding at June 30, 1998.  The line of 
     credit has a limit of $7,000,000 and expires on September 
     11, 1998.  The interest rate is adjustable as indexed to the 
     Federal Home Loan Bank daily investment return.  At June 30, 
     1998, any outstanding advances on the line would have been at 
     6.37%.

                                       32
</page>

                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


(10)  ADVANCES FROM FEDERAL HOME LOAN BANK AND OTHER BORROWED FUNDS - 
        (CONTINUED)

     Maturities of Federal Home Loan Bank advances and other borrowed
     funds are as follows:
<TABLE>
<CAPTION> 
                                     Aggregate 
                                      Annual 
          Year Ended June 30         Maturities 
          ------------------      -------------
<S>                                    <C>
                1999               $  3,500,000
                2000                  2,000,000   
                2001                         -              
                2002                         -
                2003                    200,000  
            Later Years                      -   
                                   ------------
                                  $  5,700,000
                                  =============
</TABLE>
   
     Interest expense on borrowed funds for the years ended June 30 
     is summarized below:
<TABLE>
<CAPTION>
                                           1998          1997        1996
                                        -----------   ---------   ---------
<S>                                         <C>           <C>         <C>
     Advances from Federal Home Loan      
       Bank                             $   992,959  $1,111,990   $ 613,899 
     Other borrowings                         3,954       3,848       3,850 
                                        -----------   ---------   ---------
         Total                          $   996,913  $1,115,838   $ 617,749 
                                       ============   =========   =========
</TABLE> 

(11)  INCOME TAXES

     The provision for income tax expense for the years ended June 
     30 is as follows:
<TABLE>
<CAPTION>
                              1998         1997          1996
                           ----------   ----------   ----------
<S>                            <C>           <C>          <C>
     Current               $  858,842   $  744,220   $  614,992 
     Deferred                  32,474       39,759       16,047
                           ----------   ----------   ----------
         Total             $  891,316   $  783,979   $  631,039 
                           ==========   ==========   ==========
</TABLE>
      
     The provision for income taxes differs from that computed at 
     the statutory corporate rate, 34% for the years ended June 30, 
     1998, 1997 and 1996, as follows:
<TABLE>
<CAPTION>
                                         1998         1997         1996
                                      ---------    ---------    ---------
<S>                                      <C>            <C>         <C>
     Tax at statutory rate            $ 930,512    $ 747,110    $ 607,130
     Increase (decrease) in taxes      
       resulting from:      
         State taxes, net of       
           federal benefit               68,966       56,179       51,207    
         Tax-exempt income              (24,665)     (32,586)     (37,380)
         Employee benefit plans         (85,975)      12,183       30,068
         Net effect of other      
           book/tax differences           2,478        1,093      (19,986)
                                     -----------   ----------    ---------
     Provision for income taxes       $ 891,316    $ 783,979    $ 631,039
                                      =========    =========    =========
</TABLE>
                                       33
</page>


                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(11)  INCOME TAXES - (CONTINUED)

     Deferred income tax expense results from timing differences in 
     the recognition of income and expense for tax and financial 
     reporting purposes.  The sources of the differences and the 
     related tax effects for the years ended June 30 were as follows:

<TABLE>
<CAPTION>
                                                    1998         1997         1996
                                                ----------    ----------   ----------
<S>                                                 <C>           <C>           <C>
     Difference in depreciation methods       
       used for tax purposes and      
        financial statements                     $  26,281     $  48,496    $   2,066
     Effect of health insurance plan      
       reserves not currently deductible             6,010         5,431          (9,210)
     Use of different methods for computing      
       loan loss reserves for tax purposes      
       and financial statements                    (28,083)       14,246       (7,384)
     Use of different methods for computing      
       net deferred loan costs/fees for tax      
       purposes and financial statements            17,741        17,932       21,968
     Other book/tax differences                     10,525       (46,346)       8,607
                                                 ----------     --------      --------
       Increase in deferred income taxes         $  32,474     $  39,759    $  16,047
                                                 =========     =========    =========
</TABLE>
      
     The components of deferred tax assets and liabilities as of June 
     30, 1998 and 1997 consisted of:

<TABLE>
<CAPTION>
                                                                  1998        1997
                                                               ---------   ---------
<S>                                                                <C>         <C>
     Deferred tax assets:    
       Reserve for loan losses                                 $ 195,391   $ 178,171 
       Reserve for losses on uncollected funds                    12,580          -
       Valuation reserve on investment real estate                92,190      92,190 
       Unrealized losses on securities available-for-sale            720      10,720 
       Health insurance plan reserves not    
         currently deductible                                      1,055       7,065 
       Book amortization in excess of tax amortization                -        5,855
       Nontemporary decline in security held-to-maturity          14,800      20,720
       Unearned compensation                                      10,842       9,163
                                                               ---------   ---------
          Total gross deferred tax benefits                    $ 327,578   $ 323,884 
                                                               ---------   ---------    
     Deferred tax liabilities:    
       Tax depreciation in excess of book depreciation         $ 237,229   $ 210,948 
       Federal Home Loan Bank stock dividends                     60,936      68,709 
       Bad debt reserves for tax purposes in excess of    
         base year bad debt reserve                              136,215     147,078 
       Unrealized gains on securities available-for-sale          46,282      91,134 
       Installment sale recognition                                9,141          -
       Unamortized deferred loan costs, net of fees               96,474      78,733
       Other                                                      10,735          - 
                                                               ---------   ---------
         Total gross deferred tax liabilities                  $ 597,012   $ 596,602 
                                                               ---------   ---------
           Net deferred tax liabilities                        $(269,434)  $(272,718) 
                                                               ==========  =========
</TABLE>
                                   34
</page>

                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(11)  INCOME TAXES - (CONTINUED)

     In accordance with SFAS No. 109, a deferred tax liability has 
     not been recognized for tax basis bad debt reserves of 
     approximately $2,145,621 of the Savings Bank that arose in tax 
     years that began prior to December 31, 1987.  At June 30, 1998 
     the amount of the deferred tax liability that had not been 
     recognized was approximately $793,880.  This deferred tax 
     liability could be recognized if, in the future, there is a 
     change in federal tax law, the Savings Bank fails to meet the 
     definition of a 'qualified savings institution,' as defined by 
     the Internal Revenue Code, certain distributions are made with 
     respect to the stock of the Savings Bank, or the bad debt 
     reserves are used for any purpose other than absorbing bad debts.  
     In August 1996, new legislation was enacted which provided for 
     the recapture into taxable income of certain amounts previously
     deducted as additions to the bad debt reserves for income tax
     purposes.  The Savings Bank began changing its method of 
     determining bad debt reserves for tax purposes during 1996.  
     The amounts to be recaptured for income tax reporting purposes 
     are considered by the Savings Bank in the determination of the
     net deferred tax liability.
 

(12)  EMPLOYEE BENEFIT PLANS

     The Savings Bank participates in a multiple-employer defined 
     benefit pension plan covering substantially all employees.  
     Separate actuarial valuations are not available for each 
     participating employer, nor are plan assets segregated.  Pension
     expense for the years ended June 30, 1998, 1997 and 1996 was 
     approximately $3,800, $3,681, and $3,638, respectively.  Plan 
     assets exceeded the present value of accumulated plan benefits 
     at June 30, 1998, the latest actuarial valuation date.

     The Company established an internally-leveraged ESOP in 
     December 1993 that covers all employees that are age 21 or older 
     and have completed one year of service with the Savings Bank.  
     The Savings Bank makes annual contributions to the ESOP equal 
     to the ESOP's debt service in addition to dividends received by 
     the ESOP.  All dividends received by the ESOP are used to pay 
     debt service.  The ESOP shares initially were pledged as 
     collateral for its debt to the Company.  As the debt is repaid, 
     shares are released from collateral and allocated to active 
     participants, in proportion to their compensation relative to 
     total compensation of active participants. The loan will be 
     repaid principally from the Savings Bank's discretionary 
     contributions to the ESOP over a period of ten years.  As of 
     June 30, 1998, the loan had an outstanding balance of $708,321 
     and an interest rate of 6%.  

     The Company accounts for its ESOP in accordance with Statement 
     of Position 93-6, "Employer's Accounting for Employee Stock 
     Ownership Plans".  Accordingly, the debt of the ESOP is 
     eliminated in consolidation and the shares pledged as 
     collateral are reported as unearned ESOP shares as a 
     reduction of stockholders' equity in the consolidated balance 
     sheets.  As shares are committed to be released from collateral, 
     the Company reports compensation expense equal to the current 
     market price of the shares, and the shares become outstanding 
     for earnings per share computations.  Dividends on allocated 
     ESOP shares are recorded as a reduction of retained earnings; 
     dividends on unallocated ESOP shares are recorded as a reduction 
     of debt and accrued interest.  Benefits generally become 20% 
     vested after each year of credited service beyond two years.  
     Vesting is accelerated upon retirement, death, or disability of 
     the participant.  Forfeitures are returned to the Savings Bank 
     or reallocated to other participants to reduce future funding 
     costs.  Benefits may be payable upon retirement, death, 
     disability or separation from service.  Since the Savings 
     Bank's annual contributions are discretionary, benefits payable 
     under the ESOP cannot be estimated.  The Savings Bank
     
                                   35
</page

                        FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(12)  EMPLOYEE BENEFIT PLANS - (CONTINUED)

recorded $496,302 of ESOP compensation expense in 1998, $302,763
     in 1997 and $312,118 in 1996.

     A summary of ESOP shares at June 30, 1998 is as follows:
<TABLE>
<CAPTION>
<S>                                        <C>
     Allocated shares                    125,086
     Shares committed for release         37,540
     Unreleased shares                   132,656
                                      ----------
 
          Total                          295,282
                                      ---------- 
     Fair value of unreleased shares  $1,757,692
                                      ==========
</TABLE>

     The Savings Bank has adopted a Management Recognition Plan 
     ("MRP") for the benefit of the directors, officers and employees
     of the Savings Bank.  The MRP provides directors, officers and 
     employees of the Company with a proprietary interest in the 
     Company in a manner designed to encourage such persons to 
     remain with the Savings Bank.  The MRP is managed by trustees 
     comprised of the directors of the Company. The plan authorizes
     the Company to grant up to 60,834 shares of the Company stock, 
     all of which are awarded as of June 30, 1998.
     These shares represent unearned compensation and have been 
     accounted for as a reduction of stockholders' equity.  Such 
     awards vest at the rate of 20% at the end of each twelve months.
     Vesting is accelerated upon retirement.  The Savings Bank  
     recorded $52,250 of compensation expense under the MRP in 1998, 
     $55,658 in 1997 and $55,431 in 1996.

     The Company has reserved 304,174 shares of common stock under 
     the 1994 Stock Option and Incentive Plan (Stock Option Plan) for 
     the benefit of certain officers, employees and directors.  The 
     Stock Option Plan is administered by a committee of the Board of 
     Directors.  Management intends that options granted under the 
     Stock Option Plan constitute both incentive and non-incentive 
     stock options. 

     Options granted to non-employee directors will constitute 
     non-incentive stock options.  With respect to incentive stock 
     options, the option exercise price may be no less than the fair 
     market value of the Company's common stock on the date of grant.  
     All options expire no later than ten years from the date of 
     grant. The option grants vest at a rate of 20% at the end of 
     each 12 months.  

                                      36
</page>

                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(12)  EMPLOYEE BENEFIT PLANS - (CONTINUED)

     A summary of the Company's stock option activity, and related
     information for the years ended June 30 follows:
<TABLE>
<CAPTION>
                                      1998              1997                 1996
                                -----------------  -----------------  ----------------------
                                         Weighted           Weighted          Weighted
                                          Average            Average            Average
                                          Exercise           Exercise           Exercise
                                 Options    Price    Options   Price   Options    Price
                                ---------   ------   -------   -----   -------    -----
    <S>                             <C>      <C>
Outstanding - beginning of year   247,320    5.05    258,300    5.05    364,140    5.05
Granted                                -      -           -       -          -       -
Exercised                         (52,692)   5.04    (10,980)   5.00    (3,296)     5.00 
Forfeited                            (648)   5.00        -      -       (2,544)     5.0 
                                 ---------          --------           ---------
Outstanding - end of year         193,980    5.06    247,320    5.05    258,300     5.05 
                                 ========           ========           =========
Exercisable at end of year        140,512    5.05    140,784    5.05     98,696     5.04
                                 ========           ========           =========

</TABLE>
     Exercise prices for options outstanding as of June 30, 1998 ranged 
     from $5.00 to $7.75.  The weighted-average remaining contractual 
     life of those options is 5.5 years.

     Effective, July 1, 1996, the Company adopted SFAS No. 123, 
     "Accounting for Stock-Based Compensation".  As permitted by 
     the standard, the Company has elected to contine following the 
     guidance of Accounting Principles Board Opinion No. 25 (APB No. 25),
     "Accounting for Stock Issued to Employees".  Under APB No. 25, 
     no compensation expense is recognized because the exercisable 
     price of the Company's stock options equals or exceeds the 
     market price of the stock on the date of grant.  The effect of 
     applying the fair value method required by SFAS No. 123 to the 
     Company's stock option awards results in net income and 
     earnings per share that are not materially different from 
     amounts reported in the consolidated statements of income. 

     All references in this note to the number of shares and per 
     share amounts have been restated to reflect the 100% stock 
     dividend. 

                                  37
</page>

                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(13) EARNINGS PER SHARE
     The following information shows the amounts used in computing
     earnings per share and the effect on income and the weighted
     average number of shares of dilutive potential common stock.
     The amounts in the income columns represent the numerator and
     the amounts in the shares columns represent the denominator.
<TABLE>
<CAPTION>
                                      1998                           1997                              1996
                         ---------------------------     -------------------------------     -----------------------------
                                              Per Share                          Per Share                         Per Share
                        Income     Shares      Amount    Income     Shares     Amount   Income     Shares      Amount
                        -------    -------     ------    -------    -------       ------    ---------   --------     ------
   <S>                     <C>       <C>        <C>       <C>       <C>           <C>        <C>          <C>        <C>
Basic EPS:
Income available
  to Common
  Stockholders        $ 1,845,483  2,039,290    $ .90   $1,413,403  2,174,446    $ .65    $ 1,154,637  2,422,462    $ .48
                                                =====                            ====                             ======

Effect of
  dilutive securities         -      121,818                -         107,904                             98,406
                     ------------------------            ---------------------             ----------------------

Diluted EPS:
Income available to
stockholders plus
stock options       $ 1,845,483  2,161,108      $ .85  $1,413,403  2,282,350    $ .62   $1,154,637  2,520,868     $ .46

(14)  RELATED PARTY TRANSACTIONS

     Certain employees, officers and directors are engaged in 
     transactions with the Savings Bank in the ordinary course of 
     business.  It is the Savings Bank's policy that all related 
     party transactions are conducted at "arm's length" and all 
     loans and commitments included in such transactions are made on 
     substantially the same terms, including interest rates and 
     collateral, as those prevailing at the time for comparable 
     transactions with other customers.  A summary of the changes 
     in outstanding loans to employees, officers and directors for 
     the years ended June 30 is as follows:


</TABLE>
<TABLE>
<CAPTION>
                                           1998            1997
                                       -----------     -----------
<S>                                        <C>              <C>
     Beginning balance                 $ 1,217,653     $ 1,171,828 
     Originations and advances             371,032         283,677
     Principal repayments                 (535,608)       (237,852)
                                       ------------    ------------
     Ending balance                    $ 1,053,077     $ 1,217,653 
                                       ===========     ===========
</TABLE>
    
(15)  COMMITMENTS AND CONTINGENCIES

     In the ordinary course of business, the Savings Bank has various
     outstanding commitments that are not reflected in the 
     accompanying consolidated financial statements.  Since some of 
     the commitments are expected to expire without being drawn upon,
     the total commitment amounts do not necessarily represent future
     cash requirements.  The principal commitments of the Savings 
     Bank are as follows:

     Letters of Credit - Outstanding standby letters of credit were 
     approximately $260,930 at June 30, 1998.

                                  38
</page>

                        FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(15) COMMITMENTS AND CONTINGENCIES - (CONTINUED)

     Loan Commitments - The Savings Bank had outstanding firm 
     commitments to originate real estate loans in the amount of 
     $1,063,343 at June 30, 1998.

     Lines of Credit - The unused portion of lines of credit on 
     commercial loans were approximately $2,014,145 at June 30, 1998.

     Loans in Process - The Savings Bank has recorded loans in 
     process representing the undisbursed portion of loans in the 
     amount of $3,628,736 at June 30, 1998.  These amounts were 
     recorded as loans receivable, with a corresponding reduction 
     for such loans in process as reflected in Note (6).

     At June 30, 1998, the Savings Bank had an Irrevocable Standby 
     Letter of Credit issued on its behalf from the Federal Home 
     Loan Bank of Des Moines in the amount of $300,000, expiring 
     May 27, 1999.

(16) REGULATORY CAPITAL REQUIREMENTS

     The Savings Bank is subject to various regulatory capital 
     requirements administered by its primary federal regulator, 
     the Office of Thrift Supervision ("OTS").  Failure to meet 
     the minimum regulatory capital requirements can initiate 
     certain mandatory, and possible additional discretionary 
     actions by regulators, that if undertaken, could have a direct 
     material affect on the Savings Bank and the consolidated 
     financial statements.  Under the regulatory capital adequacy 
     guidelines and the regulatory framework for prompt corrective 
     action, the Savings Bank must meet specific capital guidelines 
     involving quantitative measures of the Savings Bank's assets, 
     liabilities, and certain off-balance-sheet items as calculated 
     under regulatory accounting practices.  The Savings Bank's 
     capital amounts and classification under the prompt corrective
     action guidelines are also subject to qualitative judgments by 
     the regulators about components, risk weightings, and other 
     factors.

     Quantitative measures established by regulation to ensure 
     capital adequacy require the Savings Bank to maintain minimum 
     amounts and ratios (set forth in the table below) of total 
     risk-based capital and Tier 1 capital to risk-weighted assets 
     (as defined in the regulations), Tier 1 capital to adjusted 
     total assets (as defined), and tangible capital to adjusted 
     total assets (as defined).  Management believes, as of June 30,
     1998, that the Savings Bank meets all capital adequacy 
     requirements to which it is subject.

     As of June 30, 1998, the most recent notification from the OTS,
     the Savings Bank was categorized as well-capitalized under the 
     framework for prompt corrective action.  To be categorized as 
     well-capitalized, the Savings Bank must maintain minimum total 
     risk-based, Tier 1 risk-based, and core capital leverage ratios
     as set forth in the table.  There are no conditions or events 
     since that notification that management believes have changed 
     the institution's category.

                                     39
</page>

                           FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(16) REGULATORY CAPITAL REQUIREMENTS - (CONTINUED)

     The Savings Bank's actual capital amounts and ratios are also 
     presented in the table.


<TABLE>
<CAPTION>

                                                                                         To Be Well-
                                                                                       Capitalized Under
                                                                   For Capital         Prompt Corrective
                                                Actual          Adequacy Purposes      Action Provisions
                                             --------------     -----------------      -----------------
                                             Amount   Ratio      Amount    Ratio       Amount     Ratio 
                                             -------  -----    ----------  ------    ---------  --------
                                                              (Dollars in thousands)
<S>                                           <C>       <C>       <C>       <C>        <C>         <C>
     As of June 30, 1998:
        Total Risk-Based Capital
           (to Risk-Weighted Assets)         $ 19,070  16.3%    > $ 9,356  > 8.0%    > $ 11,695  > 10.0%
        Core Capital
           (to Adjusted Tangible Assets)       18,862  11.2%    >   6,765  > 4.0%    >    8,456  >  5.0%
        Tangible Capital
           (to Tangible Assets)                18,862  11.2%    >   2,537  > 1.5%          N/A
        Tier 1 Capital
           (to Risk-Weighted Assets)           18,862  16.1%          N/A  	          >    7,017  >  6.0%
     As of June 30, 1997:         
        Total Risk-Based Capital
           (to Risk-Weighted Assets)         $ 19,101  18.2%    >   8,380  > 8.0%    > $ 10,475  > 10.0%
        Core Capital
           (to Adjusted Tangible Assets)       18,927  11.7%    >   4,849  > 3.0%    >    8,081  >  5.0%
        Tangible Capital
           (to Tangible Assets)                18,927  11.7%    >   2,424  > 1.5%          N/A
        Tier 1 Capital
           (to Risk-Weighted Assets)           18,927  18.1%          N/A  	          >    6,285  >  6.0%
</TABLE>


(17) ADVERTISING COSTS

     The Company incurred $105,688, $73,235,and $204,469 in 
     non-direct response advertising costs during the years ended 
     1998, 1997 and 1996, respectively.  The Company incurred no 
     direct response advertising costs during these years. 

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the 
     fair value of each class of financial instruments:

     Cash and cash equivalents and certificates of deposit - For 
          these short-term instruments, the carrying amount 
          approximates fair value.

                                40
</page>

                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)


     Available-for-sale and held-to-maturity securities - Fair values
          for investment securities equal quoted market prices, if 
          available.  If quoted market prices are not available, fair
          values are estimated based on quoted market prices of 
          similar securities.


     Loans receivable - The fair value of loans is estimated by 
          discounting the future cash flows using the current rates 
          at which similar loans would be made to borrowers with 
          similar credit ratings and for the same remaining 
          maturities.  Loans with similar characteristics are 
          aggregated for purposes of the calculations.  The carrying
          value of accrued interest receivable approximates its fair 
          value.

     Investment in Federal Home Loan Bank stock - Fair value of the 
          Savings Bank's investment in Federal Home Loan Bank stock 
          approximates the carrying value as no ready market exists 
          for this investment and the stock could only be sold back 
          to the Federal Home Loan Bank.

     Deposits - The fair value of demand deposits, savings accounts 
          and interest-bearing demand deposits is the amount payable
          on demand at the reporting date (i.e., their carrying 
          amount).  The fair value of fixed-maturity time deposits 
          is estimated using a discounted cash flow calculation that 
          applies the rates currently offered for deposits of similar
          remaining maturities.  The carrying amount of accrued 
          interest payable approximates its fair value.

     Federal Home Loan Bank advances - Rates currently available to 
          the Savings Bank for advances with similar terms and 
          remaining maturities are used to estimate fair value of 
          existing advances.  The carrying amount of accrued 
          interest payable approximates its fair value.

     Commitments to extend credit, letters of credit and lines of 
          credit - The fair value of commitments is estimated using 
          the fees currently charged to enter into similar 
          agreements, taking into account the remaining terms of the 
          agreements and the present credit worthiness of the 
          counterparties.  For fixed-rate loan commitments, fair 
          value also considers the difference between current levels 
          of interest rates and the committed rates.  The fair value 
          of letters of credit and lines of credit is based on fees 
          currently charged for similar agreements or on the 
          estimated cost to terminate or otherwise settle the 
          obligations with the counterparties at the reporting date.

     The following table presents estimated fair values of the 
     Company's financial instruments.  The fair values of certain 
     of these instruments were calculated by discounted expected 
     cash flows, which involves significant judgments by management 
     and uncertainties.  Fair value is the estimated amount at which 
     financial assets or liabilities could be exchanged in a current
     transaction between willing parties, other than in a forced or 
     liquidation sale.  Because no market exists for certain of these
     financial instruments and because management does not intend to 
     sell these financial instruments, the Company does not know 
     whether the fair values shown below represent values at which 
     the respective financial instruments could be sold individually 
     or in the aggregate.

                                         41
</page>

                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - (CONTINUED)


<TABLE>
<CAPTION>

                                                                        June 30, 1998
                                                                 --------------------------
                                                                    Carrying        Fair
                                                                     Amount         Value
                                                                 ------------   -----------
<S>                                                                    <C>            <C>
     Financial assets:    
        Cash and cash equivalents                                $ 11,862,951  $ 11,862,951
        Certificates of deposit                                     2,205,000     2,205,000
        Available-for-sale securities                               2,701,208     2,701,208
        Held-to-maturity securities                                 1,113,907     1,125,763
        Investment in Federal Home Loan Bank stock                  1,057,600     1,057,600
        Available-for-sale mortgage-backed securities                 702,722       702,722
        Loans, net of allowance for loan losses                   146,406,343   147,966,000
        Accrued interest receivable                                   664,414       664,414
    
     Financial liabilities:    
        Deposits                                                  141,058,748   141,173,000
        Federal Home Loan Bank advances                             5,700,000     5,703,000
        Other borrowings                                                   -             - 
     Unrecognized financial instruments (net of contract amount)    
        Commitments to extend credit                                       -             -
        Letters of credit                                                  -             -
        Unused lines of credit                                             -             -
    
                                                                        June 30, 1997
                                                                ---------------------------
                                                                    Carrying        Fair
                                                                     Amount         Value
                                                                -------------  -------------
     Financial assets:    
        Cash and cash equivalents                                $  5,808,930  $  5,808,930
        Certificates of deposit                                     1,504,000     1,504,000
        Available-for-sale securities                              14,227,286    14,227,286
        Held-to-maturity securities                                 1,604,665     1,625,760
        Investment in Federal Home Loan Bank stock                  1,263,800     1,263,800
        Available-for-sale mortgage-backed securities                 827,547       827,547
        Loans, net of allowance for loan losses                   134,103,537   136,711,000
        Accrued interest receivable                                   665,112       665,112
    
     Financial liabilities:    
        Deposits                                                  117,684,732   117,674,000
        Federal Home Loan Bank advances                            23,500,000    23,274,000
        Other borrowings                                               55,000        55,000
     Unrecognized financial instruments (net of contract amount)    
        Commitments to extend credit                                       -             -
        Letters of credit                                                  -             -
        Unused lines of credit                                             -             -
</TABLE>
                                                  42
</page>

                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(19) PARENT COMPANY ONLY FINANCIAL INFORMATION

     The following condensed statement of financial condition and 
     condensed statements of operations and  cash flows for First 
     Bancshares, Inc. should be read in conjunction with the 
     consolidated financial statements and notes thereto.

<TABLE>
<CAPTION>
                       Condensed Statements of Financial Condition   
    
                 ASSETS                                      June 30, 1998   June 30, 1997
                -------                                     --------------   -------------
<S>                                                                 <C>             <C>
     Cash                                                    $   1,856,647   $     70,352 
     Certificates of deposit                                       210,000         10,000 
     Investment securities available-for-sale, at fair value       741,250      1,191,977 
     Investment in subsidiaries                                 20,408,871     19,586,265 
     Loan to ESOP                                                  708,321        892,981 
     Property and equipment, less accumulated    
       depreciation                                                535,928        545,113
     Other assets                                                   41,554         53,154
                                                              ------------   ------------
         Total assets                                         $ 24,502,571   $ 22,349,842 
                                                              ============   ============

     LIABILITIES AND STOCKHOLDERS' EQUITY    
     Due to subsidiary                                        $     23,171   $     89,215 
     Accrued expenses                                               73,162         11,115 
     Deferred income taxes, net                                     41,568         42,868
    
     Stockholders' equity                                       24,364,670     22,206,644 
                                                              ------------   ------------
        Total liabilities and stockholders' equity            $ 24,502,571   $ 22,349,842 
                                                              ============   ============
</TABLE>

<TABLE>
<CAPTION>
                                   Condensed Statements of Income
                                                        Year Ended     Year Ended     Year Ended
                                                       June 30, 1998  June 30, 1997  June 30, 1996
                                                       -------------  -------------  -------------
<S>                                                          <C>          <C>              <C>
     Income      
       Equity in earnings of subsidiary                  $ 1,789,186   $ 1,245,031   $ 1,016,319
       Interest income                                        96,705       135,556       227,920 
       Gain on sale of investments                            41,444       205,938        26,670
       Other                                                  26,129        27,698        30,778
                                                         -----------   -----------   -----------
         Total income                                      1,953,464     1,614,223     1,301,687 
                                                         -----------   -----------   -----------
      
     Expenses      
       Professional fees                                      13,501        12,427        18,480 
       Printing and office supplies                            9,936         9,201         9,262 
       Interest                                                  978        22,191            -  
       Other                                                  57,269        64,102        58,532 
       Income tax                                             26,297        92,899        60,776 
                                                         -----------   -----------   -----------
         Total expenses                                      107,981       200,820       147,050 
                                                         -----------   -----------   -----------
           Net income                                    $ 1,845,483   $ 1,413,403   $ 1,154,637 
                                                         ===========   ===========   ===========

</TABLE>
                                              43
</page>

                         FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996

(19) PARENT COMPANY ONLY FINANCIAL INFORMATION - (CONTINUED)

<TABLE>
<CAPTION>

                                Condensed Statements of Cash Flows
       
                                                        Year Ended     Year Ended     Year Ended 
                                                       June 30, 1998  June 30, 1997  June 30, 1996 
                                                       -------------  -------------  -------------
<S>                                                         <C>            <C>             <C>
     Cash flows from operating activities:      
       Net income                                        $ 1,845,483   $ 1,413,403   $ 1,154,637
       Adjustments to reconcile net income to net      
         cash provided from operating activities:      
           Equity in earnings of subsidiary               (1,789,186)   (1,245,031)   (1,016,319)
           Depreciation expense                               10,318        10,196        10,228
           Income reinvested on investment securities             -             -        (15,592)
           Gain on sale of investments                       (41,444)     (205,938)      (26,670)
           Net change in operating accounts:      
             Deferred income taxes, net                        1,742         2,165           302
             Other assets                                     24,570         2,028       (11,637)
             Liabilities                                      46,003        20,896       (15,765)
                                                         ------------   -----------   -----------
               Net cash from (used in) operating activities   97,486        (2,281)       79,184 
                                                         ------------   -----------   -----------
     Cash flows from investing activities:      
       Dividends from subsidiary                           1,500,000     1,500,000            - 
       Principal payment on ESOP loan                        165,939       161,258       159,059 
       Purchase of investment securities                    (248,000)     (250,000)     (150,000)
       Proceeds from maturities of investments               500,000       560,000       157,336
       Proceeds from sales of investments                    231,948       832,277     1,464,308
       Purchase of property and equipment                     (1,133)     (397,507)     (541,923)
       Proceeds from sales of property and       
           equipment                                              -        654,234            -
       Purchase of South Central Missouri Title
            Inc. stock                                        (5,000)           -             -  
       Net change in certificates of deposit                (200,000)      110,000     1,107,000
                                                           ---------     ---------     ---------
         Net cash from investing activities                1,943,754     3,170,262     2,195,780
                                                           ---------     ---------     ---------
      
     Cash flows from financing activities:      
       Proceeds from borrowed funds                               -         50,000            -
       Repayment of borrowed funds                           (50,000)           -             -
       Net proceeds from issuance of common stock            252,715        54,900        16,480
       Cash dividends paid                                  (223,153)     (212,471)     (237,826)
       Purchase of treasury stock                           (234,507)   (3,306,588)   (2,215,113)
                                                          -----------   -----------   -----------
         Net cash used in financing activities              (254,945)   (3,414,159)   (2,436,459) 
                                                          -----------   -----------   -----------
      
      
     Net increase (decrease) in cash                       1,786,295      (246,178)     (161,495)
      
     Cash at beginning of period                              70,352       316,530       478,025 
                                                          ----------     ----------    ----------
      
     Cash at end of period                               $ 1,856,647   $    70,352   $   316,530 
                                                         ===========   ===========   ===========
</TABLE>
                                            44
</page>
      

                          FIRST BANCSHARES, INC. AND SUBSIDIARIES
                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        - - - - -  - - - - - - - - - - - - - - - - -
                         Years Ended June 30, 1998, 1997 and 1996


                            COMMON STOCK INFORMATION

     The common stock of First Bancshares, Inc. is traded on The 
Nasdaq Stock Market under the symbol "FBSI".  As of September 8, 
1998, there were 792 stockholders and 2,173,678 shares of common 
stock outstanding (including unreleased ESOP shares of 132,656).  
This does not reflect the number of persons or entities who hold 
stock in nominee or "street name."  

     On August 26, 1997 and November 26, 1997, the Company declared
a $.05 ($.025 restated for stock dividend) common stock dividend 
payable September 30, and December 31, 1997 to stockholders of
record on September 15, and December 15, 1997, respectively.  On 
February 28, 1998 and May 30, 1998, the Company declared a $.03 
common stock dividend payable March 31, and June 30, 1998 to 
stockholders of record on March 16, and June 16, 1998, respectively.  
Dividend payments by the Company are dependent primarily on dividends
received by the Company from the Savings Bank.  Under Federal 
regulations, the dollar amount of dividends a savings and loan 
association may pay is dependent upon the association's capital 
position and recent net income.  Generally, if an association 
satisfies its regulatory capital requirements, it may make dividend 
payments up to the limits prescribed in the OTS regulations.  
However, institutions that have converted to stock form of ownership 
may not declare or pay a dividend on, or repurchase any of, its 
common stock if the effect thereof would cause the regulatory 
capital of the institution to be reduced below the amount required 
for the liquidation account which was established in accordance with 
the OTS regulations and the Savings Bank's Plan of Conversion.  In 
addition, under Missouri law, the Company is generally prohibited 
from declaring and paying dividends at a time when the Company's net 
assets are less than its stated capital or when the payment of 
dividends would reduce the Company's net assets below its stated 
capital.

The following table sets forth market price and dividend information 
for the Company's common stock.  All per share amounts prior to the 
stock dividend have been adjusted to reflect the stock dividend.

<TABLE>
<CAPTION>

Fiscal 1997               High         Low        Dividend
------------           ---------    --------      --------
<S>                       <C>          <C>          <C>

First Quarter            $8.375      $7.625        $.025

Second Quarter           $8.625      $7.50        $.025

Third Quarter            $10.625      $8.25        $.025

Fourth Quarter           $10.50       $9.50        $.025

Fiscal 1998	
------------

First Quarter           $12.8125    $10.00        $.025

Second Quarter          $17.50      $11.8125      $.025

Third Quarter           $17.75      $14.00        $.03

Fourth Quarter          $16.00      $12.50        $.03
</TABLE>
                                45
</page>



<TABLE>
<CAPTION>

                         DIRECTORS AND OFFICERS


FIRST BANCSHARES, INC.                           FIRST HOME SAVINGS BANK
<S>                                                <C>
DIRECTORS:                                       DIRECTORS:		

Stephen H. Romines                               Stephen H. Romines
Chairman of the Board                            Chairman of the Board

Harold F. Glass                                  Harold F. Glass
Harold F. Glass, Attorney at Law                 Harold F. Glass, Attorney at Law

John G. Moody                                    John G. Moody
Judge of the 44th                                Judge of the 44th 
Missouri Judicial Circuit                        Missouri Judicial Circuit

Dr. James F. Moore                               Dr. James F. Moore 
Director of State Fruit Experiment Station of    Director of State Fruit Experiment Station of
Southwest Missouri State University              Southwest Missouri State University

Almeta Hardebeck                                 Charles R. Cunningham
Loan Officer at the Sparta Branch                Retired Manager of the Marshfield Branch 
First Home Savings Bank                          First Home Savings Bank	

OFFICERS:                                        OFFICERS:

Stephen H. Romines                               Stephen H. Romines
President and Chief Executive Officer            President and Chief Executive Officer

Peter M. Medlen                                  Peter M. Medlen
Vice-President                                   Executive Vice-President

Susan J. Uchtman,  CPA                           Susan J. Uchtman, CPA 
Chief Financial Officer                          Chief Financial Officer

Gina Gunnels                                     Colleen B. Stofer
Secretary and Treasurer                          Secretary

                                                 Diana Lewis
                                                 Treasurer
</TABLE>
                                   46
</page>


                        CORPORATE INFORMATION

CORPORATE HEADQUARTERS                           TRANSFER AGENT

142 East First Street                       Registrar and Transfer Co.
Mountain Grove, Missouri                    10 Commerce Drive
                                            Cranford, New Jersey  
                                                07016 
INDEPENDENT AUDITORS                        (800) 866-1340

Kirkpatrick, Phillips & Miller, CPAs, P.C.  COMMON STOCK
Springfield, Missouri
                                            Traded on The Nasdaq Stock Market 
GENERAL COUNSEL                             Nasdaq Symbol:  FBSI
					
Harold F. Glass
Springfield, Missouri

SPECIAL COUNSEL

Breyer & Aguggia
Washington, D.C.







ANNUAL MEETING

     The Annual Meeting of Stockholders will be held Wednesday, 
October 21, 1998, at 2:00 p.m., Central Time, at the Days Inn 
Conference Room, 300 East 19th Street, Mountain Grove, Missouri.

____________________________________________________________________
A COPY OF THE FORM 10-KSB AS FILED WITH THE SECURITIES AND EXCHANGE 
COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF 
THE RECORD DATE FOR VOTING AT THE ANNUAL MEETING OF STOCKHOLDERS 
UPON WRITTEN REQUEST TO THE SECRETARY, FIRST BANCSHARES, INC., 142 
EAST FIRST STREET, MOUNTAIN GROVE, MISSOURI   65711.

THE CORPORATION'S FORMS 10-KSB, 10-QSB AND OTHER DISCLOSURE 
DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION 
CAN BE OBTAINED FROM THE SEC HOME PAGE ON THE WORLD WIDE WEB 
AT http://www.sec.gov.

                              47
</page>











                                  Exhibit 21

                        Subsidiaries of the Registrant

</page>





<TABLE>
<CAPTION>

Parent
-------

First Bancshares, Inc.

                                    Percentage        Jurisdiction or
Subsidiaries (a)                    of Ownership     State of Incorporation
<S>                                     <C>                 <C>
First Home Savings Bank                  100%              Missouri

South Central Missouri Title, Inc.       100%              Missouri

Fybar Service Corporation (b)            100%              Missouri
</TABLE>
----------------------
(a)     The operation of the Company's wholly owned subsidiaries are 
included in the Company's Consolidated Financial Statements contained 
in the Annual Report attached hereto as Exhibit 13.
(b)     Wholly owned subsidiary of First Home Savings Bank.
</page>















                                          Exhibit 23

                                    Consent of Auditors

(On CPA firm letterhead)

                                CONSENT OF INDEPENDENT AUDITORS

We have issued our report dated August 21, 1998, accompanying the 
Consolidated Financial Statement incorporated by reference in the 
Annual Report of First Bancshares, Inc. on Form 10-KSB for the year 
ending June 30, 1998.  We hereby consent to the incorporation by 
reference of said reports in the Registration Statement of First 
Bancshares, Inc. on Form S-8 (File No. 33-87234, effective December 
9, 1994).


                                /s/Kirkpatrick, Phillips & Miller
                          KIRKPATRICK, PHILLIPS & MILLER, CPAs , P.C.

Springfield, Missouri
September 25, 1998
</page>