COMMUNITY FEDERAL BANCORP, INC.



               Consolidated Financial Statements
               as of September 30, 1998 and 1997
                         Together With
                        Auditors' Report






To Our Stockholders:

We are pleased to report record net income of $3,050,813 or $.72
per share, fully diluted, for the fiscal year ended September 30,
1998.

Community Federal also experienced another year of outstanding
growth in loans and deposits.  Net loans increased to
$141,414,264, a gain of $14,079,306 or 11.1%.  Total deposits
rose to $144,801,613, an increase of $12,083,223 or 9.1%.  We
believe this growth affirms our philosophy of offering
traditional banking services to our customers in a warm, friendly
environment.

Total assets showed dramatic growth from $215,937,823 on
September 30, 1997 to $275,320,442 on September 30, 1998.  This
extraordinary increase of 27.5% is partially as a result of our
growth in core customer business.  However, there is a special
reason for the bulk of the increase, which is explained below.

You are aware that we have been aggressively managing our capital
to maximize the return to you.  In May of 1997, we paid a special
dividend of $2.50 per share.  During the fiscal year ended
September 30, 1998, we embarked on a stock repurchase program
through which 310,500 shares were repurchased.

Beyond the special dividend and stock repurchase program, we
implemented a growth program designed to leverage the Company's
strong capital base.  Essentially, we will be using deposit
growth and advances from the Federal Home Loan Bank to fund the
purchase of securities.  This program should result in more net
income and should improve return on stockholders' equity over
time.  We intend to implement this program with great care.  Our
new growth program helps explain our dramatic increase in total
assets.

We are fortunate to operate in the dynamic Northeast Mississippi
area.  Our customer base is strong and growing, and it is served
by a dedicated, friendly, professional staff.  By providing high
quality, personal service, our staff is building great
relationships with our customers, which is translating into
excellent growth and profitability for our company.

As stockholders, your support is critically important to our
success.  Please consider us for your banking needs.  We are
committed to building outstanding shareholder value, and we need
your full support to accomplish this goal.

On behalf of our board and staff, I want to thank you for your
continuing support of and investment in Community Federal.

Sincerely,



Jim Ingram
Chief Executive Officer



               SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA



                                       Year Ended September 30,
                                1998    1997    1996    1995    1994

INCOME STATEMENT DATA:
Total interest income          16,607  14,508  13,150  11,016  10,011
Total interest expense          9,573   7,024   6,950   6,267   6,438
  Net interest income           7,034   7,484   6,200   4,749   3,573
Provision for loan losses         235      20      20      30      25
  Net interest income
    after provision for
    loan losses                 6,799   7,464   6,180   4,719   3,548
Noninterest income              1,929     227     188     132     752
Noninterest expense             3,860   2,926   3,036   1,672   1,840
Income before income taxes      4,868   4,765   3,332   3,179   2,460
Provision for income taxes      1,817   1,728   1,184   1,144   1,012
Cumulative effect of change
 in accounting principle            0       0       0       0     131
Net income                      3,051   3,037   2,148   2,035   1,317

Earnings per share (1)
  Basic                          $.76    $.70    $.27     N/A     N/A
  Diluted                        $.72    $.70    $.27     N/A     N/A


                                        At September 30,
                          1998      1997      1996      1995      1994

BALANCE SHEET DATA:
Total assets             275,320   215,938   204,017   162,042  154,600
 Loans receivable, net   141,414   127,335   117,631    97,988   84,269
Securities:(2)
Available for sale       119,799    73,976    75,112    25,125      N/A
Held to maturity           2,742     4,157     4,756    33,837      N/A
Mortgage-backed and
 related securities(2)       N/A       N/A       N/A       N/A   33,755
Securities(2)                N/A       N/A       N/A       N/A   30,146
Deposits                 144,802   132,718   131,740   134,555  131,989
Stockholders' equity      57,565    58,563    67,139    23,427   20,394


                                       Year Ended September 30,
                                   1998   1997   1996   1995   1994

KEY OPERATING DATA:
Return on average assets            1.2%   1.5%   1.1%   1.3%   0.9%
Return on average equity            5.2    4.7    4.4    9.4    7.0
Average equity to average assets   23.6   30.9   26.2   13.6   12.4
Dividend payout ratio (1)          40.2  389.7   57.9    N/A    N/A
Number of offices                     2      2      1      1      1


(1)  Earnings per share and dividend payout ratios are presented
     from the conversion date.

(2)  Securities are presented in connection with the Company's
     adoption of Statement of Accounting Standards No. 115 as of
     October 1, 1994.



                    MARKET FOR COMMON STOCK
                AND RELATED STOCKHOLDER MATTERS

The Company's common stock began trading on the NASDAQ on
March 26, 1996, under the symbol "CFTP."  At September 30, 1998,
there were 4,318,250 shares of the common stock outstanding and
approximately 2,400 stockholders of record.

The payment of dividends on the Common Stock is subject to
determination and declaration by the Board of Directors of the
Company.  The Board of Directors has adopted a policy of paying
quarterly cash dividends on the Common Stock.  In addition, from
time to time, the Board of Directors may determine to pay special
cash dividends in addition to, or in lieu of, regular cash
dividends.  The payment of future dividends will be subject to
the requirements of applicable law and the determination by the
Board of Directors of the Company based on the net income,
capital, and financial condition of the Company and the
Association, thrift industry trends, and general economic
conditions justifying the payment of dividends, however there can
be no assurance that dividends will be paid or, if paid, will
continue to be paid in the future.

The following table sets forth information as to high and low
sales prices of the Company's common stock and cash dividends per
share of common stock for the calendar quarters indicated.


                     Price Per Share   Dividends Per Share
                     High        Low     Regular   Special
Fiscal 1998:
Fourth quarter     $17.7500    $14.000    $.080    $ .00
Third quarter       18.8750     17.250     .080      .00
Second quarter      20.8125     18.125     .080      .00
First quarter       22.0000     16.375     .075      .00

Fiscal 1997:
Fourth quarter     $18.7500    $17.250    $.075    $ .00
Third quarter       20.7500     16.875     .075     2.50
Second quarter      20.0000     16.750     .075      .00
First quarter       17.3750     13.375     .075      .00



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS





To Community Federal Bancorp, Inc.:


We have audited the accompanying consolidated statements of
financial condition of Community Federal Bancorp, Inc. (a
Delaware corporation) AND SUBSIDIARY as of September 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 September 30, 1998.  These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these 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 the audit 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 consolidated
financial position of Community Federal Bancorp, Inc. and
Subsidiary as of September 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years
in the period ended September 30, 1998, in conformity with
generally accepted accounting principles.

     ARTHUR ANDERSEN LLP




Birmingham, Alabama
October 8, 1998




                COMMUNITY FEDERAL BANCORP, INC.


         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

               AS OF SEPTEMBER 30, 1998 AND 1997


                             ASSETS

                                          1998          1997

CASH AND DUE FROM BANKS                $ 2,978,714  $  3,886,874

FEDERAL FUNDS SOLD                         300,000             0
   Total cash and cash equivalents       3,278,714     3,886,874
INTEREST-BEARING DEPOSITS IN BANKS         792,000     1,550,129

SECURITIES AVAILABLE FOR SALE,
  at fair value                        119,799,017    73,976,278

SECURITIES HELD TO MATURITY, at
  amortized cost (estimated fair
  value of $2,760,651 and
  $4,122,225 respectively)               2,742,209     4,156,732

LOANS RECEIVABLE, net                  141,414,264   127,334,958

ACCRUED INTEREST AND DIVIDENDS
  RECEIVABLE                             1,523,400     1,239,777

PREMISES AND EQUIPMENT, net              2,944,000     3,318,561

OTHER ASSETS                             2,826,838       474,514

        Total assets                  $275,320,442  $215,937,823



LIABILITIES AND STOCKHOLDERS' EQUITY


DEPOSITS                               144,801,613  $132,718,390
FEDERAL HOME LOAN BANK ADVANCES         65,451,449    18,282,186
OTHER LIABILITIES:
Accrued interest payable                   682,350       731,619
Advances from borrowers for taxes
  and insurance                            427,879       424,356
Deferred income taxes payable            4,996,792     3,410,146
Accrued expenses and other liabilities   1,395,733     1,808,125
        Total liabilities              217,755,816   157,374,822
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Preferred stock, no par value;
  2,000,000 shares authorized;
  shares issued and outstanding--none            0             0
Common stock, par value $.01 per
  share; 10,000,000 shares authorized,
  4,628,750 shares issued                   46,288        46,288
Additional paid-in capital              45,210,144    45,113,004
Retained earnings                       15,487,717    13,714,336
Treasury stock, at cost, 310,500
  shares in 1998                        (5,545,540)            0
Unearned compensation                   (5,277,786)   (5,998,323)
Unrealized gain on securities
  available for sale, net                7,643,803     5,687,696
        Total stockholders' equity      57,564,626    58,563,001
        Total liabilities and
          stockholders' equity        $275,320,442  $215,937,823

The accompanying notes are an integral part of these statements.






                    COMMUNITY FEDERAL BANCORP, INC.


                   CONSOLIDATED STATEMENTS OF INCOME

         FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996


                                     1998          1997         1996
INTEREST INCOME:
Interest and fees on loans:
Mortgage loans                   $ 8,864,345  $ 9,010,094   $ 8,217,595
Consumer loans                     1,014,303      325,172       262,356
Commercial loans                     916,603      462,641       130,510
Interest and dividends
  on securities held to
  maturity                           196,129      265,859       824,987
Interest and dividends
  on securities available
  for sale                         5,279,983    4,163,866     3,249,772
Other interest income                335,920      280,980       464,598
      Total interest income       16,607,283   14,508,612    13,149,818
INTEREST EXPENSE:
Deposits                           7,176,109    6,649,961     6,930,124
Other borrowings                   2,397,313      374,366        19,410
      Total interest expense       9,573,422    7,024,327     6,949,534
      Net interest income          7,033,861    7,484,285     6,200,284

PROVISION FOR LOAN LOSSES            235,000       20,000        20,000
      Net interest income
        after provision for
        loan losses                6,798,861    7,464,285     6,180,284
NONINTEREST INCOME:
Gain on sale of securities
  available for sale, net          1,650,548        1,967        54,838
Loan servicing fees                  129,698       92,686        67,254
Other income                         149,127      132,348        65,656
      Total noninterest income     1,929,373      227,001       187,748
NONINTEREST EXPENSES:
Compensation and benefits          2,293,192    1,963,349     1,153,133
Special SAIF assessment                    0            0       863,835
Deposit insurance premium             87,400      123,616       317,896
Occupancy and equipment              251,693      144,382       134,745
(Gain) loss on real estate
  owned, net                          30,177        3,279       (15,119)
Loss on sale of loans, net            17,269        9,616             0
Other expenses                     1,180,145       682,401      580,990
      Total noninterest expenses   3,859,876     2,926,643    3,035,480
      Income before income taxes   4,868,358     4,764,643    3,332,552
PROVISION FOR INCOME TAXES         1,817,545     1,728,120    1,184,294
NET INCOME                       $ 3,050,813    $3,036,523   $2,148,258

EARNINGS PER SHARE
  Basic                                 $.76          $.70         $.27
  Diluted                               $.72          $.70         $.27

The accompanying notes are an integral part of these statements.


                COMMUNITY FEDERAL BANCORP, INC.


        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

     FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996



                            Additional
                  Common     Paid-In    Retained     Unearned
                   Stock     Capital    Earnings   Compensation

BALANCE,
 Sep 30, 1995   $     0  $         0  $21,030,744  $         0

Net income            0            0    2,148,258            0
Change in
 unrealized
 gain (loss)
 on securities,
 due to the
 reclassification
 of securities
 from held to
 maturity to
 available for
 sale, net           0            0            0             0
Issuance of
 common stock   46,288   44,954,433            0    (3,632,000)
Change in
 unrealized gain
 on securities
 available
 for sale, net       0            0            0             0
Amortization
 of unearned
 compensation        0       51,878            0       167,890
Dividends declared
 ($.15 per share)    0            0     (667,072)            0
BALANCE,
 Sep 30, 1996   46,288   45,006,311   22,511,930    (3,464,110)

Net income           0            0    3,036,523             0
Contributions to
 stock plan trusts   0      (16,922)           0    (3,065,278)
Change in unrealized
 gain on securities
 available for
 sale, net           0            0            0             0
Amortization of
 unearned
 compensation        0      123,615            0       531,065
Dividends declared
 ($2.80 per share)   0            0  (11,834,117)            0
BALANCE,
 September 30,
 1997           46,288   45,113,004   13,714,336    (5,998,323)

Net income           0            0    3,050,813             0
Contributions to
 stock plan
 trusts              0      (27,150)           0      (156,798)
Change in
 unrealized gain
 on securities
 available for
 sale, net           0            0            0             0
Amortization
 of unearned
 compensation        0      124,290            0       877,335
Purchase of
 treasury stock,
 at cost             0            0            0             0
Dividends declared
 ($.32 per share)    0            0   (1,277,432)            0
BALANCE,
 September 30,
 1998          $46,288  $45,210,144  $15,487,717   $(5,277,786)






                                        Unrealized
                                          Gain on
                                        Securities
                             Treasury    Available
                               Stock   for Sale, Net    Total

BALANCE, Sep 30, 1995    $         0    $2,396,156   $23,426,900

Net income                         0             0    2,148,258
Change in unrealized
 gain (loss) on
 securities, due to the
 reclassification
 of securities from held
 to maturity to
 available for sale, net           0       (28,115)      (28,115)
Issuance of common stock           0             0    41,368,721
Change in unrealized gain on
 securities available for
 sale, net                         0       670,436       670,436
Amortization of unearned
 compensation                      0             0       219,768
Dividends declared ($.15
 per share)                        0             0      (667,072)
BALANCE, Sep 30, 1996              0     3,038,477    67,138,896

Net income                         0             0     3,036,523
Contributions to stock
 plan trusts                       0             0    (3,082,200)
Change in unrealized gain
 on securities available
 for sale, net                     0     2,649,219     2,649,219
Amortization of unearned
 compensation                      0             0       654,680
Dividends declared
 ($2.80 per share)                 0             0   (11,834,117)
BALANCE, September 30, 1997        0     5,687,696    58,563,001

Net income                         0             0     3,050,813
Contributions to stock
 plan trusts                       0             0      (183,948)
Change in unrealized gain on
 securities available for
 sale, net                         0     1,956,107     1,956,107
Amortization of unearned
 compensation                      0             0     1,001,625
Purchase of treasury
 stock, at cost           (5,545,540)            0    (5,545,540)
Dividends declared
 ($.32 per share)                  0             0    (1,277,432)
BALANCE, September 30,
 1998                    $(5,545,540)   $7,643,803   $57,564,626



The accompanying notes are an integral part of these statements.

                    COMMUNITY FEDERAL BANCORP, INC.


                 CONSOLIDATED STATEMENTS OF CASH FLOWS

         FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996


                                       1998         1997        1996


CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Net income                       $ 3,050,813   $3,036,523   $2,148,258
  Adjustments to reconcile net
   income to net cash provided
   by operating activities:
     Depreciation                      109,126       81,139       63,832
     Deferred income tax provision
       (benefit)                        28,874       71,401     (281,057)
     Amortization of deferred loan
       fees and costs, net              82,261       32,371       47,949
     Amortization of discounts and
       premiums of accretion,net       195,962      (48,587)     (84,616)
     Amortization of unearned
       compensation                  1,001,625      654,680      219,768
     Provision for losses on loans     235,000       20,000       20,000
     FHLB stock dividends             (136,000)     (75,000)     (72,589)
     Loss on sale of loans, net         17,269        9,616            0
     Gain on sale of securities
       available for sale, net      (1,650,548)      (1,967)     (54,838)
     (Gain) loss on sale of
       repossessed assets, net          30,177        3,279      (15,119)
     Changes in assets and liabilities:
          Decrease (increase)in other
            assets                  (2,214,544)       4,525     (171,199)
          Decrease (increase)in
            interest and dividends
            receivable                (283,623)     104,170     (184,782)
          Increase in income taxes
            payable                    604,725       71,652       53,588
          Increase (decrease)in
            accrued interest payable   (49,269)     115,197      (47,050)
          Increase (decrease)in
            accrued expenses and
            other liabilities         (658,248)    (446,868)   1,728,892
              Total adjustments     (2,687,213)     595,608    1,222,779
              Net cash provided by
                operating activities   363,600    3,632,131    3,371,037
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of
   repossessed assets                  453,502       13,000      190,000
  Proceeds from maturities and
   principal collections of
   securities held to maturity       1,404,319      590,329    1,921,600
  Proceeds from maturities,
   principal collections, and
   calls on securities available
   for sale                         43,180,945   12,998,115   13,165,134
  Proceeds from sales of
   securities available for sale     1,864,490    5,498,843    2,621,913
 (Purchase of) proceeds from
   maturities of interest-bearing
   deposits in banks, net              758,129      891,195     (692,324)
  Purchase of securities available
   for sale                        (86,112,374) (13,132,359) (36,586,411)
  Purchase of securities held to
   maturity                                  0            0     (559,141)
 (Purchase of) proceeds from
   sale of property and
   equipment, net                     (109,565)  (2,417,433)      (6,351)
  Investment in real estate owned      (41,535)      (7,064)      (2,031)
  Loan (originations) and principal
   repayments, net                 (14,993,760)  (9,892,636) (19,744,689)
            Net cash used in
               investing
               activities          (53,595,849)  (5,458,010) (39,692,300)
CASH FLOWS FROM FINANCING
 ACTIVITIES:
  (Decrease) increase in customer
   deposits, net                    12,083,223      977,957   (2,814,071)
  Proceeds from (repayments of)
   FHLB advances, net               47,169,263   18,282,186   (1,000,000)
  (Decrease) increase in advances
   from borrowers for taxes and
   insurance                             3,523      (20,428)      51,940
  Proceeds from stock offering               0            0   41,368,721
  Contributions to stock plan
   trusts                             (183,948)  (3,082,200)           0
  Purchase of treasry stock,
   at cost                          (5,545,540)           0            0
  Dividends paid                    (1,277,432) (11,834,117)    (667,072)
             Net cash provided
               by financing
               activities           52,249,089    4,323,398   36,939,518
              Net increase
              (decrease) in cash
               and cash equivalents   (983,160)   2,497,519      618,255

CASH AND CASH EQUIVALENTS,
 beginning of year                   4,261,874    1,764,355    1,146,100
CASH AND CASH EQUIVALENTS,
 end of year                       $ 3,278,714   $4,261,874   $1,764,355

SUPPLEMENTAL CASH FLOW
 INFORMATION:
 Cash paid for:
  Interest on deposits and
   other borrowings                $ 9,622,691  $6,909,130  $7,049,843

  Income taxes                     $ 1,247,500  $1,668,000  $1,185,000

SUPPLEMENTAL NONCASH INVESTING
 AND FINANCING ACTIVITIES:
  Transfer of loans to
  repossessed assets               $   579,924  $  126,576  $   33,878

  Change in unrealized net gain
   on securities available
   for sale, net of deferred
   taxes                           $ 1,956,107  $2,649,219  $   642,321

  Transfer of securities from
   held to maturity to available
   for sale at fair value          $         0  $        0  $27,758,607


The accompanying notes are an integral part of these statements.



                COMMUNITY FEDERAL BANCORP, INC.


           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  SEPTEMBER 30, 1998 AND 1997



1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization, Nature of Operations, and Principles of
Consolidation

Community Federal Bancorp, Inc. (the "Company") was incorporated
in the State of Delaware in November 1995, for the purpose of
becoming a holding company to own all of the outstanding capital
stock of Community Federal Savings Bank (the "Bank") upon the
Bank's conversion from a federally chartered mutual savings
association to a federally chartered stock savings association
(the "Conversion").  The Bank was converted to a federally
chartered stock organization in November 1995, through the sale
of all of its common stock to the Company.  The accounting for
the conversion is in a manner similar to that utilized in a
pooling of interests (see Note 19).

The accompanying consolidated financial statements include the
accounts of the Company and the Bank.  All significant
intercompany balances and transactions have been eliminated in
consolidation.

The Bank is primarily engaged in the business of obtaining funds
in the form of various savings deposits products and investing
those funds in mortgage loans or single family real estate and,
to a lesser extent, in consumer and commercial loans.  The Bank
operates from two offices in Tupelo, Mississippi, and originates
the majority of its loans in its market area.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents of $3,278,714 and $4,261,874 at
September 30, 1998 and 1997, respectively, consist of cash on
hand of $736,807 and $797,092 at September 30, 1998 and 1997,
respectively; cash due from and on deposit with other banks of
$2,241,907 and $3,464,782 at September 30, 1998 and 1997,
respectively; and federal funds sold of $300,000 at September 30,
1998.  The cash due from and on deposit with other financial
institutions primarily consisted of an interest-bearing account
with a correspondent bank.

For purposes of reporting cash flows, cash and cash equivalents
include cash on hand; amounts due from and on deposit with other
banks, and federal funds.  Federal funds are generally sold for
one-day periods overnight.

Securities

Securities classified as securities held to maturity are carried
at amortized cost, adjusted for amortization of premiums and
accretion of discounts, using the level yield method over the
estimated remaining life.  The Company has the ability and
management has the positive intent to hold these securities to
maturity.

All securities not considered held to maturity have been
designated as available for sale and are carried at fair value.
The unrealized difference between amortized cost and fair value
on securities available for sale is excluded from earnings and is
reported, net of deferred taxes, as a component of equity.
Securities available for sale includes securities that Management
intends to use as part of its asset/liability management strategy
or that may be sold in response to changes in interest rates,
changes in prepayment risk, liquidity needs, or for other
purposes.

The Company's available for sale portfolio consists of U.S.
Government and federal agencies, mortgage-backed and related
securities, and equity securities.  Also included in securities
available for sale is FHLB common stock, which is carried at cost
and evaluated for impairment, as it is considered a restricted
investment security.

The adjusted cost of the specific security sold is used to
compute gain or loss on the sale of securities.

Loans Receivable

Loans receivable are stated at their unpaid principal balances,
less the allowance for loan losses and net deferred loan
origination fees and discounts.

The Bank ceases accrual of interest on substantially all loans
when payment on a loan is in excess of 90 days past due.  An
allowance is established by a charge to interest income equal to
all interest previously accrued but unpaid.  Interest income is
subsequently recognized only to the extent that cash payments are
received until, in management's judgment, the borrower's ability
to make periodic interest and principal payments is in accordance
with the terms of the loan agreement; in which case the loan is
returned to accrual status.

The allowance for loan losses is increased by charges to income
and decreased by loan charge-offs, net of recoveries.  The
allowance for loan losses is maintained at a level which
management considers adequate to absorb losses inherent in the
loan portfolio at each reporting date.  Management's estimation
of this amount includes a review of all loans for which full
collectibility is not reasonably assured and considers, among
other factors, prior years' loss experience, economic conditions,
distribution of portfolio loans by risk class, and the estimated
value of the underlying collateral.  Though management believes
the allowance for loan losses to be adequate, ultimate losses may
vary from their estimates.  However, estimates are reviewed
periodically and, as adjustments become necessary, they are
reported in earnings in periods in which they become known.

The Bank's loan portfolio consists primarily of one-to-four
family residential mortgages and consumer installment loans that
are evaluated collectively for impairment.  The Bank had no loans
designated as impaired under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 114 at September 30,
1998 and 1997.

Loan Origination Fees and Related Costs

Loan fees and certain direct costs of loan origination are
deferred, and the net fee or cost is recognized as an adjustment
to interest income using the level yield method over the
contractual life of the loan.

Real Estate Owned

Real estate owned includes properties sold under mortgage loans
to facilitate sales of foreclosed properties.  The recognition of
gains and losses on the sale of real estate owned is dependent
upon whether the nature and terms of the sale and future
involvement of the Bank in the property meet certain
requirements.  If the transaction does not meet these
requirements, income recognition is deferred and recognized under
an alternative method in accordance with SFAS No. 66, Accounting
for Sales of Real Estate.

Real estate owned is carried at the lower of the recorded
investment in the property or the fair value of the property,
less estimated costs of disposition.  Any excess of the recorded
investment in the loan over the fair value of the underlying
property is charged to the allowance for loan losses at the time
of foreclosure.  Subsequent to foreclosure, real estate owned is
evaluated on an individual basis for changes in fair value.
Declines in the fair value of the asset, less costs of
disposition below its carrying amount, result in a loss provision
to increase the valuation allowance account.  Increases in the
fair value of the asset, less costs of disposition above its
carrying amount, reduce the valuation allowance account, but not
below zero.  Increases or decreases in the valuation allowance
account are charged or credited to income.  Costs relating to
improvement of the property incurred subsequent to acquisition
are capitalized, whereas costs relating to the holding of
property are expensed.  The amounts expensed in fiscal years
1998, 1997, and 1996 were $6,366,  $521, and $8,929,
respectively.  The amounts capitalized in 1998, 1997, and, 1996
were $41,535, $7,064, and $2,031, respectively.

Premises and Equipment

Land is carried at cost.  Buildings, furniture, fixtures, and
equipment are carried at cost, less accumulated depreciation.
Buildings, furniture, fixtures, and equipment are depreciated
using the straight-line or accelerated methods over the estimated
useful lives of the assets.  The estimated useful lives for
furniture, fixtures, and equipment range from 3 to 20 years and
for buildings and improvements range from 10 to 40 years.

Income Taxes

Provisions for income taxes are based on taxes payable or
refundable for the current year (after exclusion of nontaxable
income) and deferred income taxes on temporary differences
between the tax bases of assets and liabilities and their
reported amounts in the financial statements.  Deferred tax
assets and liabilities are included in the financial statements
at currently enacted income tax rates applicable to the period in
which the deferred tax assets are enacted, deferred tax assets
and liabilities are adjusted through the provision for income
taxes in the period of enactment.

<PAGE>
Pending Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 130, Reporting of Comprehensive Income.  This
Statement established standards for reporting and display of
comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of financial statements.  This
Statement also requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income, be reported in financial statements and are
displayed with the same prominence as other financial statements.
This Statement is effective for fiscal years beginning after
December 15, 1997.  Earlier application is permitted.
Reclassification of financial statements for earlier periods
provided for comparative purposes is required.

In June 1997, FASB issued SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information.  This
Statement establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and also establishes standards for related
disclosures about products and services, geographic areas, and
major customers.  This Statement is effective for financial
statements for periods beginning after December 15, 1997.  In the
initial year of application comparative information for earlier
years is to be restated.

In February 1998, the FASB issued SFAS No. 132, Employers'
Disclosures About Pensions and Other Postretirement Benefits.
This Statement revises employers' disclosures about pension and
other postretirement benefit plans.  It does not change the
measurement or recognition of those plans.  It standardizes the
disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values
of plan assets that will facilitate financial analysis, and
eliminates certain disclosures that are no longer as useful and
suggests combined formats for presentation of pension and other
postretirement benefit disclosures.  This Statement is effective
for fiscal years beginning after December 15, 1997.  Earlier
application is encouraged.  Restatement of disclosures for
earlier periods provided for comparative purposes is required
unless the information is not readily available, in which case
the notes to the financial statements should include all
available information and a description of the information not
available.

In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities.  This Statement
requires derivatives to be recorded in the balance sheet as
either an asset or liability measured at its fair value.  This
Statement also requires that changes in derivatives' fair value
be recognized currently in earnings unless specific hedge
criteria are met.  This Statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 1999.

Management believes there will be no material effect on the
consolidated financial statements from the adoption of these
pronouncements.

Financial Statement Reclassification

The financial statements for prior years have been reclassified
in order to conform with the 1998 financial statement
presentation.  The reclassification did not change total assets
or net income in the prior year.


2.  SECURITIES AVAILABLE FOR SALE

The amortized cost, gross unrealized gains and losses, and
estimated fair value of securities available for sale at
September 30, 1998 and 1997 are summarized as follows:


                                           1998
                                        Gross      Gross
                       Amortized     Unrealized  Unrealized   Estimated
                          Cost          Gains      Losses     Fair Value
U.S. government and
 federal agencies
 bonds and notes     $ 98,509,041  $   687,462  $(193,273)  $ 99,003,230
State and local
 bonds and notes          161,241       14,295          0        175,536
Total bonds and
 notes                 98,670,282      701,757   (193,273)    99,178,766
Equity securities:
 FNMA preferred         1,010,000       45,000          0      1,055,000
 FHLMC common             420,482    8,053,846          0      8,474,328
 FNMA common              572,331    3,728,172          0      4,300,503
 FHLB common            3,318,800            0          0      3,318,800
   Total equity
     securities         5,321,613   11,827,014          0     17,148,627
Mutual funds            3,478,377            0     (6,757)     3,471,620
   Total             $107,470,272  $12,528,775  $(200,030)  $119,799,017

                                           1997
                                        Gross      Gross
                       Amortized     Unrealized  Unrealized   Estimated
                          Cost          Gains      Losses     Fair Value
U.S. government and
 federal agencies
 bonds and notes      $57,768,977  $  244,065    $(166,253)  $57,846,789
State and local
 bonds and notes          682,787           0      (73,962)      608,825
Total bonds and
 notes                 58,682,787     244,065     (240,215)   58,455,614
Equity securities:
FNMA preferred          1,010,000      32,400            0     1,042,400
FHLMC common              457,926   5,935,838            0     6,393,765
FNMA common               734,975   3,194,225            0     3,929,200
FHLB common             1,319,500           0            0     1,319,500
   Total equity
    securities          3,522,402   9,162,463            0    12,684,865
Mutual funds            2,828,377       7,422            0     2,835,799
   Total              $64,802,543  $9,413,950    $(240,215)  $73,976,278



The amortized cost and fair value of debt securities available
for sale by contractual maturity are shown below.  Expected
maturities may differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without
call or prepayment penalties.

                                  September 30, 1998
                                Amortized      Estimated
                                  Cost         Fair Value

Due in one year or less      $  3,159,182   $  3,171,452
Due from one to five years      7,637,028      7,609,734
Due from five to ten years     16,541,501     16,705,481
Due after ten years            71,332,600     71,692,103
                               98,670,311     99,178,770
Equity securities               5,321,613     17,148,627
Mutual funds                    3,478,377      3,471,620
Total                        $107,470,301   $119,799,017


Gross realized gains on the sale of securities available for sale
totaled $1,665,533 and $43,468, and gross realized losses totaled
$14,985 and $41,501 at September 30, 1998 and 1997, respectively.


3.   SECURITIES HELD TO MATURITY

The amortized cost, gross unrealized gains and losses, and
estimated fair values of securities designated as held to
maturity at September 30, 1998 and 1997 are summarized as
follows.


                                         Gross      Gross
                           Amortized  Unrealized  Unrealized  Estimated
1998:                         Cost       Gains      Losses    Fair Value
U.S. government and
 federal agencies
 bonds and notes          $2,742,209    $19,924    $(1,482)   $2,760,651
     Total                $2,742,209    $19,924    $(1,482)   $2,760,651
1997:
U.S. government and
 federal agencies
 bonds and notes          $4,156,732       0     $ (34,507)  $4,122,225
     Total                $4,156,732       0     $ (34,507)  $4,122,225


U.S. government and federal agencies bonds and notes designated
as held to maturity at September 30, 1998 bear interest at fixed
and adjustable rates ranging from 5.5% to 7.0%.  These bonds and
notes contractually mature at various dates ranging from April
2001 to July 2023.

The carrying value and fair value of debt securities held to
maturity by contractual maturity are shown below.  Expected
maturities may differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without
call or prepayment penalties.

                                  September 30, 1998
                                Carrying    Estimated
                                  Value     Fair Value

Due from one to five years     $1,001,276   $1,004,290
Due from five to ten years      1,249,043    1,265,954
Due after ten years               491,890      490,407
                               $2,742,209   $2,760,651


4.  LOANS RECEIVABLE, NET

Loans receivable at September 30, 1998 and 1997 are summarized as
follows:




                                          1998           1997
Mortgage loans:
 Principal balances:
  Secured by 1-4 family residences    $116,674,242  $108,628,196
    Secured by multifamily and
    nonresidential properties            5,821,402     6,081,926
  Construction loans                     4,587,375     3,147,984
                                       127,083,019   117,858,106

  Less:
    Undisbursed portion of
      mortgage loans                     1,799,338     1,388,223
    Total mortgage loans               125,283,681   116,031,946

Commercial loans:
 Principal balances:
   Other                                 1,208,796     2,837,058
   Real Estate                          10,840,608     4,495,165

Consumer loans:
 Principal balances:
   Other                                 4,984,542     4,560,789
   Real Estate                             305,660             0

Total loans                            142,623,287   128,362,895
  Less allowance for loan losses           756,285       590,000
  Unearned discounts and net
  deferred loan origination fees           452,738       437,937
Loans receivable, net                 $141,414,264  $127,334,958


As a savings bank, the Bank has a credit concentration in 1-4
family residential real estate mortgage loans.  Substantially all
of the Bank's 1-4 family residential mortgage loan customers are
located in its trade area of Lee, Itawamba, Prentiss, and
Pontotoc Counties, Mississippi, which have a local unemployment
rate at or slightly below the average for the state.  Although
the Bank has generally conservative underwriting standards,
including a collateral policy calling for low loan to collateral
values, the ability of its borrowers to meet their residential
mortgage obligations is dependent upon local economic conditions.

In the normal course of business, loans are made to officers,
directors, and employees of the Company and subsidiary.  These
loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing for comparable
transactions with others.  Such loans do not involve more than
the normal risk of collectibility, nor do they present other
unfavorable features.  As of September 30, 1998 and 1997,
$3,083,622 and $2,081,135, respectively, of these loans were
outstanding.  During fiscal year 1998, $1,837,445 of new loans and
advances were made, principal repayments totalled $834,958.
During fiscal year 1997, $1,078,541 of new loans
and advances were made, principal repayments totaled $664,250.

Activity in the allowance for loan losses is summarized as
follows:

                                  1998       1997       1996

Balance at beginning of year    $590,000   $572,000   $552,000
Provision charged to income      235,000     20,000     20,000
Charge-offs                       68,715      2,000          0
Recoveries                             0          0          0
Balance at end of year          $756,285   $590,000   $572,000



The Bank had loans on nonaccrual status at September 30, 1998 and
1997 in the amounts of approximately $831,000 and $969,000,
respectively.  Interest income forgone on nonaccrual loans was
approximately $17,000 and $50,000 for fiscal years 1998 and 1997,
respectively.

5.    LOAN SERVICING

In 1984, the Bank sold first mortgage single-family residential
loans to the Federal National Mortgage Association ("FNMA") with
full recourse which are not included in the accompanying
statements of financial condition.  The total principal balances
outstanding under these mortgages were $963,367, $1,518,887, and
$2,212,865, at September 30, 1998, 1997, and 1996,respectively.
Custodial escrow balances maintained in connection with the
foregoing loan servicing were $29,041, $37,115, and $45,805,
at September 30, 1998, 1997, and 1996, respectively.  In the event
of default, the Bank must pay the principal and interest under
default to FNMA.  The Bank would bear the burden of foreclosure
losses in the event of default.  Because of the Bank's credit
policies, foreclosure losses in the event of default have not
been significant and losses under this recourse obligation
are not expected to be significant.  At September 30, 1997,
none of these loans were past due 90 days or more.  Accordingly,
no provision has been made in the financial statements for
any future losses that may result from this recourse arrangement.

6.  ACCRUED INTEREST AND DIVIDENDS RECEIVABLE

Accrued interest and dividends receivable at September 30, 1998
and 1997 are as follows:


                                      1998        1997

Securities available for sale     $  649,800  $  472,199
Securities held to maturity           13,736      21,504
Loans receivable                     855,809     729,505
Other                                  4,055      16,569
    Total                         $1,523,400  $1,239,777




7.    PREMISES AND EQUIPMENT, NET

Premises and equipment at September 30, 1998 and 1997 are
summarized as follows:

                                        1998          1997

Land                                $  947,917    $1,322,912
Building and improvements            1,898,417     1,847,918
Furniture, fixtures, and equipment     757,581       715,273
     Total                           3,603,915     3,886,103
Less accumulated depreciation          659,915       567,542
Premises and equipment, net         $2,944,000    $3,318,561



8.    DEPOSITS

Deposits at September 30, 1998 and 1997, and the related ranges
of interest rates payable for deposits at September 30, 1998, are
summarized as follows:



                                 1998                  1997
                          Amount    Percent     Amount    Percent

NOW accounts, 0% to
  5.00%               $ 14,092,613    9.73%   13,391,564   10.09%
Savings accounts,
  2.75%                  6,754,054    4.67     6,741,456    5.08
                        20,846,667   14.40    20,133,020   15.17
Certificates of deposit:
4% to 4.99%             14,418,107    9.96    15,965,857   12.03
5% to 5.99%             63,792,916   44.05    61,189,886   46.11
6% to 6.99%             45,629,034   31.51    35,322,441   26.61
7% to 7.99%                114,889     .08       107,186     .08
                       123,954,946   85.60   112,585,370   84.83
   Total              $144,801,613  100.00%  132,718,390  100.00%



The aggregate amounts of jumbo certificates of deposit with a
minimum balance of $100,000 were approximately $36,396,989 and
$37,353,716 at September 30, 1998 and 1997, respectively.
Deposits in excess of $100,000 are not federally insured.

Scheduled maturities of certificates of deposit at September 30,
1998 are as follows:



Years ending September 30:
1999                         $105,205,697
2000                           11,419,550
2001                            5,795,318
2002                            1,434,891
2003                               99,489
       Total                 $123,954,945



Interest expense on deposits for the years ended September 30,
1998, 1997, and 1996 is summarized as follows:


                              1998          1997          1996

Savings accounts          $  185,456    $  187,628    $  260,564
NOW accounts                 422,613       402,199       360,598
Certificates of deposit    6,568,040     6,060,134     6,308,962
    Total                 $7,176,109    $6,649,961    $6,930,124



9. EARNINGS PER SHARE

In 1998, the Company adopted SFAS No. 128, Earnings Per Share.
effective December 15, 1997.  Basic earnings per share were
computed by dividing net income by the weighted average number of
shares of common stock outstanding during the years ended
September 30, 1998, 1997, and 1996.  Diluted earnings per share
for the years ended September 30, 1998, 1997, and 1996, were
computed by dividing net income by the weighted average number of
shares of common stock outstanding and the dilutive effects of
the shares awarded under the Management Recognition Plan ("MRP")
and the Stock Option Plan, based on the treasury stock method
using an average fair market value of the stock during the
respective periods.  As a result, the Company's reported earnings
per share for 1997 and 1996 were restated.  Earnings per share
for the period from March 25, 1996, the date of Conversion, to
September 30, 1996, have been computed based on the earnings
during that period and on the weighted average number of shares
of common stock and common stock equivalents outstanding during
that period.  The weighted average number of shares used for the
period from March 25, 1996 through September 30, 1996, was
4,265,638.

The following table represents the earnings per share
calculations for the years ended September 30, 1998, 1997, and
1996 accompanied by the effect of this accounting change on
previously reported earnings per share:




                                                        Per Share
                                   Income     Shares      Amount

1998:
Net income                       $3,050,813
Basic earnings per share:
   Income available to common
     shareholders                 3,050,813  4,013,858     $.76
Dilutive securities:
   Management recognition
     plan shares                          0    140,915
   Incentive stock option
     plan shares                          0     57,220
Diluted earnings per share:
   Income available to common
     shareholders plus assumed
     conversions                 $3,050,813  4,211,992     $.72

1997:
Net income                       $3,036,253
Basic earnings per share:
   Income available to common
     shareholders                $3,036,253  4,215,679    $.72

Dilutive securities:
   Management recognition
     plan shares                          0     86,555
   Incentive stock option
     plan shares                          0     51,151
Diluted earnings per share:
   Income available to common
     shareholders plus
     assumed conversions         $3,036,253  4,353,385    $.70

1996:
Net income from March 25, 1996   $1,152,177
Basic and diluted earnings
  per share:
   Income available to common
     shareholders                 1,152,177  4,265,638    $.27


Changes in previously reported earnings per share were as follows
for the years ended September 30, 1997 and 1996:


                                         1997     1996

Earnings per share, as reported          $.70     $.27
Earnings per share, as amended:
   Basic                                  .72      .27
   Diluted                                .70      .27




10.   COMPENSATION AND EMPLOYEE BENEFITS

Employee Stock Ownership Plan

In connection with the Conversion, the Bank established an ESOP
for eligible employees.  The ESOP purchased 363,200 shares of the
Company's common stock with the proceeds of a $3,632,000 note
payable from the Bank to the Company and secured by the Common
Stock owned by the ESOP.  Interest and principal under the note
are due in quarterly installments through June 2013; interest is
payable quarterly based on the average daily outstanding balance
of principal at the rate of 8.25% per annum.  Impact of this
financing is eliminated in the consolidated financial statement
presentation.

Expense related to the ESOP for the years ended September 30,
1998, 1997, and 1996 was approximately $432,000, $348,000, and
$220,000, respectively.  Unearned compensation related to the ESOP was
approximately $2,996,000 and $3,240,000 at September 30, 1998 and
1997, respectively, and is shown as a reduction of stockholders'
equity in the accompanying consolidated statements of financial
condition.  Unearned compensation is amortized into compensation
expense based on employee services rendered in relation to shares
which are committed to be released.

Unearned compensation is amortized into compensation expense based on
employee services rendered in relation to shares which are committed to
be released based on the fair value of shares.  The difference between
the fair value of shares committed to be released and the cost of those
shares to the ESOP is credited to additional paid-in capital in
accordance with Statement of Position 93-6 Employers' Accounting for
Employee Stock Ownership Plans.

Contributions to the ESOP which will be used to repay the loan the
Company made to the ESOP Trust to form the ESOP are debited to other
assets.  At September 30, 1998, approximately $2.4 million which will
be used to repay the ESOP loan was included in other assets.

Management Recognition Plan

During fiscal 1997, the Bank established a MRP which purchased
174,450 shares of the Company's common stock on the open market
subsequent to the Conversion.  The MRP provides for awards of
common stock to directors and officers of the Bank.  The
aggregate fair market value of the shares purchased by the MRP is
considered unearned compensation at the time of purchase and
compensation is earned ratably over the stipulated vesting
period.  The expense related to the MRP was approximately
$633,000 and $307,000 for 1998 and 1997, respectively.  Unearned
compensation related to the MRP was approximately $2,758,000 and
is shown as a reduction to stockholders' equity in the accompanying
consolidated statements of financial condition.

Contributions to the MRP plan during 1998 and 1997 were for the
purchase of shares for grants during the year.  The amount of the
contributions which equalled the share price on the date of grant
was debited to unearned compensation.  The difference between the share
repurchase price and the price on the date of grant was debited to
addition paid-in capital.

Contributions to the MRP, usually in the form of dividend equivalents,
which will result in future compensation to the employees are debited to
unearned compensation.

Stock Option Plan

During fiscal 1997, the Company established a stock option plan
to provide incentive stock options to employees and non-incentive
stock options to non- employee directors.  The Company accounts
for the Plan under the provisions of Accounting Principles Board
Opinion ("APB") No. 25, Accounting for Stock Issued to Employees
(see Note 10).

Defined Benefit Pension Plan

The Bank has a qualified, noncontributory defined benefit pension
plan covering substantially all its employees.  Benefits are
based on each employee's years of service up to a maximum of 40
years and the average of that employee's compensation for the
highest five consecutive calendar years out of the last ten years
prior to retirement.  An employee becomes fully vested upon
completion of five years of qualifying service.  The Bank's
funding policy is to make annual contributions equal to or
greater than the required minimum under ERISA.  The funds are
primarily invested in short-term certificates of deposit with the
Bank.

The following sets forth the plan's funded status and amounts
recognized in the Bank's statement of financial condition at
September 30, 1998 and 1997:


                                            1998        1997
Actuarial present value of
  benefit obligations:
Accumulated benefit
  obligation:
     Vested                             $2,346,986   $2,011,979
     Nonvested                              59,397       55,209
Total                                    2,406,383    2,067,188
Additional benefit based on
  estimated future salary levels           516,496      567,359
Projected benefit obligation for
  service rendered to date               2,922,879    2,643,547
Plan assets at fair market value         2,372,912    2,254,819
Unfunded projected benefit obligation     (549,967)    (388,728)
Unrecognized net loss from past
  experience different from that
  assumed and effects of changes in
  assumptions                                525,550    364,104
Unrecognized net transition obligation
  (asset from adoption of SFAS No. 87)
   being amortized over 20 years            (100,083)  (109,181)
Unfunded pension cost liability
  (included in other liabilities)       $    124,500 $  133,805



The components of net periodic pension expense for the years
ended September 30, 1998, 1997, and 1996 are as follows:




                                       1998      1997      1996
Service cost--benefits earned
 during the period                  $ 72,863  $ 63,033  $ 57,591
Interest cost on the projected
 benefit obligation                  172,438   156,320   147,926
Actual return on plan assets         (93,825) (200,378) (120,002)
Net asset gain (loss) during
 the period deferred for
 later recognition                   (62,839)    9,779    13,507
Amortization of unrecognized
 net obligation                       (9,098)   (9,098)   (9,098)
Net periodic pension cost           $ 79,539  $ 19,656  $ 89,924

Assumptions used to develop
 the net periodic pension
 cost were:
    Weighted average discount
      rate                              6.50%     6.50%    6.50%
    Weighted average rate of
      compensation increase             5.00      5.00     5.00
    Weighted average expected
      long-term rate of return
      on plan assets                    4.00      4.00     4.00


Directors' Retirement Plan

During fiscal 1993, the Bank established the Directors'
Retirement Plan ("DRP") whereby directors or their beneficiaries
will be provided specific amounts of quarterly retirement
benefits for a period of ten years following retirement.
Directors are eligible under the plan upon the completion of ten
years of service.  The related compensation expense for the DRP
was $37,171, $33,199, and $52,791, for fiscal years 1998, 1997,
and 1996, respectively.  The related accrued compensation is
included in "accrued expenses and other liabilities" in the
accompanying consolidated statements of financial condition.

For fiscal year 1997 and 1996, the projected benefit obligations
related to the DRP were approximately $496,000 and $483,000; the
accumulated benefit obligations, which were accrued for and
included in "accrued expenses and other liabilities," were
approximately $325,000 and $309,000; and the service costs were
approximately $33,000 and $53,000, respectively.  The weighted
average discount rate used was 6.5% for 1998 and 1997.

Employment Agreement

The Company has 36-month employment agreements with its Chief
Executive Officer and its President.  These agreements provide
that if their employment under the agreements is terminated by
the Company without cause or if they terminate their employment
for good reason, they shall be paid approximately three times
their salary.


11.   STOCK-BASED COMPENSATION PLANS

Effective July 1, 1996, the Company adopted SFAS No. 123,
Accounting for Stock-Based Compensation.  This Statement
establishes financial accounting and reporting standards for
stock-based employee compensation plans.  Those plans include all
arrangements by which employees receive shares of stock or other
equity instruments of the employer or the employer incurs
liabilities to employees in amounts based on the price of the
employer's stock.  Examples are stock purchase plans, stock
options, restricted stock and stock appreciation rights.  The
accounting requirements of this Statement are effective for
transactions entered into in fiscal years that begin after
December 15, 1995.

The Company has a stockholder approved Option Plan.  The Option
Plan provides for the grant of incentive stock options ("ISO") to
employees and nonincentive stock options ("non-ISO") to
non-employee directors.  The Company accounts for this plan under
APB No. 25, under which no compensation cost has been recognized.

The Company may grant options up to 462,875 shares under the
Option Plan and has granted options outstanding of 440,859 shares
through September 30, 1997.  Under the Option Plan, the option
exercise price equals the stock's market price at the date of
grant.  The options vest 20% per year and become exercisable upon
the participant's completion of each of five years of service.

Had compensation costs for these plans been determined consistent
with SFAS No. 123, the Company's net income and earnings per
share would have been reduced to the following pro forma amounts
for the year ended September 30:





                              1998           1997
Net income:
  As reported              $3,050,813     $3,036,523
  Pro forma                 2,436,936      2,745,844

Earnings per share:
  As reported:
     Basic                       $.76           $.70
     Diluted                      .72            .70
  Pro forma:
     Basic                        .61            .63
     Diluted                      .57            .63


Because the SFAS No. 123 method of accounting has not been
applied to options granted prior to March 25, 1996, the resulting
pro forma compensation costs may not be representative of that to
be expected in future years.

At September 30, 1998, unearned compensation related to the
Option Plan has not been recorded, as the Company has not
purchased shares of the Company's common stock to fund the Option
Plan Trust.  A summary of the status of the Company's stock
option plan at September 30, 1998 and 1997 and the changes during
the year then ended is as follows:


                                  1998               1997
                                     Weighted           Weighted
                                      Average            Average
                                     Exercise           Exercise
                             Shares    Price    Shares    Price
Outstanding at beginning
  of year                   440,859   $15.42         0   $ 0.00
    Granted
    Forfeitures              22,016    15.10   440,859    15.42
    Exercised                     0     0.00         0     0.00
Outstanding at end
  of year                   462,875   $15.41   440,859   $15.42

Exercisable at end
  of year                    92,875   $15.41         0   $ 0.00

Weighted average fair
  value of the options
  granted                     $6.80              $6.92




At September 30, 1998, 440,859 of the 462,875 options outstanding
have exercise prices between $15.19 and $15.94 with a weighted
average exercise price of $15.42 and an average remaining
contractual life of 8.5 years.  The remaining 22,016 options
outstanding at September 30, 1998, consist of options granted
during fiscal 1998 and have exercise prices between $14.50 and
$16.38, with a weighted average exercise price of $15.10 and an
average remaining contractual life of 9.5 years.  Of the options
granted in fiscal 1998 and 1997, 4,703 and 88,172 options,
respectively, are exercisable as of September 30, 1998.

The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 1998
and 1997, respectively:  risk-free interest rates of 6.07% and
5.12% for 1998 and 6.76% and 6.70% for 1997; expected life of the
options is 20% per year over the next five years and expected
volatility of 24% in 1998 and 21% in 1997; and dividend yields of
2% in 1998 and 30% in 1997.

12.   INCOME TAXES

The provisions (benefit) for income taxes for the years ended
September 30, 1998, 1997, and 1996, were as follows:


                   1998          1997        1996
Current:
  Federal      $1,623,894    $1,500,326   $1,324,389
  State           164,777       156,393      140,962
                1,788,671     1,656,719    1,465,351
Deferred           28,874        71,401     (281,057)
      Total    $1,817,545    $1,728,120   $1,184,294



The differences between the provisions for income taxes and the
amounts computed by applying the statutory federal income tax
rate of 34% to income before income taxes at September 30, 1998,
1997, and 1996 were as follows:



                                     1998         1997       1996
Expected income tax expense
 at federal tax rate             $1,655,242   $1,619,979  $1,133,068
Increase (decrease) resulting
 from:
   State income tax, net            110,519      107,588      75,840
   Dividend received deduction      (52,377)     (55,452)    (47,997)
   Tax-exempt interest income             0            0      (5,798)
   Other                            104,161       56,005      29,181
                                 $1,817,545   $1,728,120  $1,184,294

Effective income tax rate               37%          36%         35%


Temporary differences between the financial statement carrying
amounts and tax bases of assets and liabilities that give rise to
significant portions of the net deferred tax liability as of
September 30, 1998 and 1997 relate to the following:


                                            1998          1997

Book allowance for loan loss           $  288,148    $   224,200
Retirement plan                           131,093        123,580
Accrued bonuses                            27,031         54,792
Employee benefit plans                    185,035        201,805
Other                                      44,298         50,902
Deferred tax asset                        675,605        655,279

Unrealized gain on securities
  available for sale                   (4,684,912)    (3,486,038)
Tax bad debt reserve in excess
  of base year                           (255,993)      (324,778)
FHLB dividends                           (181,446)      (129,766)
Accretion of bond discount                (40,938)       (37,667)
Deferred loan fees and costs, net         (97,474)       (49,857)
Depreciation                              (40,343)       (23,502)
Other                                     (12,393)       (13,817)
Deferred tax liability                 (5,313,499)    (4,065,425)
Net deferred tax liability            $(4,637,894)   $(3,410,146)


Thrift institutions, in determining taxable income, had
historically been allowed special bad debt deductions based on
specified experience formulae or on a percentage of taxable
income before such deductions.  On August 2, 1996, Congress
passed the Small Business Job Protection Act that, among other
things, repealed the tax bad debt reserve method for thrifts
effective for taxable years beginning after December 31, 1995.
As a result, thrifts must recapture into taxable income the
amount of their post-1987 tax bad debt reserves over a six-year
period beginning after 1995.  At September 30, 1997, the Bank's
post-1987 tax bad debt reserve, subject to recapture, was
approximately $855,000.  The Bank recaptured approximately
$171,000 of this reserve into taxable income in the current year.
The recapture did not have any effect on the Bank's net income
because the related tax expense has already been accrued.

Because of such repeal, thrifts such as the Bank may only use the
same tax bad debt reserve that is allowed for commercial banks.
Accordingly, a thrift with assets of $500 million or less may
only add to its tax bad debt reserves based upon its moving
six-year average experience of actual loan losses (i.e., the
experience method).

The portion of a thrift's tax bad debt reserve that is not
recaptured under this new law is only subject to recapture at a
later date under certain circumstances.  These include stock
repurchases, redemptions by the thrift or if the thrift converts
to a type of institution (such as a credit union) that is not
considered a commercial bank for tax purposes.  However, no
further recapture would be required if the thrift converted to a
commercial bank charter or was acquired by a commercial bank.
The Bank does not anticipate engaging in any transactions at this
time that would require the recapture of its pre-1988 tax bad
debt reserves of approximately $4,650,000.

13.   FEDERAL HOME LOAN BANK ADVANCES

The Company uses Federal Home Loan Bank ("FHLB") advances as an
alternative to funding sources with similar maturities such as
certificates of deposit or other deposit programs.  The Company
is required by its blanket floating lien agreement with the FHLB
to pledge its portfolio of first mortgage collateral, demand
deposit accounts, capital stock, and certain other assets.  These
advances generally offer more attractive rates when compared to
other traditional financing options and are flexible, allowing
the Company to quickly obtain the necessary maturities and rates
that best suit the Company's overall asset/liability policy.

The following table summarizes information concerning FHLB
advances at September 30:


                                          1998       1997
                                          (In thousands)
Ending balance                          $65,451    $18,282
Average balance                          41,178      6,944
Maximum month-end balance during year    65,451     18,282
Average rate paid                          5.30%      5.93%


Scheduled maturities of FHLB advances as of September 30, 1998
were as follows (in thousands):

Due in less than one year          $39,000
Due from one to five years           5,000
Due from five to ten years          15,750
Due after ten years                  5,701
                                   $65,451

14.   REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies.  Failure to meet
minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Bank's
financial statements.  Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must
meet specific capital guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting
practices.  The Bank's capital amounts and classifications 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 Bank to maintain minimum amounts and ratios
(set forth in the table which follows) of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets
(as defined), and of Tier 1 capital (as defined) to average
assets (as defined).  Management believes, as of September 30,
1998, and 1997 that the Bank meets all capital adequacy
requirements to which it is subject.

As of September 30, 1998 and 1997, the most recent notification
from the regulatory authorities categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action.  To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier 1 risk-based, Tier 1
leverage ratios as set forth in the table which follows.

Actual capital amounts and ratios are presented in the table
below for the Bank:



                                                     To Be Well
                                                  Capitalized Under
                                    For Capital   Prompt corrective
                       Actual    Adequacy Purpose  Action Provision
                    Amount  Ratio  Amount  Ratio    Amount   Ratio
                     ($)     (%)     ($)     (%)      ($)      (%)
September 30,1998

Total Capital
 (To risk weighted
  Assets)          44,003   40.6   8,672    8.0    10,840    10.00

Tier 1 (core)
  capital (to risk
  weighted assets) 43,247   39.9     N/A    N/A     6,504     6.0
Tier 1 (core)
  capital (to
  adjusted total
  assets)          43,247   16.5   7,840    3.0    13,066     5.0

Tangible Capital
 (to adjusted
  total assets)    43,247   16.5   3,920    1.5       N/A     N/A

September 30, 1997

Total capital
 (to risk weighted
  assets)          43,555   47.5   7,335    8.0     9,169    10.0

Tier 1 (core)
  capital (to risk
  weighted assets) 42,965   46.9     N/A    N/A     5,502     6.0

Tier 1 (core)
  capital (to
  adjusted total
  assets)          42,965   21.5   6,000    3.0     9,999     5.0

Tangible Capital
 (to adjusted
  total assets)    42,965   21.5   3,000    1.5       N/A     N/A

The following table is a reconciliation of the Bank's
stockholder's equity to tangible, Tier 1, and risk-based capital
as required by the OTS:

                                      1998       1997
                                       (In thousands)
Stockholder's equity               $ 50,876   $ 48,604
Unrealized gain on securities
 available for sale                  (7,629)    (5,639)
Tangible and Tier 1 capital          43,247     42,965
Allowance for loan losses               756        590
Total risk based capital           $ 44,003   $ 43,555

Total assets                       $273,631   $205,627
Adjusted total assets               261,327    199,988
Total risk weighted assets          108,401     91,693


The Company's principal source of funds for dividend payments is
dividends from the Bank.  Pursuant to OTS regulations, an
institution that exceeds all fully phased-in capital requirements
before and after a proposed capital distribution and has not been
advised by the OTS that it is in need of more than the normal
supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal
to the greater of (i) 100% of its net income to date during the
calendar year plus the amount that would reduce by one-half its
"surplus capital ratio" (the excess capital over its fully
phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent
four-quarter period.  Any additional capital distributions
require prior regulatory approval.

14.   COMMITMENTS AND CONTINGENCIES

Loan Commitments

At September 30, 1997, the Bank had outstanding commitments to
originate loans in the amount of $2,955,025.  Of these
outstanding amounts, commitments of $1,106,600 were at fixed
rates ranging between 7.25% and 8.25%; terms for these
outstanding commitments are up to 360 days.  Commitments to
extend credit include exposure to some credit loss in the event
of nonperformance of the customer.  The Bank's credit policies
and procedures for credit commitments are the same as those for
extensions of credit that are recorded on the statement of
financial condition.

Litigation

The Company is a defendant in certain claims and legal actions
arising in the ordinary course of business.  In the opinion of
management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material
adverse effect on the consolidated financial position of the
Company.


15.   COMMITMENTS AND CONTINGENCIES

Loan Commitments

At September 30, 1998, the Bank had outstanding commitments to
originate loans in the amount of $4,523,134.  Of these
outstanding amounts, commitments of $2,239,584 were at fixed
rates ranging between 7% and 9.25%; terms for these outstanding
commitments are up to 360 days.  Commitments to extend credit
include exposure to some credit loss in the event of
nonperformance of the customer.  The Bank's credit policies and
procedures for credit commitments are the same as those for
extensions of credit that are recorded on the statement of
financial condition.

Litigation

The Company is a defendant in certain claims and legal actions
arising in the ordinary course of business.  In the opinion of
management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material
adverse effect on the consolidated financial position of the
Company.


16.   INTEREST RATE SENSITIVITY

A portion of the Bank's interest-earning assets are long-term
fixed rate mortgage loans and mortgage-backed and related
securities (approximately 54%), while its principal source of
funds is savings deposits with maturities of three years or less
(approximately 91%).  Because of the short-term nature of the
savings deposits, their cost generally reflects returns currently
available in the market.  Accordingly, the savings deposits have
a high degree of interest rate sensitivity, while the mortgage
loan portfolio, to the extent of fixed rate loans, is relatively
fixed and has much less sensitivity to changes in current market
rates.  Although these conditions are somewhat mitigated by the
Bank's risk management strategies of selling certain long-term
fixed rate loans and plans to increase amounts of short-term
consumer loans originated, changes in market interest rates tend
to directly affect the level of net interest income.

At June 30, 1998, based on the most recent available information
provided by the Office of Thrift Supervision ("OTS"), it was
estimated, on an unaudited basis, that the Bank's net portfolio
value ("NPV") (the net present value of the Bank's cash flows
from assets, liabilities, and off-balance sheet items) would
decrease 6%, 13%, 20%, and 27% and increase 5%, 6%, 7%, and 11%
in the event of 1%, 2%, 3%, and 4% increases and decreases in
market interest rates, respectively.  These calculations indicate
that the Bank's NPV could be adversely affected by increases in
interest rates but could be favorably affected by decreases in
interest rates.  Computations of prospective effects of
hypothetical interest rate changes are based on numerous
assumptions, including relative levels of market interest rates,
prepayments, and deposit run-offs and should not be relied upon
as indicative of actual results.  Certain shortcomings are
inherent in such computations.  In order to mitigate its interest
rate risk, the Bank maintains substantial capital levels that
management believes are sufficient to sustain unfavorable
movements in market interest rates.

17.   FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about
financial instruments, whether or not recognized in the statement
of condition, for which it is practicable to estimate that value.
In cases where quoted market prices are not available, fair
values are based on estimates using present value or other
valuation techniques.  Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows.  In that regard, the derived fair
value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instrument.  The use of different
market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.  Also, the
fair value estimates presented herein are based on pertinent
information available to Management as of September 30, 1998.
Such amounts have not been comprehensively revalued for purposes
of these financial statements since those dates and, therefore,
current estimates of fair value may differ significantly from the
amounts presented herein.

The following methods and assumptions were used by the Company in
estimating its fair values disclosures for financial instruments:

Investment Securities

Fair values for investment securities are primarily based on
quoted market prices.  If a quoted market price is not available,
fair value is estimated using market prices for similar
securities.

Loans

For equity lines and other loans with short-term or variable rate
characteristics, the carrying value reduced by an estimate for
credit losses inherent in the portfolio is a reasonable estimate
of fair value.  The fair value of all other loans is estimated by
discounting their future cash flows using interest rates
currently being offered for loans with similar terms, reduced by
an estimate of credit losses inherent in the portfolio.  The
discount rates used are commensurate with the interest rate and
prepayment risks involved for the various types of loans.

Deposits

The fair value disclosed for demand deposits (e.g., interest and
non-interest bearing demand, savings and money market savings),
are, as required by SFAS No. 107, equal to the amounts payable on
demand at the reporting date (i.e., their carrying amounts).
Fair values for certificates of deposits are estimated using a
discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of
aggregated monthly maturities.


Federal Home Loan Bank Advances

The fair values of the Company's FHLB advances are based on
quoted market prices of similar instruments or estimates using
the Company's incremental borrowing rates for similar types of
instruments.


Commitments to Extend Credit

The value of these unrecognized financial instruments is
estimated based on the fee income associated with the commitments
which, in the absence of credit exposure, is considered to
approximate their settlement value.  As no significant credit
exposure exists and because such fee income is not material to
the Company's financial statements at September 30, 1998 and
1997, the fair value of these commitments is not material.

Many of the Company's assets and liabilities are short-term
financial instruments whose carrying amounts reported in the
statement of condition approximate their fair values.  These
items include cash and due from banks, interest-bearing bank
balances, interest receivable and payable, and similar assets.
The estimated fair values of the Company's remaining on-balance
sheet financial instruments as of September 30, 1998 and 1997,
are summarized below:

                                1998                 1997
                         Carrying  Estimated  Carrying Estimated
                           Value   Fair Value   Value  Fair Value
Financial Assets:
Securities available
  for sale               107,470     119,799   73,976    73,976
Securities held to
  maturity                 2,742       2,761    4,157     4,122
Loans, net               141,414     142,461  127,335   127,123
Financial Liabilities:
Deposits                 144,802     144,237  132,718   132,599
FHLB advances             65,451      64,398   18,282    18,213


SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements.  The
disclosures also do not include certain intangible assets, such
as customer relationships, deposit base intangibles and goodwill.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.


18.   FDIC ASSESSMENT

The deposits of the Bank are currently insured by the Savings
Association Insurance Fund ("SAIF").  Both the SAIF and the Bank
Insurance Fund ("BIF"), the federal deposit insurance fund that
covers the deposits of state and national banks and certain state
savings banks, are required by law to attain and thereafter
maintain a reserve ratio of 1.25% of insured deposits.  The BIF
achieved the required reserve rate, and, as discussed below, the
FDIC reduced the average deposit insurance premium paid by
BIF-insured banks to a level substantially below the average
premium paid by savings institutions.  Banking legislation was
enacted September 30, 1996 to eliminate the premium differential
between SAIF-insured institutions and BIF-insured institutions.
The FDIC Board of Directors established a special assessment
necessary to recapitalize the SAIF at 65.7 basis points of SAIF
assessable deposits held by affected institutions as of March 31,
1995.  Based upon its level of SAIF deposits as of March 31,
1995, the Bank recorded its special assessment of approximately
$864,000 during the year ended September 30, 1996.  Upon
recapitalization of the SAIF, premiums paid by SAIF-insured
institutions were reduced.  The legislation also provides for the
merger of the BIF and the SAIF, with such merger being
conditioned upon the prior elimination of the thrift charter.



19.   STOCK CONVERSION

On September 15, 1995, the Conversion of the Bank from a
federally-chartered mutual institution to a federally-chartered
stock savings bank through amendment of its charter and issuance
of common stock to the Company was completed.  Related thereto,
the Company sold 4,628,750 shares of common stock, par value $.01
per share, at an initial price of $10 per share in subscription
and community offerings.  Costs associated with the Conversion
were approximately $1,285,000, including underwriting fees.
These conversion costs were deducted from the gross proceeds of
the sale of the common stock.

In connection with the Offering, the Bank established a
liquidation account in an amount equal to its regulatory capital
as of the latest practicable date prior to consummation of the
Offering.

The Company's ability to pay dividends will be largely dependent
upon dividends to the Company from the Bank.  Pursuant to OTS
regulations, the Bank will not be permitted to pay dividends on
its capital stock or repurchase shares of its stock if its
stockholders' equity would be reduced below the amount required
for the liquidation account or if stockholders' equity would be
reduced below the amount required by the OTS.

20.   SIGNIFICANT EVENT

On May 2, 1997, the Company's Board of Directors declared a
special dividend of $2.50 per share.  The dividend, payable
May 30, 1997, to shareholders of record as of May 16, 1997,
totaled approximately $10.6 million.

21.   PARENT COMPANY FINANCIAL STATEMENTS

Separate condensed financial statements of Community Federal
Bancorp, Inc. (the "Parent Company") as of and for the year ended
September 30, 1998 and 1997 are presented below:

                Statement of Financial Condition
                  September 30, 1998 and 1997
                 (Dollar amounts in thousands)


                                      1998       1997
ASSETS:
Cash and cash equivalents           $ 2,147    $ 5,902
Securities available for
 sale                                 1,192     11,260
Investment in subsidiary             50,876     48,604
ESOP loan receivable                  3,255      3,368
Premises and equipment                  436        811
Other assets                              8        313
Total assets                        $57,914    $70,258

LIABILITIES:
FHLB advances                       $     0    $10,500
Other liabilities                       349      1,195
Total liabilities                       349     11,695

STOCKHOLDERS' EQUITY:
Preferred stock                           0          0
Common stock                             46         46
Additional paid-in capital           45,210     45,113
Retained earnings                    15,488     13,714
Treasury stock, at cost              (5,546)         0
Unearned compensation                (5,277)    (5,998)
Unrealized gain on securities
 available for sale, net              7,644      5,688
Total stockholder's equity           57,565     58,563
Total liabilities and
 stockholders' equity               $57,914    $70,258



                      Statement of Income
         For the Year Ended September 30, 1998 and 1997
                 (Dollar amounts in thousands)



                                           1998       1997
INTEREST INCOME:
Interest and dividends on
 securities available for sale          $   452     $  963
Interest income from subsidiary             393        415
Dividends from subidiary                  3,500          0
Total income                              4,345      1,378

INTEREST EXPENSE                            377        232
Net interest income                       3,968      1,146
NONINTEREST EXPENSE:
Loss on sale of securities                    0         29
Other operating expenses                    127        165
INCOME BEFORE INCOME TAXES AND
 DISTRIBUTION (IN EXCESS OF)
 UNDER EQUITY BASIS EARNINGS
 OF SUBSIDIARY                            3,841        952

INCOME TAXES                                107        347
INCOME BEFORE DISTRIBUTIONS
 (IN EXCESS OF) UNDER EQUITY
 BASIS EARNINGS OF SUBSIDIARY             3,734        605

DISTRIBUTIONS (IN EXCESS OF)
 UNDER EQUITY BASIS EARNINGS
 OF SUBSIDIARY                             (683)     2,431
Net income                               $3,051     $3,036




                    Statement of Cash Flows
         For the Year Ended September 30, 1998 AND 1997
                 (Dollar amounts in thousands)


                                          1998       1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                               $ 3,051    $3,036
Distribution (in excess of) under
 equity basis earnings of subsidiary         683    (2,431)
                                                       605
Adjustments to reconcile net income
 to net cash provided by operating
 activities:
Loss on sale of securities available
 for sale                                      0        29
Amortization of premiums and discounts,
 net                                         (39)       13
Decrease in other assets                     305        75
Increase in other liabilities               (825)       530
Net cash provided by operating
 activities                                3,175      1,252
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of available
 for sale securities                      10,804      5,397
(Purchase)sale of property and
 equipment,net                               375       (811)
Purchase of securities available
 for sale                                 (3,018)    (1,920)
Proceeds from maturities, principal
 collections and calls on securities
 available for sale                        2,266      2,682
Net cash provided by investing
 activities                               10,427      5,348
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of)FHLB
 advances, net                           (10,500)    10,500
Contributions to stock plan trusts          (147)    (1,127)
Purchase of treasury stock, at cost       (5,546)         0
Payments received on ESOP loan               113        130
Dividends paid                            (1,277)   (11,834)
Net cash provided by financing
 activities                              (17,357)    (2,331)
NET INCREASE(DECREASE)IN CASH
 AND CASH EQUIVALENTS                     (3,755)     4,269

CASH AND CASH EQUIVALENTS,
 beginning of year                         5,902      1,633
CASH AND CASH EQUIVALENTS,
 end of year                             $ 2,147     $5,902

Earnings are presented on a retroactive basis, recognizing
earnings of the subsidiary for the years ended September 30, 1998
and 1997.  This presentation is based on the accounting for the
Conversion at historical cost, in a manner similar to that
utilized in a pooling of interests.





MANAGEMENET'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                     RESULTS OF OPERATIONS


General

Community Federal Bancorp, Inc. (the "Company") was incorporated
under the laws of Delaware effective March 25, 1996.  The Company
is classified as a unitary savings institution holding company
and is subject to regulation by the Office of Thrift Supervision
("OTS").

The Company is the sole shareholder of Community Federal Savings
Bank (the "Bank").  The Bank was organized in 1933 as a federally
chartered mutual savings and loan association.  In that year, it
became a member of the Federal Home Loan Bank ("FHLB") system and
obtained federal deposit insurance.  Today the Bank's deposits
are insured by the Federal Deposit Insurance Corporation
("FDIC").

The Bank's primary market area includes Lee County and its six
contiguous counties, which it serves from two Tupelo locations.
The Bank's business strategy centers around the concept of
operating as a profitable, community-oriented organization
dedicated to providing high-quality products and service to this
market.  As part of this strategy, the Bank pursues the following
concepts.

Emphasis on Traditional Banking Products.  Traditionally, the
Bank has focused on originating a portfolio of one-to-four family
residential first mortgage loans in its primary market area.  In
recent years, the Bank has added consumer and commercial loan
products and has experienced outstanding growth in delivering
these loans to its customers.  Historically, the major sources of
funds have been savings deposits and certificates of deposit.  In
recent years, checking accounts for consumers and businesses have
been offered by the Bank.

Management of Interest Rate Risk.  The Bank has actively sought
to reduce vulnerability of its operations to changes in interest
rates by managing the imbalance between its interest-earning
assets and interest-bearing liabilities with shorter-term and
more liquid securities and other investments.  To achieve this
goal, the Bank has invested new funds from deposit growth,
earnings and funds from repayments of loans and securities into
mortgage-backed securities and collateralized mortgage
obligations and government-related securities with a maturity or
average life of five years or less.  Moreover, the consumer and
commercial loans that the Bank recently began to originate has
added additional shorter-term loans that will be held in the
Bank's loan portfolio.

Emphasis on Asset Quality.  Management believes that high asset
quality is a key to long-term financial success.  As a result,
the loans which are emphasized by the Bank and its related
policies and practices are intended to be of high quality.  At
September 30, 1998, the Bank's non-performing assets, which
consist of non-accrual loans, accruing loans greater than 90 days
delinquent and real estate acquired through foreclosure or by
deed-in-lieu thereof, amounted to $1.1 million or .40% of the
Bank's total assets.  Total charge offs were $68,715 or .05% of
average loans for the fiscal year ended September 30, 1998.

Utilization of Capital.  It is the Company's policy to maintain a
prudent, adequate level of capital.  Presently, the Company's
capital far exceeds the level established by regulatory
guidelines.  In September of 1997, the Company embarked on a
growth program designed to leverage the Company's capital to a
higher degree.  The program involves the use of new deposits and
borrowings from the FHLB to fund the purchase of securities.  The
goal of this program is to increase net income and improve the
return on shareholders' equity.


Financial Condition Review

At September 30, 1998, the Company's assets totaled $275 million,
as compared to $216 million at September 30, 1997.  Total assets
increased by $59 million, or 27.5%, from September 30, 1997 to
September 30, 1998.

The increase in other assets can be primarily attributed to a $2.4
million Contribution to the ESOP Trust which will be used to repay
the loan the Company made to the ESOP Trust to form the ESOP.

Major uses of funds were loans and investment securities.
Overall net loan growth in 1998 was $14 million, up 11.1% from
$127.3 million at September 30, 1997 to $141.4 million at
September 30, 1998.  Consumer loans increased $729,000 or 16%
from $4.6 million at September 30, 1997 to $5.3 million at
September 30, 1998.  Commercial loans increased $4.7 million or
64.3% to $12 million at September 30, 1998, compared to $7.3
million at September 30, 1997.  Mortgage loans increased $8.8
million or 7.6% from $116.5 million at September 30, 1997 to
$125.2 million at September 30, 1998.

The securities portfolio is utilized to provide a quality
investment alternative for available funds as well as a stable
source of interest income.  Investment securities, along with
mortgage-backed and related securities, totaled $122.5 million at
September 30, 1998, an increase of $44.4 million or 56.8% from
$78.1 million at September 30, 1997.  The portfolio mix at
September 30, 1998 consisted of 83.2% U.S. Government and federal
agencies bonds and notes, 14% equity securities and 2.8% mutual
funds.

Major sources of funds are deposits and advances from the Federal
Home Loan Bank.  During the fiscal year ended September 30, 1998,
total deposits increased by $12.1 million or 9.1% to $144.8
million, compared to $132.7 million at September 30, 1997.  The
deposit mix has remained substantially unchanged with the
exception of a slight shift toward more time deposits.

The Company used advances from the FHLB to leverage the purchase
of mortgage-backed and related securities during the fiscal year
ended September 30, 1998.  Advances from FHLB amounted to $65.5
million at September 30, 1998, an increase of $47.2 million over
September 30, 1997.

At September 30, 1998, stockholders' equity totaled $57.6 million
or 20.9% of assets.  This represents a decrease of $998,000 or
1.7%, compared to September 30, 1997.  The Company entered a
stock repurchase program in early 1998, which is recorded as
treasury stock and, in turn, reduced stockholders' equity by $5.5
million.  During fiscal 1998, the Company paid regular dividends
of $.32 per share amounting to $1.3 million.  Net income
continued to be a strong contributor to stockholders' equity
during fiscal 1998 as the Company's net income amounted to $3.1
million.  In addition, the amortization of unearned compensation
increased stockholders' equity by $1 million and realized gains
on securities available for sale increased $2 million.

Results of Operations

Net Income.  The Company had consolidated net earnings of $3.1
million for the fiscal year ended September 30, 1998,
representing a return on average assets of 1.2%, a return on
average equity of 5.2%, and basic earnings per share of $.76 and
fully diluted of $.72.  For the fiscal year ended September 30,
1997, the Company's net income amounted to $3.0 million or fully
diluted earnings per share of $.70 compared to $2.1 million for
the fiscal year ended September 30, 1996.  Net income for 1996
was materially affected by the $864,000 ($535,000, net of tax
benefit), one-time special assessment of 65.7 basis points on
SAIF insured deposits as of March 31, 1995.  But for this event,
the Company's net income for fiscal 1996 would have been $2.6
million as compared to the $2.1 reported in the consolidated
statements of income.

Net Interest Income.  Net interest income is the largest
component of the Company's net income and is determined by the
difference between the yields earned on its interest-earning
assets and the rates paid on interest-bearing liabilities.
Changes in net income can be broken down into two components, the
change in earning assets, less the change in average interest
bearing liabilities, and the change in net interest spread.  Net
interest income was $7.0 million, $7.5 million, and $6.2 million
for the years ended September 30, 1998, 1997, and 1996,
respectively.  The $450,000 decrease for fiscal 1998 is a
combination of the two components.  Net interest margin decreased
to 2.87% from 3.65% for fiscal 1997, and average interest earning
assets increased $40 million or 19.5%, while average interest
bearing liabilities increased $46 million or 32.9%.  The net
interest margin for fiscal 1997 increased 24 basis points to
3.65% from 3.41% for fiscal 1996.  The main reason for the
increase in net interest income for fiscal year 1997 compared to
fiscal 1996 can be attributed to the  $22.8 million increase in
average interest earning assets while there was only a slight
increase of $4 million in average interest bearing liabilities.

Total interest income increased $2.1 million or 14.5% from $14.5
million at September 30, 1997 to $16.6 million at September 30,
1998.  Total interest income increased $1.4 million or 10.3% from
September 30, 1996 to September 30, 1997.

Total interest expense increased $2.5 million or 36.3% to $9.5
million at September 30, 1998 from $7 million at September 30,
1997.  At September 30, 1997, total interest expense increased
$74,000 or 1.1% over September 30, 1996.

Provision for Loan Losses.  The Bank's provision for loan losses
was $235,000 for the fiscal year ended September 30, 1998
compared to $20,000 each during fiscal 1997 and 1996.  Provisions
for loan losses are charged to earnings to bring the total
allowance to a level deemed appropriate by management based on
the volume and type of lending conducted by the Bank.  Provision
in fiscal 1998 was made in order to adjust the allowance for the
outstanding growth of the consumer and commercial loan portfolio
as well as the mortgage loan portfolio.  At September 30, 1998,
the reserve for loan losses amounted to $756,000 or .53% of total
loans outstanding, which is an amount that management considers
to be sufficient to protect against loan loss inherent in the
portfolio.

Non-Interest Income.  Non-interest income for September 30, 1998
was $1.9 million, a $1.7 million increase, compared to fiscal
1997.  In an effort to maximize earnings on assets, management
sold equity securities for a gain of $1.6 million.  The sales
proceeds were reinvested in higher yielding loans and securities.
The remainder of the growth was in the other income category for
service release premiums on fixed rate mortgage loans that were
sold and increased fee income.  Non-interest income for fiscal
1997 was $227,000, an increase of $39,000, compared to
non-interest income of $188,000 in fiscal 1996, which was mainly
increased fee income.

Non-Interest Expense.  Non-interest expense increased $933,000 to
$3.9 million in fiscal 1998 compared to fiscal 1997.
Compensation and benefits increased $330,000 to $2.3 million due
primarily to expenses associated with the valuation of stock
released from the Employee Stock Ownership Plan and increased
participation in benefit plans.  General and administrative
expense accounted for the remaining $218,000 increase.
Non-interest expense decreased $109,000 to $2.9 million in fiscal
1997, compared to fiscal 1996.  The primary reasons for the
decrease were attributed to the one-time special assessment of
$864,000 to recapitalize the SAIF in 1996, the $194,000 decrease
in regular deposit insurance premiums; offset by the $810,000
increase in compensation and benefits resulting from an increase
in personnel, merit raises, the Employee Stock Ownership Plan and
Management Recognition Plan, and $101,000 increase in other
general expenses.

Impact of Inflation and Changing Prices

The financial statements and related financial data presented
herein have been prepared in accordance with GAAP, which requires
the measurement of financial position and operating results in
terms of historical dollars, without considering change in
relative purchasing power over time due to inflation.

Changing prices generally have an impact on interest rates, which
can affect the Bank's earning stream and the market valuation of
its assets.

Year 2000 Problem

The Company is aware of the issue associated with the programming
code in existing computer systems as the Year 2000 approaches.
The Year 2000 issue is the result of computer programs being
written to store and process data using two digits rather than
four to define the applicable year.  Computer programs that have
time sensitive coding may recognize a date using "00" as the year
1900 rather than the year 2000.  Systems that do not properly
recognize such information could generate erroneous data or cause
systems to fail.

The Bank has conducted a review of its computer systems to
identify the systems that could be affected by the Year 2000
Issue and has developed an implementation plan to resolve the
issue.  The majority of the Bank's data processing is provided by
a third party service bureau.  The service bureau is actively
involved in resolving Year 2000 issues and has provided the Bank
with frequent updates regarding its progress.  The service bureau
has advised the Bank that it has resolved the majority of thee
Year 2000 issue.  The Bank tested the service bureau's system for
Year 2000 compliance during November of 1998.  The Bank presently
believes that, based on the progress and testing of the Bank's
service bureau, the Year 2000 problem will not pose significant
operational problems for the Bank's computer system.  The total
cost of Year 2000 projects are not estimated to be material to
the financial performance of the Company.

Average Balance, Interest, and Average Yields and Rates

The following table sets forth certain information relating to
the Company's average interest-earning assets and
interest-bearing liabilities and reflects the average yield on
assets and the average cost of liabilities for the periods and at
the date indicated.  Such yields and costs are derived by
dividing income or expense by the average monthly balance of
assets or liabilities, respectively, for the periods indicated.

The table also presents information for the periods indicated and
at September 30, 1998 with respect to the difference between the
weighted average yield earned on interest-earning assets and the
weighted average rate paid on interest-bearing liabilities, or
"interest rate spread," which savings institutions have
traditionally used as an indicator of profitability.  Another
indicator of an institution's net interest income is its "net
yield on interest-earning assets," which is its net interest
income divided by the average balance of interest-earning assets.
Net interest income is affected by the interest rate spread and
by the relative amounts of interest-earning assets and
interest-bearing liabilities.  When interest-earning assets
approximate or exceed interest-bearing liabilities, any positive
interest rate spread will generate net interest income.



                                       Year Ended September 30,
                                                1998
                                      Average            Yield
                                       Balance  Interest  /Rate

Interest-earning assets:
Loans receivable, net(3)              $136,626   $10,795  7.90%
Securities:
Available for sale                      98,230     5,280  5.38
Held to maturity                         3,513       196  5.58
Other interest-earning  assets(1)        6,401       336  5.25
   Total interest-earning assets       244,770    16,607  6.78
Non-interest-earning assets              5,386
   Total assets                       $250,156
Interest-bearing liabilities:
Transaction accounts                  $ 23,641       608  2.57
Certificates of deposit                115,413     6,568  5.69
Borrowings                              45,263     2,397  5.30
   Total interest-bearing
     liabilities                       184,317     9,573  5.19
Non-interest-bearing
 liabilities                             6,841
   Total liabilities                   191,158
Equity                                  58,998
   Total liabilities and equity       $250,156

Net interest income;
 interest rate spread                             $7,034  1.59%
Net interest margin (2)                                   2.87%
Average interest-earning
 assets to average
 interest-bearing liabilities                           132.80%



                                          Year Ended September 30,
                                                    1997
                                          Average            Yield
                                          Balance  Interest  /Rate
Interest-earning assets:
Loans receivable, net(3)                 $123,610  $ 9,797   7.93%
Securities:
Available for sale                         71,645    4,164   5.81
Held to maturity                            4,542      266   5.86
Other interest-earning assets(1)            5,001      281   5.62
   Total interest-earning assets          204,798   14,508   7.08
Non-interest-earning assets                 3,132
   Total assets                          $207,930
Interest-bearing liabilities:
Transaction accounts                     $ 19,959  $   589   2.95
Certificates of deposit                   111,745    6,061   5.42
Borrowings                                  6,945      374   5.39
   Total interest-bearing liabilities     138,649    7,024   5.07
Non-interest-bearing liabilities            5,024
   Total liabilities                      143,673
Equity                                     64,257
   Total liabilities and equity          $207,930

Net interest income;interest rate spread           $ 7,484   2.02%
Net interest margin (2)                                      3.65
Average interest-earning assets to
 average interest-bearing liabilities                      147.71



                                          Year Ended September 30,
                                                    1996
                                         Average             Yield
                                         Balance  Interest   /Rate
Interest-earning assets:
Loans receivable, net(3)                $104,425   $ 8,610   8.25%
Securities:
Available for sale                        56,340     3,249   5.77
Held to maturity                          11,998       825   6.88
Other interest-earning assets(1)           9,242       465   5.03
   Total interest-earning assets         182,005    13,149   7.22
Non-interest-earning assets                5,214
   Total assets                         $187,219
Interest-bearing liabilities:
Transaction accounts                    $ 26,507       621   2.79
Certificates of deposit                  107,848     6,309   5.85
Borrowings                                   250        19   7.60
   Total interest-bearing liabilities    134,605     6,949   5.16
Non-interest-bearing liabilities           3,531
   Total liabilities                     138,136
Equity                                    49,083
   Total liabilities and equity         $187,219

Net interest income;interest rate spread            $6,200   2.06%
Net interest margin (2)                                      3.41
Average interest-earning assets to
 average interest-bearing liabilities                      135.21%


(1)  Consists primarily of interest-bearing deposits in banks.
(2)  Net interest margin is net interest income divided by
     average interest-earning assets.
(3)  Nonaccrual loans are included in loans receivable.


Rate/Volume Analysis

The following table describes the extent to which changes in
interest rates and changes in volume of interest-related assets
and liabilities have affected the Company's interest income and
expense during the periods indicated.  For each category of
interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in
volume (change in volume multiplied by prior year rate), (ii)
changes in rate (change in rate multiplied by prior year volume),
and (iii) total change in rate and volume.  The combined effect
of changes in both rate and volume has been allocated
proportionately to the change due to rate and the change due to
volume.


                                       Year Ended September 30,
                                        1998 Compared to 1997
                                Increase      Increase       Total
                               (Decrease)    (Decrease)     Increase
                               Due to Rate  Due to Volume  (Decrease)
Interest-Earning Assets:
Loans                             $ (30)        $1,028       $  998
Securities:
  Available for sale               (283)         1,399        1,116
  Held to maturity                  (12)           (58)         (70)

Other interest-earning assets       (17)            72           55
Total interest-earning assets     $(342)         2,441        2,099

Interest-Bearing Liabilities:
  Transaction accounts              (44)            63           19
  Certificates of deposit           304            203          507
  Borrowings                         (6)         2,029        2,023
  Total interest-bearing
    liabilities                     254          2,295        2,549
Increase (decrease) in
  net interest income             $(596)        $  146       $ (450)



                                       Year Ended September 30,
                                        1997 Compared to 1996
                                Increase      Increase       Total
                               (Decrease)    (Decrease)     Increase
                               Due to Rate  Due to Volume  (Decrease)
Interest-Earning Assets:
Loans                            $ (317)       $1,504        $1,187
Securities:
  Available for sale                 26           889           915
  Held to maturity                 (108)         (451)         (559)

Other interest-earning assets        63          (247)         (184)
Total interest-earning assets    $1,695         1,695         1,359

Interest-Bearing Liabilities:
  Transaction accounts             (659)          627           (32)
  Certificates of deposit          (492)          244          (248)
  Borrowings                         (4)          359           355
  Total interest-bearing
    liabilities                  (1,155)        1,230            75
Increase (decrease) in
  net interest income            $  819        $  465         $ 465



                                       Year Ended September 30,
                                        1996 Compared to 1995
                                Increase      Increase       Total
                               (Decrease)    (Decrease)     Increase
                               Due to Rate  Due to Volume  (Decrease)
Interest-Earning Assets:
Loans                            $  463        $1,106        $1,569
Securities:
  Available for sale               (158)        1,085           927
  Held to maturity                   77          (684)         (607)
Other interest-earning assets       (12)          256           244
Total interest-earning assets       370         1,763         2,133

Interest-Bearing Liabilities:
  Transaction accounts              (61)          133            72
  Certificates of deposit           948          (209)          739
  Borrowings                         37          (166)         (129)
  Total interest-bearing
    liabilities                     924          (242)          682
Increase (decrease) in
  net interest income            $ (554)       $2,005        $1,451


Liquidity and Capital Resources

The Company continues to maintain a high level of liquid assets
in order to meet its funding requirements.  At September 30,
1998, the Company had approximately $3.3 million in cash on hand
and interest-bearing deposits in other banks, which represented
1.2% of total assets.  At September 30, 1998, the Company's level
of liquid assets, as measured for regulatory compliance purposes
was 66%, or $94.8 million, in excess of the minimum liquidity
requirement of 4%.

At September 30, 1998, the Savings Bank had $50.9 million of
total equity or 18.6% of total assets.  The Savings Bank
continues to exceed its regulatory capital requirements ratios at
September 30, 1998.  Tangible and core capital were $43.2
million, which represented 16.5% of adjusted total assets and
risk-based capital was $44 million which represented 40.6% of
total risk-weighted assets at September 30, 1998.  Such amounts
exceeded the minimum required ratios of 1.5%, 3%, and 8%,
respectively.  At September 30, 1998, the Savings Bank continued
to meet the definition of a "well-capitalized" institution, the
highest of the five categories under the FDICIA prompt corrective
action standards.


Directors

Medford M. Leake                   Robert R. Black, Sr.
Chairman of the Board              Retired--Periodontist
President--Steel City Lumber Co.   Tupelo, MS
Birmingham, AL

Jim Ingram                         Michael R. Thomas
Chief Executive Officer            President--Washington
Community Federal Bancorp, Inc./     Furniture Mfg., Inc.
Community Federal Savings Bank     Houlka, MS
Tupelo, MS

Charles V. Imbler, Sr.             Robert W. Reed III
President and Chief Executive      Account Executive--Reed
  Officer--Truck Center, Inc.        Mfg. Co.
Tupelo, MS                         Tupelo, MS

J. Leighton Pettis                 H. Lewis Whitfield
Ophthalmologist                    President
Tupelo, MS                         Community Federal Bancorp, Inc
                                   Community Federal Savings Bank
                                   Tupelo, MS
L.F. Sams, Jr.
Partner, Law Firm
Mitchell, McNutt, Threadgill,
 Smith & Sams
Tupelo, MS
                                   Officers
                                   Jim Ingram, CEO
                                   H. Lewis Whitfield, President
                                   Gill Simmons, Vice President
                                   Jack Johnson, Vice President
                                   Mark Burleson, Vice President
                                   Sherry McCarty, CFO
                                   Terry Baker, Assistant Vice
                                     President
                                   Lynda Riley, Treasurer
                                   Judy Ballard, Secretary


Corporate Headquarters             Independent Public Accountants
333 Court Street                   Arthur Andersen LLP
Tupelo, MS 38801                   Birmingham, AL
(601) 842-3981

Transfer Agent                     Special Counsel
Registrar and Transfer Co.         Elias, Matz, Tiernan and
Cranford, NJ                         Herrick, LLP
(800) 368-5948                     Washington, DC


Listing of Common Stock            Special Counsel
Traded Over-the-Counter            Mitchell, McNutt, Threadgill,
NASDAQ National Market               Smith & Sams, PA
 System/ Symbol: CFTP              Tupelo, MS

                                   10-K Information
                                   This report is available to
                                   stockholders upon request to:
                                   The Chief Financial Officer
                                   PO Box F
                                   Tupelo, MS 38802
                                   (601) 840-0302



Annual Meeting

The 1999 Annual Meeting of the Stockholders of Community Federal
Bancorp, Inc. will be held at 5:00 p.m. on January 21, 1999, in
the Lobby of Community Federal Savings Bank, 333 Court Street,
Tupelo, Mississippi.