<PAGE>   1
                                                                    Exhibit 13.1





                              SOUTH FLORIDA BANK

                             HOLDING CORPORATION





                              [PICTURE OF BANK]



                              ANNUAL REPORT 1997


<PAGE>   2


                    SOUTH FLORIDA BANK HOLDING CORPORATION

                               MISSION STATEMENT

South Florida Bank is a locally-owned community commercial bank:

      o          Serving Lee County businesses and professionals.

      o          Building long-term customer relationships.

      o          Providing prompt and informed local banking decisions.

      o          Maximizing its shareholders' equity.

      o          Utilizing "extraordinary" products and services to
                      benefit our customers.

      o          Employing superior people in a rewarding work environment to
                      best serve our customers.



                          INDEX TO 1997 ANNUAL REPORT



<TABLE>
<CAPTION>
                                                                         PAGE
                                                                         ----
<S>                                                                      <C>

LETTER TO SHAREHOLDERS .......................................               1

SELECTED FINANCIAL DATA ......................................               2

MANAGEMENT'S DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS
    OF OPERATIONS ............................................               3

BUSINESS OF THE COMPANY ......................................              19

CAPITAL STOCK ................................................              19

HOLDING CORPORATION DIRECTORS AND OFFICERS ...................              20

REPORT OF INDEPENDENT CERTIFIED
    PUBLIC ACCOUNTANTS .......................................              21

CONSOLIDATED FINANCIAL STATEMENTS ............................              22

</TABLE>



<PAGE>   3



             [SOUTH FLORIDA BANK HOLDING CORPORATION LETTERHEAD]




March, 1998



Dear Fellow Shareholders:

    South Florida Bank Holding Corporation has successfully completed an
exciting and eventful 1997.  Among our accomplishments was a 16% growth in
assets, the opening of a new banking office in Iona, a significant upgrade in
our technology, and record earnings.  Perhaps the most significant event was
your Board's declaration of an annual dividend of $.20 per share, the first in
our history.

    During 1997 your company earned $1.4 million or $1.18 per share
representing a 42% increase over 1996 earnings of $1.0 million or $.83 per
share.  This is the third consecutive year of record profits.  The 1997 return
on average equity was 21.4% and the return on average assets was 1.8%.

    In response to our advertising campaign and other business development
efforts, total assets increased $11.4 million, ending the year at $82.9
million. Our loan portfolio ended the year at $48.8 million, a growth of 13%
over the previous year.  In addition, the Bank improved its asset quality,
reducing loans on non-accrual status and other real estate owned to $858,000 or
1% of total assets.

    Earnings improved during 1997 from 1996 primarily as a result of the
increase in net interest income, partially offset by the increase in
non-interest expense.  Net interest income increased $520,000 in response to
the increased volume of assets.  Non-interest expense increased $214,000
primarily as a result of the opening of the new branch in Iona.  In addition,
the Company recorded a $261,000 income tax benefit for its net operating loss
carryforward.  Most of the tax benefits have been recognized, and during 1998
the Company anticipates that it will begin recording income tax expense.

    Please read the following report as it provides an in-depth analysis of
your Company's financial condition.  We look forward to meeting with you at the
Annual Meeting to be held on Tuesday, April 28, 1998 at 4:00 p.m. at the Bank's
Colonial Office, 1500 Colonial Boulevard, Fort Myers, Florida.




Very truly yours,




/s/  Robert Ernest Hendry                           /s/  William P. Valenti

Robert Ernest Hendry                                William P. Valenti   
Chairman of the Board                               President and Chief
                                                    Executive Officer
<PAGE>   4



                     SOUTH FLORIDA BANK HOLDING CORPORATION
                            SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                1997            1996           1995          1994           1993     
                                             -----------    -----------    -----------    -----------   -----------
<S>                                         <C>             <C>            <C>            <C>           <C>
STATEMENTS OF OPERATIONS:
-------------------------
Total interest income ....................   $ 5,839,160    $ 4,869,672    $ 4,534,245    $ 3,749,349   $ 4,325,676
Total interest expense ...................     2,406,550      1,956,622      2,009,174      1,402,489     1,744,587
                                             -----------    -----------    -----------    -----------   ----------- 
    Net interest income ..................     3,432,610      2,913,050      2,525,071      2,346,860     2,581,089
Provision for loan losses ................          ---           ---           28,000        (75,000)      325,000
Non-interest income ......................       576,078        611,513        547,321        515,196       612,408
Non-interest expense .....................     2,846,185      2,632,357      2,711,569      2,894,585     3,518,497
                                             -----------    -----------    -----------    -----------   ----------- 
    Income (Loss) before income taxes ....     1,162,503        892,206        332,823         42,471      (650,000)
Benefit for income taxes .................       261,218        108,000        260,000          ---           --- 
                                             -----------    -----------    -----------    -----------   ----------- 
    Net income (loss) ....................   $ 1,423,721    $ 1,000,206    $   592,823    $    42,471   $  (650,000)
                                             ===========    ===========    ===========    ===========   ===========

    Net income (loss) per share: 
         Basic ...........................   $      1.18    $       .83    $      0.59    $      0.04   $     (0.71)
                                             ===========    ===========    ===========    ===========   ===========
         Diluted .........................   $      1.15    $       .82    $      0.59    $      0.04   $     (0.71)
                                             ===========    ===========    ===========    ===========   ===========

Return (Loss) on average assets ..........          1.82%          1.57%          1.01%           .08%        (1.05)%
Return (Loss) on average equity ..........         21.39          18.44          14.89           1.20        (16.99)

Loans charged-off ........................   $   (72,116)   $   (98,341)   $  (815,193)   $  (163,072)  $(1,454,117)
Loans recovered ..........................        49,588        150,633        296,700        507,821       487,932
                                             -----------    -----------    -----------    -----------   ----------- 
    Net loans (charged-off) recovered ....   $   (22,528)   $    52,292    $  (518,493)   $   344,749   $  (966,185)
                                             ===========    ===========    ===========    ===========   ===========

STATEMENTS OF FINANCIAL CONDITION:
----------------------------------
Total loans ..............................   $49,706,387    $44,040,268    $36,545,637    $32,854,507   $35,887,129
Allowance for loan losses ................       882,034        904,562        852,270      1,342,763     1,073,014
                                             -----------    -----------    -----------    -----------   ----------- 
    Loans - net ..........................    48,824,353     43,135,706     35,693,367     31,511,744    34,814,115

Total loan delinquencies 
    30 days and over .....................       377,034        390,345        904,198      1,609,520     1,756,673
Other real estate owned ..................       514,211        548,500        582,500      2,361,035     4,107,177
                                             -----------    -----------    -----------    -----------   ----------- 
    Total ................................       891,245        938,845      1,486,698      3,970,555     5,863,850

Investments ..............................    24,551,768     16,639,176     17,867,052     13,461,342    11,559,669
Federal funds sold .......................     1,998,000      5,179,000      5,337,000      1,428,000     1,785,000

Total assets .............................    82,859,358     71,529,527     63,590,119     52,751,846    57,476,270

Total deposits ...........................    73,099,288     63,887,775     55,990,836     48,136,291    51,847,669

Total shareholders' equity ...............     7,622,486      6,407,725      5,386,085      3,803,037     3,813,952
Book value per share .....................          6.29           5.29           4.50           3.79          3.80

Number of branches .......................             4              3              3              3             3

Average equity to average assets .........          8.49%          8.52%          6.48%          6.56%         6.17%
Total risk-based capital ratio ...........         15.46          13.70          13.33          11.04          9.84
Tier 1 capital to total asset ratio ......          8.55           8.82           8.05           6.92          6.25


</TABLE>



                                      2

<PAGE>   5
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

    Consolidated total assets of South Florida Bank Holding Corporation (the
"Holding Corporation"), its subsidiary South Florida Bank (the "Bank"), and the
Bank's wholly-owned subsidiaries, New Town Properties, Inc. and Valu Prop, Inc.
(collectively, the "Company") increased to $82.9 million as of December 31,
1997, from $71.5 million as of December 31, 1996, an increase of $11.4 million
or 15.84%.  During 1997 the Bank emphasized growth by means of an advertising
campaign, an officer calling program and the opening of a new branch.  The
Company's shareholders' equity increased to $7.6 million as of December 31,
1997 from $6.4 million as of December 31, 1996, an increase of $1.2 million or
18.96%.  This increase was primarily the result of net income of $1.4 million
and the $33,000 increase resulting from unrealized securities gains, partially
offset with the $242,000 (or $.20 per share) dividend declared as of December
31, 1997.  As of December 31, 1997, the Bank's total risk-based capital ratio
was 15.46% and leverage ratio was 8.55%, as compared to 13.70% and 8.82%,
respectively, as of December 31, 1996.  See "Capital Resources" for additional
information regarding the Bank's capital ratios.

    Net income increased to $1.4 million for the year ended December 31, 1997,
or $1.18 per share, from $1.0 million for the year ended December 31, 1996, or
$.83 per share, and from net income of $593,000 for the year ended December 31,
1995, or $.59 per share.  Income before income taxes increased to $1.2 million
for 1997, from $892,000 for 1996 and $333,000 for 1995.  The Company's improved
earnings during 1997 as compared to the prior two years resulted partly from
net interest income increasing $520,000 from 1996 to 1997 and $388,000 from
1995 to 1996 as the Bank's total interest-earning assets grew.  In addition,
the Bank recorded a benefit for income taxes of $261,000 during 1997, compared
to $108,000 during 1996 and $260,000 during 1995.

    The following discussion provides a more in-depth analysis of the Company's
financial condition and results of operations.  The financial statements and
accompanying notes included in this report are an integral part of this
discussion and should be read in conjunction with it.

FINANCIAL CONDITION

    The Bank's advertising campaign, coupled with an officer calling program
and the opening of a new branch, resulted in an increase in total assets and
liabilities.  The Company's total assets increased to $82.9 million as of
December 31, 1997 from $71.5 million as of December 31, 1996, an increase of
$11.4 million or 15.84%.  Earning assets, comprised of loans and the investment
portfolio (which in turn is comprised of investments held-to-maturity,
investments available-for-sale, and federal funds sold) increased, as discussed
below, to $75.4 million as of December 31, 1997 from $64.9 million as of
December 31, 1996, an increase of $10.5 million or 16.04%.  Non-earning assets,
comprised of cash and due from banks, premises and equipment, accrued interest
receivable, other real estate owned and other assets, increased to $7.5 million
as of December 31, 1997 from $6.6 million as of December 31, 1996, an increase
of $910,000 or 13.83%.

    Net loans increased to $48.8 million as of December 31, 1997 from $43.1
million as of December 31, 1996, an increase of $5.7 million or 13.19%.
Mortgage loans which increased $3.3 million were the primary components of
outstanding loans.  In addition, installment loans increased $1.2 million
(primarily with a mobile home loan product) and commercial loans increased $1.2
million.  Management's strategy is to lend to small-to-medium sized businesses.
For a discussion of the increase of loans on non-accrual status to $344,000 as
of December 31, 1997 from $263,000 as of December 31, 1996, and the decrease in
the allowance for loan losses to $882,000 as December 31, 1997 from $905,000 as
of December 31, 1996, see "--Allowance for Loan Losses".

    The investment portfolio increased to $26.6 million as of December 31, 1997
from $21.8 million as of December 31, 1996, an increase of $4.8 million or
21.69%.  The proceeds from the increase in deposits were primarily used to fund
the increase in loans and investments.







                                      3
<PAGE>   6

    Cash and due from banks increased to $5.0 million as of December 31, 1997
from $4.7 million as of December 31, 1996, or an increase of $338,000 or 7.25%.
This increase resulted primarily from the increase in funds on deposit with
other banks.

    Premises and equipment increased to $590,000 as of December 31, 1997 from
$408,000 as of December 31, 1996, an increase of $182,000 or 44.43%.  This
increase resulted primarily from the excess cost of the new branch and
computers over depreciation expense of $157,000 during 1997.  Accrued interest
receivable increased to $601,000 as of December 31, 1997 from $452,000 as of
December 31, 1996, an increase of $149,000 or 32.91%.  This increase resulted
primarily from the increase in interest-earning assets.

    Other assets increased to $779,000 as of December 31, 1997 from $504,000 as
of December 31, 1996, an increase of $275,000 or 54.76%.  This increase
resulted primarily from the $261,000 increase in deferred income tax assets,
net of the valuation allowance, associated with the Company's tax loss
carryforward.  Net deferred income tax assets totaled $656,000 as of December
31, 1997.  See Note F of the Notes to Consolidated Financial Statements.

    Deposits increased to $73.1 million as of December 31, 1997 from $63.9
million as of December 31, 1996, an increase of $9.2 million or 14.42%.  Core
deposits increased to $66.9 million as of December 31, 1997 from $59.5 million
as of December 31, 1996, an increase of $7.4 million or 12.42%.  This increase
in core deposits primarily reflected deposit accounts opened as a result of the
advertising campaign, officer calling program and the opening of a new branch.
As of December 31, 1997 and 1996, the ratio of net loans to deposits was 66.79%
and 67.52%, respectively.

    Securities sold under agreements to repurchase ("Sweep Accounts") increased
to $1.3 million as of December 31, 1997 from $749,000 as of December 31, 1996,
an increase of $577,000 or 77.09%.  This increase resulted primarily from the
opening of new sweep accounts.





                                       4
<PAGE>   7

    For the years ended December 31, 1997, 1996 and 1995, the Bank's average
statements of financial condition, interest income and expense, and yields
earned and rates paid were as follows:

                  AVERAGE BALANCES, INTEREST YIELDS AND RATES

<TABLE>
<CAPTION>
                                          1997                            1996                               1995                   
                            -------------------------------   -------------------------------    -------------------------------
                             Average                Yield/    Average                  Yield/     Average                 Yield/
ASSETS:                      Balance     Interest    Rate     Balance     Interest      Rate      Balance     Interest     Rate  
------                     -----------  ----------  ------   ----------   ----------   ------   -----------  -----------  ------
<S>                        <C>          <C>         <C>      <C>          <C>          <C>      <C>          <C>          <C>
Loans:                    
  Commercial ..........    $ 8,446,610  $  871,378   10.32%  $ 7,536,483  $  767,113   10.18%   $ 6,292,714  $  647,245   10.29%
  Mortgage (a).........     31,506,620   2,801,285    8.89    26,930,923   2,434,924    9.04     23,846,224   2,214,187    9.29
  Installment  ........      4,059,505     346,559    8.54     2,593,582     224,442    8.65      1,458,742     144,760    9.92
  Other ...............      2,915,892     284,059    9.74     2,876,305     289,674   10.07      2,511,312     260,973   10.39
                           -----------  ----------   -----   -----------  ----------   -----    -----------  ----------   -----
Total loans, net
  of unearned
  income (b) ..........     46,928,627   4,303,281    9.17    39,937,293   3,716,153    9.30     34,108,992   3,267,165    9.58
Investment securities-
  all taxable .........     20,130,432   1,180,155    5.86    16,703,169     981,321    5.88     16,796,439   1,053,831    6.27
Federal funds sold.....      6,542,783     355,724    5.44     3,234,819     172,198    5.32      3,625,897     213,249    5.88
                           -----------  ----------   -----   -----------  ----------   -----    -----------  ----------   -----
Total earning
  assets (c)...........     73,601,842  $5,839,160    7.93%   59,875,281  $4,869,672    8.13%    54,531,328  $4,534,245    8.31%
                                        ==========   =====                ==========   =====                 ==========   =====
Cash and due
  from banks...........      3,603,228                         2,809,497                          2,497,149
Other assets ..........      2,116,596                         1,879,234                          2,637,183
Allowance for
  loan losses .........       (911,423)                         (927,332)                          (981,014)
                           -----------                       -----------                        -----------
Total assets ..........    $78,410,243                       $63,636,680                        $58,684,646
                           ===========                       ===========                        ===========

LIABILITIES AND SHAREHOLDERS' EQUITY:
-------------------------------------
Interest-bearing deposits:
  NOW accounts  .,,,,,.    $ 9,894,916  $  133,934    1.35%  $ 7,604,620  $  123,378    1.62%   $ 7,131,146  $  136,564    1.92%
  Money market  .......      9,178,891     244,917    2.67     9,332,707     242,863    2.60      9,274,608     280,082    3.02
  Savings .............      3,238,009      72,016    2.22     2,360,086      52,476    2.22      2,260,354      55,796    2.47
  Time deposits:
  Under $100,000.......     28,357,929   1,624,930    5.73    23,031,493   1,333,029    5.79     22,445,225   1,335,187    5.95
  $100,000 & over......      5,379,827     302,886    5.63     3,145,980     178,118    5.66      2,822,473     162,786    5.77
                           -----------  ----------   -----   -----------  ----------   -----    -----------  ----------   -----
Total interest-bearing
  deposits ............     56,049,572   2,378,683    4.24    45,474,886   1,929,864    4.24     43,933,806   1,970,415    4.48
Sweep accounts.........      1,282,216      40,841    3.19     1,194,434      38,623    3.23        958,802      39,750    4.15
                           -----------  ----------   -----   -----------  ----------   -----    -----------  ----------   -----
Total interest-bearing
  liabilities .........     57,331,788  $2,419,524    4.22%   46,669,320  $1,968,487    4.22%    44,892,608  $2,010,165    4.48%
                                        ==========   =====                ==========   =====                 ==========   =====
Demand deposits .......     13,884,711                        11,093,282                          9,520,152
Other liabilities......        538,056                           450,556                            471,786
Shareholders' equity...      6,655,688                         5,423,522                          3,800,100
                           -----------                       -----------                        -----------
Total .................    $78,410,243                       $63,636,680                        $58,684,646
                           ===========                       ===========                        ===========

SPREAD AND INTEREST DIFFERENTIAL:
---------------------------------
Interest rate spread...                               3.71%                             3.91%                              3.83%
                                                     =====                             =====                              =====   
Excess of total earning 
  assets over total 
  interest-bearing
  liabilities .........    $16,270,054                       $13,205,961                        $ 9,638,720
                           ===========                       ===========                        ===========
Net yield on interest-
  earnings assets......                 $3,419,636    4.65%               $2,901,185    4.85%                $2,524,080    4.63%
                                        ==========   =====                ==========   =====                 ==========   =====
                                                                                        
                                                                                                             
                                   


</TABLE>


------------------------
See footnotes on page 6.


                                       5
<PAGE>   8

Footnotes to pages 5:
    (a)  Interest income on mortgage loans included loan fees recognized as
         income of $14,000, $9,000 and $15,000 during the years ended December
         31, 1997, 1996 and 1995, respectively.
    (b)  Non-accrual loans were included in loans, net of unearned income.
    (c)  The Company has made no loans or investments that qualify for
         tax-exempt treatment and, accordingly, has no tax-exempt income.

LOAN PORTFOLIO

    The Bank's loan portfolio is primarily concentrated in commercial,
mortgage, and installment loans.  As of December 31, 1997, 1996 and 1995, the
composition of the Bank's loan portfolio was as follows:


<TABLE>
<CAPTION>
                                                  1997                  1996                         1995
                                         ----------------------  -----------------------    --------------------
                                                        % OF                      % OF                     % OF
                                                        TOTAL                     TOTAL                    TOTAL
                                            AMOUNT      LOANS        AMOUNT       LOANS        AMOUNT      LOANS 
                                         -----------   -------   ------------    -------     ----------   -------
<S>                                      <C>           <C>       <C>            <C>        <C>            <C>
Commercial .........................     $ 9,289,611    18.69%   $ 8,062,573    18.31%     $ 7,081,642     19.38%
Mortgage: (a)
    Construction ...................         961,264     1.93      1,029,003     2.34        1,331,809      3.64
    Non-construction ...............      31,508,547    63.39     28,172,195    63.97       23,909,249     65.42
Installment (b) ....................       4,781,456     9.62      3,589,684     8.15        1,490,577      4.08
Other loans (c) ....................       3,165,509     6.37      3,186,813     7.23        2,732,360      7.48
                                         -----------    -----    ------------   -----      -----------     -----

Total loans, net of
    unearned income ................      49,706,387   100.00%    44,040,268   100.00%      36,545,637    100.00%
                                                       ======                  ======                     ====== 

Allowance for loan losses ..........        (882,034)    1.77%      (904,562)    2.05%        (852,270)     2.33%
                                         -----------   ======    -----------   ======      -----------    ====== 

Loans, net .........................     $48,824,353             $43,135,706               $35,693,367
                                         ===========             ===========               ===========
</TABLE>
                   
-------------------
    (a)  In addition to loans for the purchase, construction, improvement of or
         investment in real estate, the Bank's real estate loans include all
         loans for various other consumer or business purposes which are
         secured by real estate mortgages.
    (b)  Installment loans generally include loans secured with mobile homes,
         automobiles, trucks, boats, and equipment.
    (c)  Other loans generally include credit card loans, equity lines to
         individuals, deposit overdraft protection and deposit overdrafts.

    Average total loans, net of unearned income, were $46.9 million during the
year ended December 31, 1997 as compared to $39.9 million during the year ended
December 31, 1996, representing a $7.0 million (or 17.51%) increase.  Total
loans outstanding, net of unearned income, as of December 31, 1997 were $49.7
million as compared to $44.0 million as of December 31, 1996, representing a
$5.7 million (or 12.87%) increase.  The increase in loans from 1996 to 1997 was
primarily attributable to loan originations of $15.2 million which exceeded
loan repayments of $9.3 million.  During 1996, loan originations were $17.5
million, while loan repayments were $9.9 million.  The Bank's loan portfolio is
its largest category of earning assets.  The Bank is a locally owned and
operated commercial bank, serving consumers, professionals, and small-to-medium
sized businesses located in the Lee County area.  The majority of the Bank's
loans currently are to customers located within this area.

    New loans and loan renewals are reviewed by management and the Directors,
including the potential created for possible credit concentrations.  Management
reviews the loan portfolio on a quarterly basis for potential credit
concentrations.  Loan concentrations are defined as amounts loaned to a number
of borrowers engaged in similar activities, which would cause them to be
similarly impacted by economic or other conditions.  As of December 31, 1997




                                       6
<PAGE>   9

and 1996, no concentration of loans within any portfolio category to any group
of borrowers engaged in similar activities or in a similar business, exceeded
10% of total loans, except that as of such date loans collateralized with
mortgages on real estate represented 65.32% and 66.31%, respectively, of the
loan portfolio and were to borrowers in varying activities and businesses.

    As of December 31, 1997, the maturities and interest rate sensitivity of
certain categories of loans based on remaining scheduled principal repayments
were as follows:
<TABLE>
<CAPTION>
                                                                       AFTER ONE           OVER
                                                      ONE YEAR         YEAR THRU           FIVE
                                                       OR LESS         FIVE YEARS          YEARS           TOTAL    
                                                     ------------      ------------     ------------    ------------
<S>                                                  <C>               <C>              <C>             <C>
Selected loan categories:
    Commercial .................................      $5,141,727       $2,750,655       $1,397,229       $ 9,289,611
    Real estate-construction ...................         632,827          312,362           16,075           961,264
                                                      ----------       ----------       ----------       -----------
         Total .................................      $5,774,554       $3,063,017       $1,413,304       $10,250,875
                                                      ==========       ==========       ==========       ===========
Loans due after one year:
    Having predetermined interest rates ........                       $1,495,407       $  330,384       $ 1,825,791
    Having floating interest rates .............                        1,567,610        1,082,920         2,650,530
                                                                       ----------       ----------       -----------
         Total .................................                       $3,063,017       $1,413,304       $ 4,476,321
                                                                       ==========       ==========       ===========

</TABLE>

    The Bank recognizes interest income from loans on the accrual basis.  If a
loan is placed on non-accrual status, then accrual of interest income is
suspended and any interest earned, but unpaid, is charged against current
earnings as a reduction in current period interest income.  A loan is placed on
non-accrual status when principal or interest is past due 90 days or more
unless, in the determination of management, the principal and interest on the
loan are well secured and in the process of collection.  In addition, a loan is
placed on non-accrual status before 90 days delinquency occurs if management
believes that after giving consideration to economic and business conditions
and collection efforts, the collection of interest or principal is doubtful.

ALLOWANCE FOR LOAN LOSSES

    As matter of policy, the Bank maintains an allowance for loan losses.  The
amount provided for loan losses during any period is based on an evaluation by
management of the amount needed to maintain the allowance at a level sufficient
to cover anticipated losses and the inherent risk of losses in the loan
portfolio.  In determining the amount of the allowance, management considers
the dollar amount of loans outstanding, its assessment of known or potential
problem loans, current economic conditions, the risk characteristics of the
various classifications of loans, credit record of its borrowers, the fair
market value of underlying collateral and other factors.  Although management
believes that it uses the best information available to make determinations
with respect to loan loss reserves, subsequent adjustments to reserves may be
necessary if future economic conditions differ from the assumptions used in
making the initial determinations or if regulatory policies change.

    Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" ("FAS 114") and Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan, Income Recognition and
Disclosure" ("FAS 118").  FAS 114 and 118 address the accounting by creditors
for impairment of certain loans and generally require the Company to identify
loans, for which the Company probably will not receive full repayment of
principal and interest, as impaired loans.  These Statements require that
impaired loans be valued at the present value of expected future cash flows,
discounted at the loan's effective interest rate, or at the observable market
price of the loan, or the fair value of the underlying collateral if the loan
is collateral dependent.  The Company has implemented these Statements by
modifying its quarterly review of the adequacy of the allowance for loan losses
to also identify and value impaired loans in accordance with guidance in these
Statements.  Adoption of FAS 114 and 118 did not have a material impact on the
Company's financial position or results of operations.

    As of December 31, 1997 and 1996, impaired loans, all of which were
considered collateral dependent, totaled $687,000 and $1,134,000, respectively,
and the related allowance for loan losses was $128,000 and $170,000,





                                       7
<PAGE>   10

respectively.  As of December 31, 1997 and 1996, the net investment in impaired
loans was $559,000 and $964,000, respectively.  During the years ended December
31, 1997, 1996 and 1995, impaired loans averaged $1,082,000, $1,214,000 and
$1,977,000, respectively, interest income recognized on impaired loans totaled
$72,000, $113,000 and $131,000, respectively, and interest income received on
impaired loans totaled $39,000, $91,000 and $86,000, respectively.

    The Bank's loan accounting and collection policies specify that a notice
will be sent to a customer after a loan becomes ten days past due.  If a
payment has not been made in this time, a personal follow-up might occur or
letter issued.  If no progress has been made to bring the loan current within
90 days, the loan is generally placed on non-accrual status and steps are
taken to refer the loan to legal counsel for foreclosure on any collateral
and/or collection from the borrower.  Management may also place loans on
non-accrual status earlier when, in its judgment, the collectibility of such
loans or interest thereon appears to be in doubt.

    As of December 31, 1997, the allowance for loan losses was $882,000 or
1.77% of total loans, net of unearned income, as compared to $905,000 or 2.05%
of total loans, net of unearned income, as of December 31, 1996.  For the years
ended December 31, 1996, 1995 and 1994, the Bank's loan loss experience and its
provision for loan losses were as follows:
<TABLE>
<CAPTION>
                                                         1997              1996               1995    
                                                      ------------     ------------      ------------
<S>                                                    <C>              <C>               <C>              
Average loans outstanding  ......................      $46,928,627      $39,937,293       $34,108,992
                                                        ==========       ==========        ==========
Net loans at end of period ......................      $48,824,353      $43,135,706       $35,693,367
                                                       ===========       ==========        ==========

Allowance for loan losses at
    beginning of period  ........................      $   904,562      $   852,270       $ 1,342,763
Loans charged-off:
    Commercial ..................................           11,386           27,535           268,548
    Mortgage ....................................           25,999           17,816           472,586
    Installment .................................           23,613            6,110             7,866
    Other loans .................................           11,118           46,880            66,193
                                                       -----------      -----------       -----------
Total loans charged-off .........................           72,116           98,341           815,193
                                                       -----------      -----------       -----------
Recoveries of loans previously charged-off:
    Commercial  .................................           25,877          123,003           161,125
    Mortgage ....................................           19,595           21,925           122,564
    Installment..................................            3,074            3,998             8,811
    Other loans .................................            1,042            1,707             4,200
                                                       -----------      -----------       -----------
Total recoveries ................................           49,588          150,633           296,700
                                                       -----------      -----------       -----------
Net loan charged-offs (recoveries) ..............           22,528          (52,292)          518,493
Provision charged to expense ....................            ---             ---               28,000
                                                       -----------      -----------       -----------

Allowance for loan losses at end of period  .....      $   882,034      $   904,562       $   852,270
                                                       ===========      ===========       ===========

Ratio of net charge-offs during period
    to average net loans outstanding  ...........             .05%           (.13)%             1.52%
Allowance for loan losses as a percentage
    of loans, net of unearned income
    at end of period ............................            1.77%            2.05%             2.33%


</TABLE>

    During 1997, 13 loans were charged-off, none of which exceeded $18,000.
During 1997, there were 21 loans with recoveries, none of which exceeded
$18,000.

    Senior management of the Bank and the loan staff meet weekly or more often
as needed to review all past due and non-performing loans and to discuss
collection actions.  The Bank's Board of Directors performs a similar review on
at least a monthly basis.  Loans are charged-off when and to the extent they
are deemed by management to be a loss to the Bank.







                                      8
<PAGE>   11

    Non-performing assets increased to $858,000 as of December 31, 1997 as
compared to $811,000 as of December 31, 1996, which had decreased from $1.3
million at December 31, 1995, or a respective increase of $47,000 or 5.77% and
a decrease of $448,000 or 35.56%.  The increase during 1997 resulted primarily
from the increase in loans over 90 days delinquent.  The decrease during 1996
occurred primarily due to the Bank collecting or charging-off non-accruing
loans, removing loans from non-accrual status after the loans have performed
for six months in accordance with the respective note and selling certain other
real estate owned.  The ratio of non-performing loans as a percent of total
loans, net of unearned income, was .69%, .60% and 1.85% as of December 31,
1997, 1996 and 1995, respectively.  The allowance for loan losses as a
percentage of non-performing loans was 256.59%, 344.34% and 126.01% as of
December 31, 1997, 1996 and 1995, respectively.

    As of December 31, 1997, 1996 and 1995, the Bank's non-performing loans and
repossessed assets were as follows:

<TABLE>
<CAPTION>

                                                 1997                      1996                  1995               
                                         ---------------------   --------------------     --------------------
                                                      % OF                      % OF                     % OF
                                                      TOTAL                     TOTAL                    TOTAL
                                          AMOUNT      LOANS         AMOUNT      LOANS        AMOUNT      LOANS 
                                         --------    --------    ---------    -------     ----------   -------
<S>                                      <C>         <C>         <C>          <C>         <C>          <C>
Non-accruing loans:
    Under 90 days delinquent ...         $154,278      .31%       $117,930      .27%        $  262,855       .72%
    90 or more days delinquent .          189,470      .38         144,762      .33            413,477      1.13
                                         --------      ---        --------      ---         ----------      ----
Total non-accruing loans  ......         $343,748      .69%       $262,692      .60%        $  676,332      1.85%
                                         ========      ===        ========      ===         ==========      ==== 

Total real estate owned ........         $514,211                 $548,500                  $  582,500
                                         --------                 --------                  ----------
Total non-performing assets ....         $857,959                 $811,192                  $1,258,832
                                         ========                 ========                  ==========

Loans delinquent and accruing:
    30 to 59 days ..............         $ 12,648      .03%       $ 21,818      .05%        $  145,495       .40%
    60 to 89 days ..............           20,638      .04         105,835      .24             82,371       .22
                                         --------      ---        --------      ---         ----------      ----
         Total .................         $ 33,286      .07%       $127,653      .29%        $  227,866       .62%
                                         ========       ===       ========      ===         ==========      ==== 

Total delinquencies
    30 days and over ...........         $377,034      .76%       $390,345      .89%        $  904,198      2.47%
                                         ========       ===       ========      ===         ==========      ==== 

</TABLE>
    As of December 31, 1997, 1996 and 1995, the Bank did not have any troubled
debt restructurings and no loans were over 90 days delinquent and still
accruing interest.  Non-accruing loans totaled $344,000 as of December 31, 1997
as compared to $263,000 as of December 31, 1996, an increase of $81,000 or
30.86%.  The largest non-accruing loan as of December 31, 1997 was a $112,000
first mortgage loan secured with commercial real estate, to which the Bank took
title in January, 1998, in foreclosure proceedings.  The Bank has entered into
a contract to sell the real estate at no loss.  The second largest non-accruing
loan as of December 31, 1997 was a $96,000 first mortgage loan secured with
commercial real estate.  As of December 31, 1997, this loan was current.

    Management continues to manage its non-performing assets to restore them to
performing status when possible, or otherwise liquidate such assets in an
orderly fashion to maximize the value of such assets to the Company.  Although
the Company is endeavoring to actively manage the risks in its loan portfolio,
there is no assurance that the level of non-accrual loans and other real
estate owned will not increase during 1998.

    As of December 31, 1997, other real estate owned, all of which is located
in Lee County, Florida and which was recorded at the lower of fair value or the
loan balance, comprised of two parcels of raw land with a carrying value of
$475,500 (and a fair value of $540,000), a mobile home with a carrying value of
$28,000 (and a fair value of $35,000) and two single-family residential lots
with a carrying value of $11,000 (and a fair value of $14,000).

ALLOCATION OF ALLOWANCE FOR LOAN LOSSES

    Although the total allowance for loan losses was available to absorb losses
from all loans, management allocated 




                                       9
<PAGE>   12
the reserve among general portfolio categories for informational and regulatory
reporting purposes.  At December 31, 1997, 1996 and 1995 the allocation of the
allowance for loan losses was as follows:


<TABLE>
<CAPTION>

                                              1997                       1996                     1995
                                        --------------------    --------------------     ---------------------
                                                     LOANS                    LOANS                      LOANS
                                                   TO TOTAL                 TO TOTAL                   TO TOTAL
                                         AMOUNT      LOANS       AMOUNT       LOANS         AMOUNT       LOANS 
                                         ------    ---------    --------    ---------     ---------    --------
<S>                                    <C>         <C>           <C>        <C>           <C>          <C>

Commercial loans ...............       $157,000      18.69%      $177,000      18.31%      $118,000      19.38%
Mortgage:
   Construction ................         10,000       1.93         11,000       2.34         13,000       3.64
   Non-construction ............        428,000      63.39        450,000      63.97        504,000      65.42
Installment loans ..............         74,000       9.62         57,000       8.15         27,000       4.08 
Other loans ....................         58,000       6.37         57,000       7.23         50,000       7.48
Unallocated reserve ............        155,034       ---         152,562       ---         140,270       ---   
                                       --------     ------       --------     ------       --------     ------
Total allowance for 
    loan losses ................       $882,034     100.00%      $904,562     100.00%      $852,270     100.00%
                                       ========     ======       ========     ======       ========     ======

</TABLE>
INVESTMENT PORTFOLIO

    The carrying value of the Bank's investment portfolio was $26.5 million as
of December 31, 1997 as compared to $21.8 million as of December 31, 1996.  The
average book yield on the Bank's investment portfolio was 6.03% and 6.09% as of
December 31, 1997 and 1996, respectively.  The average maturity of the Bank's
investment portfolio as of December 31, 1997 and 1996, was 34 and 36 months,
respectively.  There was unrealized net market depreciation of approximately
$13,000 as of December 31, 1997.

    The Bank classifies as available-for-sale those investment securities which
may be sold prior to maturity in connection with changes in market interest
rates, liquidity needs or other reasons.  The available-for-sale portfolio has
been reflected at its aggregate fair value in the accompanying consolidated
statements of financial condition.  The net unrealized securities holding gains
(losses), net of anticipated income tax effect, have been reflected as a
separate component of shareholders' equity.  Those investment securities which
the Bank has the positive intent and ability to hold until their maturity have
been classified as investments held-to-maturity.  These securities are carried
on an amortized cost basis.

    As of December 31, 1997, the carrying values, the maturities and the
average yields of the Bank's investment securities, all of which were taxable,
were as follows:

<TABLE>
<CAPTION>
                                                                  AFTER ONE YEAR   
                                       WITHIN ONE YEAR            THROUGH 5 YEARS                AFTER TEN YEARS    
                                      -------------------     --------------------            ----------------------
                                       AMOUNT      YIELD        AMOUNT      YIELD              AMOUNT        YIELD 
                                      ---------    ------      ---------    ------            ---------      ------
<S>                                   <C>          <C>         <C>          <C>              <C>             <C>
AVAILABLE-FOR-SALE:
U. S. Agency obligations .........     $2,496,875     5.44%     $14,087,625     6.13%        $     ---          --- %
                                       ==========     ====      ===========     ====         ==========       ====== 
HELD-TO-MATURITY:
U. S. Agency obligations .........     $1,000,000     4.49%     $ 5,125,282     6.24%        $     ---          --- %
Collateralized mortgage 
   obligations ...................           ---      ---             ---       ---           1,841,986         5.93
                                       ----------     ----      -----------     ----         ----------       ------  
Total held-to-maturity ...........     $1,000,000     4.49%     $ 5,125,282     6.24%        $1,841,986         5.93%
                                       ==========     ====      ===========     ====         ==========       ====== 

</TABLE>

DEPOSITS

    The Bank's average core deposits increased to $64.6 million during the year
ended December 31, 1997 from $53.4 million during the year ended December 31,
1996 and from $50.6 million during the year ended December 31, 1995, or
respective increases of $11.2 million or 20.84% and $2.8 million or 5.51%.
Average total deposits increased to 





                                      10


<PAGE>   13

$69.9 million during 1997 from $56.6 million during 1996 and from $53.5 million
during 1995, or respective increases of $13.3 million or 23.63% and $3.1 million
or 5.83%.  Average non-interest bearing deposits increased to $13.9 million
during 1997 from $11.1 million during 1996 and from $9.5 million during 1995, or
respective increases of $2.8 million or 25.16% and $1.6 million or 16.52%. 
These increases resulted from advertising campaigns coupled with an officer
calling program and the opening of a new branch in 1997.  For the years ended
December 31, 1997, 1996 and 1995 the Bank's average deposit balances and the
percent of total average deposits were as follows:

<TABLE>
<CAPTION>
  
                                         1997                       1996                            1995
                                ---------------------      ------------------------         -----------------------
                                  AVERAGE       % OF        AVERAGE          % OF            AVERAGE         % OF
                                  AMOUNT       TOTAL         AMOUNT         TOTAL             AMOUNT        TOTAL 
                                ----------    -------      ----------      -------          ----------     -------
<S>                             <C>           <C>          <C>             <C>              <C>            <C>
Demand deposits:
    Non-interest-bearing....    $13,884,711     19.85%      $11,093,282       19.61%       $ 9,520,152      17.81%
    NOW accounts ...........      9,894,916     14.15         7,604,620       13.44          7,131,146      13.34
Money Market ...............      9,178,891     13.13         9,332,707       16.50          9,274,608      17.35
Savings deposits............      3,238,009      4.63         2,360,086        4.17          2,260,354       4.23 
Time deposits under
    $100,000 ...............     28,357,929     40.55        23,031,493       40.72         22,445,225      41.99
                                -----------    ------       -----------      ------        -----------     ------
Total core deposits ........     64,554,456     92.31        53,422,188       94.44         50,631,485      94.72
Time deposits $100,000 
    and over ...............      5,379,827      7.69         3,145,980        5.56          2,822,473       5.28
                                -----------    ------       -----------      ------        -----------     ------
Total deposits .............    $69,934,283    100.00%      $56,568,168      100.00%       $53,453,958     100.00%
                                ===========    ======       ===========      ======        ===========     ======

</TABLE>

    Time deposits of $100,000 and over, public fund deposits and other large
deposit accounts tend to be short-term in nature and more sensitive to changes
in interest rates than other types of deposits and, therefore, may be a less
stable source of funds.  In the event that existing short-term deposits are not
renewed, the resulting loss of the deposited funds could adversely affect the
Bank's liquidity.  In a rising interest rate market, such short-term deposits
may prove to be a costly source of funds because their short-term nature
facilitates renewal at increasingly higher interest rates, which may adversely
affect the Company's earnings.  However, the converse is true in a falling
interest-rate market where such short-term deposits are more favorable to the
Company.

    As of December 31, 1997, the Bank had $225,000 of public deposits, while as
of December 31, 1996, the Bank had no public fund deposits.  As of December 31,
1997 and 1996, no single depositor had deposits totaling in excess of 3% of
total deposits.  The Bank has not accepted any brokered certificates of
deposit.  Management does not believe the Bank is dependent on a single deposit
customer, or a group of customers concentrated in a particular industry, whose
loss or insolvency would have a material adverse effect on the Bank's
operations.

    As of December 31, 1997, approximately 8.48% of the Bank's deposits
consisted of certificates of deposit in amounts of $100,000 or more, the
majority of which were held by residents of the Bank's market area and
approximately 77.23% of which will mature within twelve months of December 31,
1997.  As of December 31, 1997, the maturity distribution of the Bank's time
deposits of $100,000 or more was as follows:

<TABLE>
<CAPTION>
                                                                          AMOUNT  
                                                                        ----------
         <S>                                                            <C>
         3 months or less ....................................           $1,470,380
         Over 3 months through 6 months ......................              989,403
         Over 6 months trough 12 months ......................            2,327,075
         Over 12 months ......................................            1,411,033
                                                                         -----------
         Total time deposits $100,000 and over ...............           $6,197,891
                                                                         ==========
                                                                   
</TABLE>
SHORT-TERM BORROWINGS

    The Bank has entered into short-term borrowing arrangements with certain of
its customers.  These arrangements, entitled "Sweep Accounts", call for the
Bank to automatically transfer customer funds in excess of certain pre-defined
amounts from the customer's insured deposit account to the Sweep Account.  The
Sweep Accounts mature weekly and 







                                      11

<PAGE>   14

were collateralized with U. S. Government agency securities totaling $1.4
million as of December 31, 1997; accordingly, they were classified on the
Company's consolidated statements of financial condition as securities sold
under agreements to repurchase.  For the years ended December 31, 1997, 1996 and
1995, the Bank's short-term Borrowings were as follows:

<TABLE>
<CAPTION>
                                                              1997             1996             1995    
                                                          ------------      -----------      -----------
<S>                                                       <C>              <C>              <C>
Year ended December 31:
    Average indebtedness outstanding............           $1,282,216       $1,194,434       $  958,802
    Average rate paid ..........................                3.19%            3.23%            4.15%
    Maximum indebtedness
         at any month-end ......................           $1,793,439       $1,415,369       $1,623,320
As of December 31:
    Balance outstanding ........................           $1,326,473         $749,057       $1,623,320
    Rate paid ..................................                3.16%            3.15%            3.38%

</TABLE>
CAPITAL RESOURCES

    The Holding Corporation's total shareholders' equity was $7.6 million and
$6.4 million as of December 31, 1997 and 1996, respectively.  This increase was
the result of 1997's net income of $1.4 million and the $33,000 increase in the
net unrealized securities gains (losses) to December 31, 1997 from December 31,
1996, partially offset with the $242,000 (or $.20 per share) dividend declared
as of December 31, 1997.  The Bank's total shareholder's equity was $7.2
million and $6.0 million as of December 31, 1997 and 1996, respectively.  The
increase in the Bank's shareholder's equity was the result of the Bank's net
income of $1.4 million and the $33,000 increase in the net unrealized
securities gains (losses) to December 31, 1997 from December 31, 1996,
partially offset with the $247,000 dividend declared payable to the Holding
Company from the Bank.

    Banking laws and regulations limit the amount of dividends that may be paid
by financial institutions, including the Company.  In addition, banking
regulations impose certain minimum capital ratios on financial institutions,
including the Company, which also restrict the Company's right to pay
dividends.  The federal banking regulatory authorities have adopted certain
"prompt corrective action" rules with respect to depository institutions.  The
rules establish five capital tiers:  "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized."  The various federal banking regulatory agencies
have adopted regulations to implement the capital rules by, among other things,
defining the relevant capital measures for the five capital categories.  An
institution is deemed to be "well capitalized" if it has a total risk-based
capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or
greater, and a Tier 1 leverage ratio of 5% or greater and is not subject to a
regulatory order, agreement, or directive to meet and maintain a specific
capital level.  As of December 31, 1997, the Bank met the capital ratios of a
"well capitalized" financial institution with a total risk-based capital ratio
of 15.46%, a Tier 1 risk-based capital ratio of 14.20%, and a Tier 1 leverage
ratio of 8.55%.  Depository institutions which fall below the "adequately
capitalized" category generally are prohibited from making any capital
distribution, are subject to growth limitations, and are required to submit a
capital restoration plan.  There are a number of requirements and restrictions
that may be imposed on institutions treated as "significantly undercapitalized"
and, if the institution is "critically undercapitalized," the banking
regulatory agencies have the right to appoint a receiver or conservator.

    The Bank's total risk-based capital (total capital to risk-weighted
assets), Tier 1 risk-based capital (Tier 1 capital to risk-weighted assets) and
leverage (Tier 1 capital to total average assets during the three months ended
December 31) ratios as compared to the ratios mandated by the FDIC were as
follows:

<TABLE>
<CAPTION>
                                                      TOTAL            TIER 1
                                                    RISK-BASED       RISK-BASED          LEVERAGE
                                                   CAPITAL RATIO    CAPITAL RATIO          RATIO    
                                                   -------------    -------------      ------------
<S>                                                <C>              <C>                 <C>
Well capitalized per FDIC(minimum ratios).           10.00%            6.00%             5.00%
Bank:    December 31, 1996 ...............           13.70            12.45              8.82
         December 31, 1997 ...............           15.46            14.20              8.55


</TABLE>

ASSET/LIABILITY MANAGEMENT

    The principal objectives of asset and liability management are to manage
interest rate risks, ensure adequate liquidity 







                                      12

<PAGE>   15

and coordinate sources and uses of funds.  The Bank engages in a process of
asset and liability management through its Asset and Liability Management
Committee.  In the analysis of interest rate risks, the objective is to manage,
within acceptable limits, the impact on the income statement caused by
fluctuating interest rates and changing rate relationships.  In this process,
interest sensitivity is analyzed employing the traditional gap analysis.  While
generally the policy is to maintain a relatively neutral interest sensitivity
position, the Bank may initiate gap exposures within prescribed limits.  The
Bank can then manage interest rate risk, while responding to change within the
balance sheet and financial markets as it strives to enhance net interest
income.

    Bank management also meets periodically to review the Bank's asset and
liability position.  Among other things, cash needs are reviewed, along with
local and national market conditions and economic trends.  As necessary, the
Bank's rates are periodically adjusted.  Generally, the Bank does not engage in
short-term borrowing as a substantial portion of its business market.  The Bank
does not participate in the securities brokers market for deposit funds, or
actively seek jumbo certificates of deposit ($100,000 and over) through any
brokers or media advertising.

LIQUIDITY

    Holding Corporation.  The Holding Corporation's operating revenue and net
income are derived solely from the Bank through interest income on its deposit
accounts, dividends and management fees.  There are various statutory and
contractual limitations on the ability of the Bank to pay dividends, extend
credit, or otherwise supply funds to the Holding Corporation.  The FDIC and the
Florida Department of Banking and Finance also have the general authority to
limit the dividends paid by insured banks and bank holding companies.  Until
the $.20 dividend declared as of December 31, 1997, the Holding Corporation had
not paid any cash dividends and, prior to its acquisition by the Holding
Corporation on January 30, 1991, the Bank had not paid any cash dividends to
its shareholders.

    The Holding Corporation commenced an offering of its common stock at a
price of $5.00 per share in 1995 and closed it on December 31, 1995.  The
purpose of the offering was to infuse additional capital into the Bank to
increase its capital position.  Of the $920,000 of net proceeds from the
offering received by the Holding Corporation, $700,000 of capital was
contributed to the Bank and the remaining $220,000 was placed into an interest
bearing-deposit in the name of the Holding Corporation with the Bank.

    Bank.  Liquidity management involves the ability to meet the cash flow
requirements of customers who may be either depositors wanting to withdraw
their funds or borrowers needing assurance that sufficient funds will be
available to meet their credit needs.  In the ordinary course of business, the
Bank's cash flows are generated from interest and fee income, as well as from
loan repayments and the maturity or sale of other earning assets.  In addition
to cash and due from banks, the Bank considers all securities
available-for-sale and all federal funds sold as primary sources of asset
liquidity.  Many factors affect the ability to accomplish these liquidity
objectives successfully, including the economic environment, and the
asset/liability mix within the balance sheet, as well as the Bank's overall
reputation in the community.  During the years ended December 31, 1997, 1996
and 1995, investing activities provided (used) $(13.9) million, $(6.3) million
and $(6.8) million, respectively, of cash.  During the years ended December 31,
1997, 1996 and 1995, financing activities provided $9.8 million, $7.1 million
and $9.9 million, respectively, of cash.  These activities primarily resulted
from the Bank focusing its efforts on growth through an advertisement campaign,
as well as an officer calling campaign and the opening of a new branch in 1997.

RESULTS OF OPERATIONS

SUMMARY

    The Company's net income was $1.4 million for the year ended December 31,
1997, or $1.18 per share, as compared to $1.0 million for the year ended
December 31, 1996, or $.83 per share, and $593,000 for the year ended December
31, 1995, or $.59 per share.  For the years ended December 31, 1997, 1996 and
1995, the Company's performance ratios were as follows:
<TABLE>
<CAPTION>
                                                            1997              1996              1995  
                                                           -------           -------          --------
<S>                                                        <C>               <C>              <C>
Return on average assets .......................               1.82%            1.57%            1.01%
Return on average equity .......................              21.39            18.44            14.89
Average equity to average assets ...............               8.49             8.52             6.48
</TABLE>




                                      13

<PAGE>   16

NET INTEREST INCOME

    The Bank's earnings are dependent primarily on its net interest income
which is the excess of interest income earned on earning assets (primarily
loans and the investment portfolio - all of which are taxable) over interest
expense paid on deposits and short-term borrowings.  Changes in net interest
income are caused by changes in the interest rates earned or paid and by volume
changes in loans, the investment portfolio, deposits and short-term borrowings.

    The Bank's net interest income increased to $3.4 million during the year
ended December 31, 1997 from $2.9 million during the year ended December 31,
1996, an increase of $518,000 or 17.87%.  The increase was primarily due to the
increase in average interest-earning assets and average interest-bearing
liabilities.  The 17.15% volume increase in 1997 from 1996 in loan interest
income was primarily attributable to the 14.90% increase in average loans and
the 32.72% volume increase in 1997 from 1996 in investment interest income was
primarily attributable to the 25.25% increase in average investments.  The
24.91% volume increase in 1997 from 1996 in interest expense was primarily
attributable to the 18.60% increase in average interest-bearing liabilities.
The yield on the loan portfolio decreased 13 basis points, while the yield on
the investment portfolio decreased 3 basis points.  The interest rates paid on
interest-bearing liabilities remained the same.  The result was a decrease in
the net interest margin to 4.65% during 1997 from 4.85% during 1996.

    The increase (decrease) during the year ended December 31, 1997 from the
year ended December 31, 1996 in the Bank's interest income earned and interest
expense paid resulting from changes in volumes of, rates earned or paid on, and
the combined effect of changes in both volume and rate on, various categories
of interest-earning assets and interest-bearing liabilities were as follows:
                                                                         
<TABLE>
<CAPTION>


         
                                                                                       VOLUME/
ASSETS:                                                  VOLUME          RATE           RATE          TOTAL   
-------                                               -----------      ---------       --------      --------
<S>                                                   <C>              <C>             <C>           <C>
Loans:
    Commercial ................................       $    92,639      $  10,374       $  1,252      $104,265
    Mortgage ..................................           413,706        (40,469)        (6,876)      366,361
    Installment ...............................           126,857         (3,029)        (1,711)      122,117
    Other .....................................             3,987         (9,471)          (131)       (5,615)
                                                      -----------      ---------       --------      -------- 
         Total loans  .........................           637,189        (42,595)        (7,466)      587,128
Investment securities .........................           201,354         (2,091)          (429)      198,834
Federal funds sold ............................           176,092          3,676          3,758       183,526
                                                      -----------      ---------       --------      -------- 
Total interest income .........................         1,014,635        (41,010)        (4,137)      969,488
                                                      -----------      ---------       --------      -------- 
LIABILITIES:
------------
Interest-bearing deposits:
    NOW accounts ..............................            37,158        (20,445)        (6,157)       10,556
    Money market accounts .....................            (4,003)         6,158           (101)        2,054
    Savings deposits ..........................            19,520             14              6        19,540
    Time deposits:
         Under $100,000 .......................           308,286        (13,308)        (3,077)      291,901
         $100,000 and over  ...................           126,475           (998)          (709)      124,768
                                                      -----------      ---------       --------      -------- 
    Total interest-bearing deposits ...........           487,436        (28,579)       (10,038)      448,819
Securities sold under agreements
    to repurchase .............................             2,839           (578)           (43)        2,218
                                                      -----------      ---------       --------      -------- 
Total interest expense ........................           490,275        (29,157)       (10,081)      451,037
                                                      -----------      ---------       --------      -------- 
Net interest income ...........................       $   524,360      $ (11,853)      $  5,944      $518,451
                                                      ===========      =========       ========      ========

</TABLE>
    The Bank's net interest income increased to $2.9 million during the year
ended December 31, 1996 from $2.5 million during the year ended December 31,
1995, an increase of $377,000 or 14.94%.  The increase was primarily due to the
increase in average interest-earning assets and average interest-bearing
liabilities.  The 17.29% volume increase in 1996 from 1995 in loan interest
income was primarily attributable to the 14.59% increase in average loans and
the 2.28% volume decrease in 1996 from 1995 in investment interest income was
primarily attributable to the 2.43% decrease in average investments.  The 3.81%
volume increase in 1996 from 1995 in interest expense was primarily
attributable to the 3.81% increase in average interest-bearing liabilities.
The interest rate variance for loans primarily 







                                      14

<PAGE>   17

resulted from the decrease in interest rates in 1996 from 1995, including a 56
basis point decrease in average prime interest rate.  The yield on the
investment portfolio decreased 18 basis points reflecting the reinvestment of
the proceeds from investment securities maturing subsequent to 1995 at lower
interest rates.  The interest rates paid on interest-bearing liabilities
decreased 26 basis points as the Bank paid lower rates on new deposit accounts
than those maturing subsequent to 1995.  The result was a increase in the net
interest margin to 4.85% during 1996 from 4.63% during 1995.

    The increase (decrease) during the year ended December 31, 1996 from the
year ended December 31, 1995 in the Bank's interest income earned and interest
expense paid resulting from changes in volumes of, rates earned or paid on, and
the combined effect of changes in both volume and rate on, various categories
of interest-earning assets and interest-bearing liabilities were as follows:
                                                                         
<TABLE>
<CAPTION>

       
                                                                                        VOLUME/
ASSETS:                                                    VOLUME          RATE           RATE          TOTAL   
-------                                                  ---------      ---------     ----------     ----------
<S>                                                      <C>            <C>           <C>            <C>
Loans:
    Commercial ............................               $127,929      $  (6,731)     $  (1,330)     $119,868
    Mortgage ..............................                286,423        (58,162)        (7,524)      220,737
    Installment ...........................                112,617        (18,524)       (14,411)       79,682
    Other .................................                 37,930         (8,058)        (1,171)       28,701
                                                          --------      ---------       --------       -------
        Total loans .......................                564,899        (91,475)       (24,436)      448,988
Investment securities .....................                 (5,852)       (67,030)           372       (72,510)
Federal funds sold ........................                (23,000)       (20,233)         2,182       (41,051)
                                                          --------      ---------       --------       -------
Total interest income .....................                536,047       (178,738)       (21,882)      335,427
                                                          --------      ---------       --------       -------

LIABILITIES:
------------
Interest-bearing deposits:
    NOW accounts ..........................                  9,067        (20,868)        (1,385)      (13,186)
    Money market accounts .................                  1,755        (38,731)          (243)      (37,219)
    Savings deposits ......................                  2,462         (5,538)          (244)       (3,320)
    Time deposits: 
        Under $100,000 ....................                 34,875        (36,090)          (943)       (2,158)
        $100,000 and over .................                 18,658         (2,984)          (342)       15,332
                                                          --------      ---------       --------       -------
    Total interest-bearing deposits .......                 66,817       (104,211)        (3,157)      (40,551)
Securities sold under agreements 
    to repurchase .........................                  9,769         (8,746)        (2,150)       (1,127)
                                                          --------      ---------       --------       -------
Total interest expense ....................                 76,586       (112,957)        (5,307)      (41,678)
                                                          --------      ---------       --------       -------
Net interest income .......................               $459,461      $ (65,781)      $(16,575)     $377,105
                                                          ========      =========       ========      ========

</TABLE>
    As interest rates continue to change, the Bank's net interest margin may be
squeezed by the repricing of the interest-earning assets at different times
than the repricing of interest-costing liabilities.

PROVISION FOR LOAN LOSSES

    The Bank made no provision for loan losses during the years ended December
31, 1997 and 1996 as compared to $28,000 during the year ended December 31,
1995.  Net loan charge-offs (recoveries) during 1997, 1996 and 1995 were
$23,000, $(52,000) and $518,000, respectively.  Two loans totaling $591,000 to
one borrower were charged-off during 1995.  These two loans were fully reserved
as of December 31, 1994.  Prior to these two loans being charged-off, net loan
charge-offs (recoveries) during 1995 was $(73,000).  The amount provided for
loan losses was based on an evaluation by management of the amount needed to
maintain the allowance at a level sufficient to cover anticipated losses and
the inherent risk of losses in the loan portfolio.  As of December 31, 1997 and
1996, the allowance for loan losses as a percentage of loans net of unearned
income was 1.77% and 2.05%, respectively, and as a percentage of non-accrual
loans was 256.59% and 344.34%, respectively.  See "--Financial
Condition-Allowance for Loan Losses".

NON-INTEREST INCOME

    Deposit service charge income increased $34,000 or 7.35% to $489,000 (or
 .70% of average deposits) during the year ended December 31, 1997, after
decreasing $18,000 or 3.66% to $455,000 (or .80% of average deposits) during







                                      15

<PAGE>   18

the year ended December 31, 1996 from $473,000 (or .88% of average deposits)
during the year ended December 31, 1995.  These increases and decreases
primarily resulted from changes in the volume of overdraft charges.  During
1996, the Bank sold $2.5 million of investments available-for-sale recognizing
a $4,000 gain.  Also during 1996, the Bank received a $70,000 settlement with
Lee County for business damages resulting from the Mid-Point bridge
construction in front of the Colonial branch.

NON-INTEREST EXPENSE

    Personnel expenses increased to $1.4 million during the year ended December
31, 1997, from $1.3 million and $1.2 million during the respective years ended
December 31, 1996 and 1995, or respective increases of $114,000 or 8.92% and
$28,000 or 2.26%.  The increase to 1997 from 1996 primarily resulted from
salaries paid to the employees at the new branch, as well as compensation
increases for existing employees.  The increase to 1996 from 1995 primarily
resulted from compensation increases for existing employees.  The monthly
average of full-time equivalent employees during 1997 was 35.8 as compared to
33.2 employees during 1996 and 33.7 employees during 1995.  As of December 31,
1997, the Bank employed 33 full-time and three part-time employees.

    Occupancy expense increased $20,000 or 3.69% during the year ended December
31, 1997 to $545,000 after decreasing $50,000 or 8.64% to $525,000 during the
year ended December 31, 1996, from $575,000 during the year ended December 31,
1995.  The increase in 1997 from 1996 primarily resulted from additional costs
of the new branch and computers.  The decrease in 1996 from 1995 primarily
resulted from lower depreciation expense as assets became fully depreciated.

    Advertising expense increased to $107,000 during the year ended December
31, 1997 from $74,000 and $57,000 during the years ended December 31, 1996 and
1995, respectively, or respective increases of $33,000 or 44.65% and $17,000 or
30.35%.  These increases primarily resulted from the cost of the advertising
campaigns.

    Loan collection expenses, excluding legal expenses but including real
estate taxes, insurance, gain (loss) on the sale of other real estate owned,
and appraisal costs on real estate in foreclosure, increased $43,000 or 87.93%
to $93,000 for the year ended December 31, 1997, after decreasing to $50,000
during the year ended December 31, 1996, from $90,000, or a decrease of $40,000
or 44.75%.  The 1997 increase resulted from an increase in write-downs of other
real estate owned.  The 1996 decrease resulted from a reduction in write-downs
and losses on disposal of other real estate owned.

    Supplies expense increased to $78,000 during the year ended December 31,
1997, from $64,000 and $53,000 during the years ended December 31, 1996 and
1995, respectively, or respective increases of $14,000 or 21.61% and $11,000 or
21.97%.  These increases resulted from the Bank purchasing more supplies to
meet the needs of increased loans and deposits, including supplies to stock the
new branch.

    Legal expenses decreased to $72,000 during the year ended December 31,
1997, from $99,000 and $103,000 during the years ended December 31, 1996 and
1995, respectively, or respective decreases of $27,000 or 27.62% and $4,000 or
3.99%.  These decreases reflected the reduction in collection actions handled
by the Bank's attorneys.

    Other operating expenses increased to $538,000 during the year ended
December 31, 1997, from $521,000 and $492,000 during the years ended December
31, 1996 and 1995, respectively, or respective increases of $17,000 or 3.28%
and $29,000 or 5.90%.  The 1997 increase primarily resulted from the increased
costs associated with the increase in the size of the Bank.  The 1996 increase
primarily resulted from increased intangible tax expense.

INCOME TAXES

    During the years ended December 31, 1997, 1996 and 1995, the Company had a
benefit for income taxes of $261,000, $108,000 and $260,000 by recording
deferred income tax assets resulting from the corresponding reduction in the
valuation allowance associated with the Company's tax loss carry forward.  At
December 31, 1997, the Company had a net operating loss carry forward of $2.9
million for Federal income tax reporting purposes.  The Internal Revenue
Service examined without change the Bank's Federal income tax return for the
year ended December 31, 1988.

    Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and 







                                      16
<PAGE>   19

tax basis of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income. 
Valuation allowances are established when considered necessary to reduce
deferred tax assets to the estimated amount expected to be realized.  Income tax
expense is the tax payable or refundable for the period plus or minus the change
during the period in deferred tax assets and liabilities.  One of the principal
differences from the deferred method is that changes in tax rates and laws will
be reflected in income from continuing operations in the period such changes are
enacted. Under the deferred method such changes are reflected over time, if at
all.

YEAR 2000 ISSUES

    In the next two years, many companies, including financial institutions
such as the Bank, will face potentially serious issues associated with the
inability of existing data processing hardware and software to appropriately
recognize calendar dates beginning in the year 2000.  Many computer programs
that can only distinguish the final two digits of the year entered may read
entries for the year 2000 as the year 1900 and compute payment, interest or
delinquency based on the wrong date, or are expected to be unable to compute
payment, interest or delinquency.  In 1997, the Bank began the process of
identifying the many software applications and hardware devices expected to be
impacted by this issue.  The Bank outsources its principal data processing
activities to one or more third parties, and purchases most of its software
applications from third party vendors.  The Bank believes that its vendors are
actively addressing the problems associated with the "Year 2000" issue.
However, there can be no assurance that the Bank will not be adversely affected
by the failure of such third party vendors to become Year 2000 compliant.

INFLATION

    The financial statements and related data presented in this report have
been prepared in accordance with generally accepted accounting principles which
require the measurement of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time due to inflation.  The principal element of the Company's
earnings was interest income which may be significantly affected by the level
of inflation and by government monetary and fiscal policies adopted in response
to inflationary or deflationary pressures.

    Inflation affects the reported financial condition and results of
operations of all companies.  However, the majority of assets and liabilities
of financial institutions are monetary in nature and therefore differ greatly
from most commercial and industrial companies that have significant investments
in fixed assets or inventories.  Inflation does have an important impact on the
growth of total assets and the resulting need to increase equity capital at
higher than normal rates in order to maintain an appropriate equity to assets
ratio.  Inflation also is a factor which may influence interest rates, yet the
frequency and magnitude of interest rate fluctuations do not necessarily
coincide with changes in the general inflation rate.  In an effort to cope with
the effects of inflation, the Company attempts to monitor its interest rate
sensitivity gap position, as discussed above.  In addition, the periodic
reviews of banking services and products are conducted to adjust pricing in
view of current costs.

INTEREST RATE SENSITIVITY

    Management meets periodically to review general economic conditions,
interest rate trends, and the interest rate sensitivity of the Bank's various
portfolios.  The Company's objective in managing interest rate sensitivity is
to protect the Company's interest rate margins from the negative effects of
upward or downward changes in interest rates.  Legislative changes, monetary
control efforts and the effects of industry deregulation have been significant
factors affecting the task of managing interest sensitivity positions.

    The Company's rate-sensitive assets are those maturing within one year or
less.  Rate-sensitive liabilities include interest-bearing demand deposits
(insured money market account and NOW accounts), savings accounts and time
deposits which mature or are subject to rate changes in one year or less;
however, industry experience indicates that many interest-bearing demand
deposits and regular savings deposits are not as interest-sensitive as other
types of interest-bearing deposits.  The profitability of the Company is
influenced significantly by management's ability to control the relationship
between interest rate-sensitive assets and liabilities, especially during
periods of frequent changes in interest rates.  As set forth in the table
below, the difference between the amounts of interest-earning assets and
interest-bearing liabilities subject to rate changes is known as the
"interest-sensitivity gap", and is referred to as a "positive gap" when the
amount of interest-sensitive assets exceeds that of liabilities, and as a 
"negative gap" when the amount of interest-







                                      17

<PAGE>   20
sensitive liabilities exceeds that of assets.

    At December 31, 1997, $33.6 million or 44.08% of the Company's total
interest-earning assets were subject to rate adjustment during 1998, while a
total of $50.9 million or 84.53% of the Company's total interest-bearing
liabilities were subject to adjustment during that same period.  As reflected
by the table, the Company had a cumulative "negative" gap of $17.3 million
during the year following December 31, 1997.

    At December 31, 1997, an analysis of the interest rate sensitivity of the
Company's assets and liabilities was as follows:

<TABLE>
<CAPTION>
                               Immediately                                                                               
                               Adjustable or                                                                               
                                 Less Than      31 to 90       91 to 180     181 to 365     Over 365                     
                                  30 Days         Days           Days           Days          Days         Total          
                                -----------  -----------      -----------   -----------    -----------     -----------      
<S>                            <C>           <C>              <C>           <C>            <C>             <C> 
Loans:                                                                                                                  
Commercial:                                                                                                             
   Variable-interest rate ....  $ 6,303,383  $      ---       $      ---    $      ---     $       ---     $ 6,303,383  
   Fixed-interest rate .......       97,580      189,794          379,068       822,433       1,497,353      2,986,228  
Mortgage:                                                                                                               
   Construction:                                                                                                        
     Variable-interest rate ..      354,333         ---              ---           ---             ---         354,333  
     Fixed-interest rate .....         ---        49,163          229,331          ---          328,437        606,931  
   Non-construction:                                                                                                    
     Variable-interest rate ..   13,813,545         ---              ---           ---             ---      13,813,545  
     Fixed-interest rate .....      253,177      437,193          344,245     1,515,289      15,145,098     17,695,002  
Installment ..................      142,164       97,727          166,367       370,651       4,004,547      4,781,456  
Other ........................    2,553,376         ---              ---           ---          612,133      3,165,509  
                                -----------  -----------      -----------   -----------    ------------    -----------
   Total loans ...............   23,517,558      773,877        1,119,011     2,708,373      21,587,568     49,706,387  
Federal funds sold ...........    1,998,000         ---              ---           ---             ---       1,998,000  
Investments available-                                                                                                  
   for sale ..................    1,000,000         ---              ---      1,496,875      14,087,625     16,584,500  
Investments held-                                                                                                       
   to-maturity ...............    1,000,000         ---              ---           ---        6,967,268      7,967,268
                                -----------  -----------      -----------   -----------    ------------    -----------
   Total earning assets ......   27,515,558      773,877        1,119,011     4,205,248      42,642,461    $76,256,155  
                                -----------  -----------      -----------   -----------    ------------    ============
                                                                                                                        
DEPOSITS:                                                                                                               
---------                                                                                                               
NOW Accounts .................   11,125,578         ---              ---           ---            ---      $11,125,578  
Money Market..................    8,621,852         ---              ---           ---            ---        8,621,852  
Savings deposits .............    3,635,619         ---              ---           ---            ---        3,635,619  
Time deposits:                                                                                                          
  Under $100,000..............    3,542,101    3,705,112        5,227,585     8,905,057       7,899,545     29,279,400  
  $100,000 and over...........      854,935      615,445          989,403     2,327,075       1,411,033      6,197,891  
                                -----------  -----------      -----------   -----------    ------------    -----------
  Total costing deposits .....   27,780,085    4,320,557        6,216,988    11,232,132       9,310,578     58,860,340  
Sweep accounts ...............    1,326,473         ---              ---           ---            ---        1,326,473  
                                -----------  -----------      -----------   -----------    ------------    -----------
  Total costing liabilities ..   29,106,558    4,320,557        6,216,988    11,232,132       9,310,578    $60,186,813  
                                -----------  -----------      -----------   -----------    ------------    ============
                                                                                                                        
INTEREST RATE                                                                                                           
  SENSITIVITY GAP:                                                                                                      
  ----------------                                                                                                      
Amount .......................  $(1,591,000) $(3,546,680)     $(5,097,977)  $(7,026,884)    $33,331,883                 
                                ===========  ===========      ===========   ===========     ===========
% of total assets ............        (1.92)%      (4.28)%          (6.15)%       (8.48)%         40.22%                
                                ===========  ===========      ===========   ===========     ===========
                                                                                                                        
CUMULATIVE INTEREST                                                                                                     
  RATE SENSITIVITY GAP:                                                                                                 
  ---------------------                                                                                                 
                                                                                                                        
Amount .......................  $(1,591,000) $(5,137,680)    $(10,235,657) $(17,262,541)    $16,069,342                 
                                ===========  ===========     ============  ============     ===========
% of total assets ............        (1.92)%      (6.20)%         (12.35)%      (20.83)%         19.39%                 
                                ===========  ===========      ===========   ===========     ===========
                                                                                                                        
</TABLE>



                                      18


<PAGE>   21
BUSINESS OF THE COMPANY

    The Holding Corporation was organized in 1990 for the purpose of serving as
a one-bank holding company for the Bank.  On January 30, 1991, the Holding
Corporation, following approval by Bank shareholders at a special meeting,
acquired all of the outstanding shares of Bank common stock.

    The Bank commenced business on May 23, 1988 for purposes of serving the
needs of the residents of Fort Myers and other surrounding communities.  The
Bank's broad shareholder base is composed primarily of Lee County residents,
and the composition of the Bank's Board of Directors reflects the Bank's
philosophy of serving the banking needs of local residents.  The Bank intends
to be and remain a progressive financial institution offering as many
financial services as its size and capital base will allow on a prudent and
conservative level.  The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation to the extent provided by law.

    The Bank conducts a general banking business from four locations.  The
Bank's main office is located within the city limits of Fort Myers, Florida, at
2017 McGregor Boulevard.  In May, 1989, the Bank opened a branch office at 1500
Colonial Boulevard in Fort Myers.  In September, 1990, the Bank opened another
branch office at the corner of Daniels Road and Metro Parkway in Lee County.
In July, 1997, the Bank opened another branch office at the corner of Iona Road
and McGregor Boulevard.  In accordance with the Community Reinvestment Act of
1977, the Bank has designated the local community to be served by the Bank as
Fort Myers (Lee County) Florida.  The Bank has the responsibility to help meet
the credit needs of the entire local community, including low and moderate
income neighborhoods.

CAPITAL STOCK

    There is no established public trading market for the Holding Corporation's
common stock.  Management of the Holding Corporation is aware of certain
transactions in its common stock that occurred in 1997 and 1996 although the
trading prices of all stock transactions are not known.  At December 31, 1997,
there were 1,210,975 shares of Holding Corporation common stock outstanding
held by 686 shareholders of record.

    Until the $.20 per share dividend (or a total of $242,000) was declared as
of December 31, 1997, the Holding Corporation had not paid any dividends since
it was organized in January, 1991 and, prior thereto, the Bank did not pay any
dividends to its shareholders since its organization in May, 1988.  The ability
of the Holding Corporation to pay dividends is subject to statutory
restrictions on cash dividends applicable to Florida corporations.  Further,
the Holding Corporation's primary source of income is the dividends it receives
from the Bank, which declared a $247,000 dividend payable as of December 31,
1997 to the Holding Company.  The Florida Banking Code imposes certain
restrictions on the right of Florida state banking corporations, such as the
Bank, from paying dividends.

    Transactions in Company common stock are infrequent and are negotiated
privately between the persons involved in those transactions.  The following
sets forth the high and low trading prices for certain trades of Holding
Corporation common stock that occurred in transactions known to management in
the respective periods during 1997 and 1996:


<TABLE>
<CAPTION>

                                                    1997                                     1996                       
                                       ---------------------------------          -------------------------------
                                        HIGH           LOW        SHARES           HIGH          LOW       SHARES
                                        ----          ----        ------           ----          ----       ------
<S>                                   <C>             <C>           <C>           <C>           <C>          <C>
1st Quarter ....................      $  7.25         $6.00         4,800         $5.00         $5.00          600
2nd Quarter ....................        10.00          7.00         3,350          8.00          5.00        1,250
3rd Quarter ....................        10.00          7.25         5,890          5.50          5.50          300
4th Quarter ....................        10.75          8.00        45,900         10.00          6.38        4,050

</TABLE>




ANNUAL MEETING

    The Holding Corporation's Annual Meeting will be held on Tuesday, April 28,
1998 at 4:00 p.m. at the Bank's Colonial Office, 1500 Colonial Boulevard, Fort
Myers, Florida 33919.


                                      19




<PAGE>   22


                   HOLDING CORPORATION DIRECTORS AND OFFICERS
DIRECTORS

    The following are the Directors of both the Holding Corporation and the
Bank:

    ROBERT C. ADKINS has been President and General Manager of Dixie Buick,
Inc. located in Fort Myers, for many years.  From 1983 to 1986, he was on the
board of directors of Security National Bank in Fort Myers.

    RONALD D. FOCHT is President and owner of United Welding and Machine
Company since 1976.  Subsequently, he purchased Frank's Supply Company and
Woods Metal Works, both of Fort Myers.

    CAROLE A. GREEN is a Director of the Hospital Board of Lee County d/b/a Lee
Memorial Health Systems since 1995.  She also serves on The Children's Hospital
of Southwest Florida Development Board and the Health Education Center of
Southwest Florida.

    ROBERT ERNEST HENDRY, a dentist, is a Fort Myers native.  He served on the
board of directors of Exchange National Bank in Fort Myers from 1980 to 1983,
and was a founding director of Security National Bank from 1983 until 1988.  He
serves as Chairman of the Holding Corporation's Board.

    JAMES T. HUMPHREY, JR., is senior member of the law firm of Humphrey &
Knott, P.A. located in Fort Myers.  He served as city judge from 1972 to 1973,
and as county attorney from 1973 to 1977.  His law firm is the Company's
general legal counsel.

    GEORGE T. (PAT) MANN, JR. is President of George T. Mann General
Contractor, Inc. since 1985.  He served on the board of directors of First
Federal Savings and Loan Association of Fort Myers, and subsequently,
Society/First Federal from 1980 to 1996.  He also currently serves as a
Commissioner of the Lee County Mosquito Control District, where he was first
elected in 1992.

    WALLACE M. TINSLEY was President of an auto parts business until he sold
most of the stores to employees in 1984, and the balance of the business in
1989.  He is retired.

    WILLIAM P. VALENTI serves as the Company's President and Chief Executive
Officer since February, 1992.  Included in his thirty years of banking
experience, is service as Group President of SunBank, N.A. and as President and
Chief Executive Officer of Flagship First National Bank of Titusville, Florida.


EXECUTIVE OFFICERS OF THE HOLDING CORPORATION

    In addition to William P. Valenti (Chief Executive Officer), Harold S.
Taylor, Jr. also serves as an executive officer of the Holding Corporation.
Mr. Taylor joined the Holding Corporation as Executive Vice President,
Secretary and Treasurer in February, 1996.  He also serves as Executive Vice
President of South Florida Bank.

MAIN OFFICE OF THE COMPANY:                 LEGAL COUNSEL:

2017 McGregor Boulevard                     Humphrey & Knott, P. A.
Fort Myers, Florida 33901                   1625 Hendry Street
Phone: (941) 334-2020                       Fort Myers, Florida 33901
Fax:   (941) 334-6203                       Phone:  (941) 334-2722

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS:

Brewer, Beemer, Kuehnhackl & Koon, P.A.
250 North Orange Avenue, Suite 1500
Orlando, Florida 32801
Phone:  (407) 649-7923





                                       20
<PAGE>   23

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Shareholders
  of South Florida Bank Holding Corporation

We have audited the consolidated statements of financial condition of South
Florida Bank Holding Corporation as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.
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 South
Florida Bank Holding Corporation as of December 31, 1997 and 1996, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.



/s/ Brewer, Beemer, Kuehnhackl & Koon, P.A.

BREWER, BEEMER, KUEHNHACKL & KOON, P.A.

Orlando, Florida
January 29, 1998





                                       21
<PAGE>   24



                     SOUTH FLORIDA BANK HOLDING CORPORATION
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


<TABLE>
<CAPTION>
                                                                             DECEMBER 31,            
                                                                   --------------------------------
                                                                         1997             1996      
                                                                   ---------------  ---------------
<S>                                                                <C>              <C>
ASSETS
------

Cash and due from banks .................................             $ 5,001,112      $ 4,663,206
Federal funds sold ......................................               1,998,000        5,179,000
Investments available-for-sale ..........................              16,584,500        8,476,165
Investments held-to-maturity 
   (market value of $7,980,325 and $8,139,978) ..........               7,967,268        8,163,011
Loans, net of allowance for loan losses 
   of $882,034 and $904,562 .............................              48,824,353       43,135,706
Accrued interest receivable .............................                 600,536          451,821
Premises and equipment, net .............................                 589,881          408,434
Other real estate owned .................................                 514,211          548,500
Other assets ............................................                 779,497          503,684
                                                                      -----------      -----------
   Total assets .........................................             $82,859,358      $71,529,527
                                                                      ===========      ===========
LIABILITIES
-----------
Deposits:
   Demand deposits ......................................             $14,238,948      $15,215,611
   NOW accounts .........................................              11,125,578        7,841,350
   Money market accounts ................................               8,621,852        7,749,782
   Savings deposits .....................................               3,635,619        2,725,840
   Time deposits under $100,000 .........................              29,279,400       25,975,567
   Time deposits $100,000 and over ......................               6,197,891        4,379,625
                                                                      -----------      -----------
      Total deposits ....................................              73,099,288       63,887,775
Securities sold under agreements to repurchase ..........               1,326,473          749,057
Accrued interest payable ................................                 457,407          443,538
Other liabilities .......................................                 353,704           41,432
                                                                      -----------      -----------
   Total liabilities ....................................              75,236,872       65,121,802
                                                                      -----------      -----------
Commitments and contingencies (Notes B, E and I)

SHAREHOLDERS' EQUITY
--------------------
Common stock, $.01 par value, 10,000,000 shares
   authorized, 1,210,975 shares outstanding .............                  12,110           12,110
Additional paid-in capital ..............................              10,366,378       10,366,378
Net unrealized securities gains (losses) ................                     324          (32,911)
Retained deficit ........................................              (2,756,326)      (3,937,852)
                                                                      -----------      -----------
   Total shareholders' equity ...........................               7,622,486        6,407,725
                                                                      -----------      -----------
   Total liabilities and shareholders' equity ...........             $82,859,358      $71,529,527
                                                                      ===========      ===========

</TABLE>




         The accompanying Notes to Consolidated Financial Statements
             are an integral part of these financial statements.






                                      22

<PAGE>   25

                    SOUTH FLORIDA BANK HOLDING CORPORATION
                      CONSOLIDATED STATEMENTS OF INCOME

                                       
<TABLE>
<CAPTION>
                                                                            FOR THE YEARS ENDED DECEMBER 31,     
                                                                      ---------------------------------------------
                                                                           1997            1996           1995     
                                                                      ------------    ------------     ------------
<S>                                                                   <C>             <C>              <C>
INTEREST AND FEE INCOME FROM EARNING ASSETS:
Loans .................................................                $4,303,281       $3,716,153       $3,267,165
Federal funds sold ....................................                   355,724          172,198          213,249
Investment securities .................................                 1,180,155          981,321        1,053,831
                                                                       ----------       ----------       ----------
   Total interest income ..............................                 5,839,160        4,869,672        4,534,245
                                                                       ----------       ----------       ----------

INTEREST EXPENSE:
Deposits:
   NOW accounts .......................................                   133,934          123,378          136,564
   Money market accounts ..............................                   231,943          230,998          279,091
   Savings deposits ...................................                    72,016           52,476           55,796
   Time deposits under $100,000 .......................                 1,624,930        1,333,029        1,335,187
   Time deposits $100,000 and over ....................                   302,886          178,118          162,786
Other .................................................                    40,841           38,623           39,750
                                                                       ----------       ----------       ----------
   Total interest expense .............................                 2,406,550        1,956,622        2,009,174
                                                                       ----------       ----------       ----------

NET INTEREST INCOME ...................................                 3,432,610        2,913,050        2,525,071
PROVISION FOR LOAN LOSSES .............................                     ---              ---             28,000
                                                                       ----------       ----------       ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES....                 3,432,610        2,913,050        2,497,071
                                                                       ----------       ----------       ----------
NON-INTEREST INCOME:
Service charge income .................................                   488,711          455,246          472,521
Realized securities gains .............................                     ---              3,828             ---
Other .................................................                    87,367          152,439           74,800
                                                                       ----------       ----------       ----------
   Total non-interest income ..........................                   576,078          611,513          547,321
                                                                       ----------       ----------       ----------

NON-INTEREST EXPENSES:
Personnel expense .....................................                 1,386,331        1,272,815        1,244,680
Occupancy expense .....................................                   544,767          525,366          575,072
Advertising ...........................................                   107,161           74,084           56,834
Loan collection expenses ..............................                    93,180           49,582           89,742
Supplies ..............................................                    77,954           64,103           52,558
Legal expenses ........................................                    71,767           99,147          103,265
FDIC insurance ........................................                    26,587           25,921           97,129
Other .................................................                   538,438          521,339          492,289
                                                                       ----------       ----------       ----------
  Total non-interest expenses ........................                  2,846,185        2,632,357        2,711,569
                                                                       ----------       ----------       ----------

INCOME BEFORE INCOME TAXES ............................                 1,162,503          892,206          332,823

BENEFIT FOR INCOME TAXES ..............................                   261,218          108,000          260,000
                                                                       ----------       ----------       ----------

NET INCOME ............................................                $1,423,721       $1,000,206       $  592,823
                                                                       ==========       ==========       ==========
NET INCOME PER SHARE:
   Basic ..............................................                $     1.18       $      .83       $      .59
                                                                       ==========       ==========       ==========
   Diluted ............................................                $     1.15       $      .82       $      .59
                                                                       ==========       ==========       ==========

Weighted average number of common shares  .............                 1,210,975        1,207,696        1,002,875
                                                                       ==========       ==========       ==========



</TABLE>





         The accompanying Notes to Consolidated Financial Statements
             are an integral part of these financial statements.





                                      23

<PAGE>   26


                   SOUTH FLORIDA BANK HOLDING CORPORATION
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                            NET
                                                         UNREALIZED                      TOTAL
                                           ADDITIONAL    SECURITIES                      SHARE-        NUMBER
                                COMMON      PAID-IN        GAINS         RETAINED       HOLDERS'         OF
                                STOCK       CAPITAL       (LOSSES)       DEFICIT         EQUITY        SHARES  
                              ---------  -------------   ----------    ------------  ------------    ----------
<S>                           <C>        <C>             <C>           <C>           <C>             <C>
Balance,
  December 31, 1994 ........    $10,029    $ 9,373,100    $(49,211)    $(5,530,881)   $3,803,037      1,002,875

Proceeds from issuance of
  193,100 shares of common
  stock, net of $45,141 of
  issuance costs ...........      1,931        918,428        ---            ---         920,359        193,100

Investment valuation .......       ---            ---       69,866           ---          69,866           ---

Net income for 1995.........       ---            ---         ---          592,823       592,823           ---   
                                -------    ----------     --------     -----------    ----------     ----------
Balance,
  December 31, 1995 ........     11,960     10,291,528      20,655      (4,938,058)    5,386,085      1,195,975

Proceeds from exercise of
   15,000 stock options ....        150         74,850        ---            ---          75,000         15,000

Investment valuation .......       ---            ---      (53,566)          ---         (53,566)          ---

Net income for 1996.........       ---            ---         ---        1,000,206     1,000,206           ---   
                                -------    ----------     --------     -----------    ----------     ----------
Balance,
  December 31, 1996 ........     12,110     10,366,378     (32,911)     (3,937,852)    6,407,725      1,210,975

Investment valuation .......       ---            ---       33,235           ---          33,235           ---

Dividend declared
  at $.20 per share ........       ---            ---         ---         (242,195)     (242,195)          ---

Net income for 1997.........       ---            ---         ---        1,423,721     1,423,721           ---   
                                -------    ----------     --------     -----------    ----------     ----------
Balance,
  December 31, 1997 ........    $12,110    $10,366,378    $    324     $(2,756,326)   $7,622,486      1,210,975
                                =======    ===========    ========     ===========    ==========     ==========


</TABLE>




          The accompanying Notes to Consolidated Financial Statements
             are an integral part of these financial statements.


                                      24

<PAGE>   27




                    SOUTH FLORIDA BANK HOLDING CORPORATION
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

               INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


<TABLE>
<CAPTION>
                                                                                 FOR THE YEARS ENDED DECEMBER 31,        
                                                                           ----------------------------------------------
                                                                                1997             1996              1995    
                                                                           --------------   --------------   --------------
<S>                                                                        <C>              <C>              <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Interest received ............................................               $5,690,445       $4,914,008       $4,377,971
Non-interest income ..........................................                  576,078          611,513          547,321
Interest paid ................................................               (2,392,681)      (2,035,555)      (1,734,112)
Personnel expenses ...........................................               (1,386,331)      (1,272,815)      (1,244,680)
Other operating expenditures .................................               (1,268,178)      (1,235,772)      (1,299,258)
                                                                             ----------       ----------       ----------
Net cash provided by operating activities ....................                1,219,333          981,379          647,242
                                                                             ----------       ----------       ----------

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Investments available-for-sale:
   Purchases .................................................              (10,054,730)      (6,546,175)      (8,954,298)
   Maturities ................................................                2,000,000        7,006,520        6,453,147
   Sales .....................................................                     ---         2,454,923             ---
Investments held-to-maturity:
   Purchases .................................................               (3,987,621)      (6,948,492)      (2,053,176)
   Maturities ................................................                4,183,364        5,174,703          231,142
Proceeds from the sales of other real estate owned ...........                   83,300           78,377        1,607,813
Increase in loans ............................................               (5,737,658)      (7,486,716)      (4,038,901)
Increase in premises and equipment ...........................                 (338,011)         (51,586)         (47,513)
                                                                             ----------       ----------       ----------
Net cash used in investing activities ........................              (13,851,356)      (6,318,446)      (6,801,786)
                                                                             ----------       ----------       ----------

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Increase (Decrease) in:
   Demand deposits ...........................................                 (976,663)       4,825,558        1,194,045
   NOW accounts ..............................................                3,284,228         (626,162)       1,275,112
   Money market accounts .....................................                  872,070         (602,799)      (1,715,618)
   Savings deposits ..........................................                  909,779          519,124         (292,167)
   Time deposits .............................................                5,122,099        3,781,218        7,393,173
Securities sold under agreements to repurchase ...............                  577,416         (874,263)       1,130,002
Proceeds from issuance of common stock .......................                   ---              75,000          920,359
                                                                             ----------       ----------       ----------
Net cash provided by financing activities ....................                9,788,929        7,097,676        9,904,906
                                                                             ----------       ----------       ----------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS ..........................................               (2,843,094)       1,760,609        3,750,362

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  ............                9,842,206        8,081,597        4,331,235
                                                                             ----------       ----------       ----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD....................               $6,999,112       $9,842,206       $8,081,597
                                                                             ==========       ==========       ==========


</TABLE>


                                       


          The accompanying Notes to Consolidated Financial Statements
             are an integral part of these financial statements.





                                       25

<PAGE>   28

                    SOUTH FLORIDA BANK HOLDING CORPORATION
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (CONTINUED)

       Reconciliation of net income to net cash provided by operating activities


<TABLE>
<CAPTION>
                                                                      FOR THE YEARS ENDED DECEMBER 31,        
                                                                ----------------------------------------------
                                                                    1997              1996              1995   
                                                                -------------      ----------       -----------
<S>                                                              <C>              <C>               <C>
Net income ........................................              $1,423,721       $1,000,206        $ 592,823

Adjustments:
    Provision for loan losses .....................                    ---              ---            28,000
    Depreciation and amortization .................                 156,564          145,666          210,499
    Benefit for income taxes ......................                (261,218)        (108,000)        (260,000)
    Decrease (Increase) in:
         Accrued interest receivable ..............                (148,715)          44,336         (156,274)
         Other assets .............................                 (34,965)           4,079          (25,825)
    Increase (Decrease) in:
         Accrued interest payable .................                  13,869          (78,933)         275,062
         Other liabilities ........................                  70,077          (25,975)         (17,043)
                                                                 ----------       ----------        --------- 

Net cash provided by operating activities .........              $1,219,333       $  981,379        $ 647,242
                                                                 ==========       ==========        =========

Supplemental schedule of non-cash activities:
    Loans transferred to other real estate owned ..              $  106,586       $   78,377        $  69,100

    Other real estate owned returned 
        to loan status.............................                    ---              ---           151,123

    Net unrealized securities gains (losses) ......                  33,235          (53,566)          69,866

    Dividend declared, not paid  ..................                 242,195             ---              ---




</TABLE>


          The accompanying Notes to Consolidated Financial Statements
             are an integral part of these financial statements.





                                       26
<PAGE>   29

                   SOUTH FLORIDA BANK HOLDING CORPORATION
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

    South Florida Bank (the "Bank") is a state-chartered bank incorporated on
March 15, 1988 under the laws of the state of Florida.  The Bank commenced
operations on May 23, 1988.  South Florida Bank Holding Corporation (the
"Holding Corporation") is a one-bank holding company incorporated under the
laws of the state of Florida on September 14, 1990 to reorganize the Bank into
a one-bank holding company structure.  On December 19, 1990, the Bank's
shareholders approved a plan of corporate reorganization, which was consummated
on January 30, 1991, under which the Bank became a wholly-owned subsidiary of
the Holding Corporation (the "Corporate Reorganization").  On July 22, 1992 and
May 14, 1993, the Bank formed two wholly-owned subsidiaries, New Town
Properties, Inc. ("New Town") and Valu Prop, Inc. ("Valu Prop"), respectively,
for the purpose of acquiring title to certain properties in foreclosure.  The
consolidated financial statements include the accounts of the Holding
Corporation, the Bank, New Town, and Valu Prop (collectively, the "Company")
after elimination of all material intercompany balances and transactions.

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.

Investment Securities

    The Bank classifies as available-for-sale those investment securities which
may be sold prior to maturity in connection with changes in market interest
rates, liquidity needs or other reasons.  The available-for-sale portfolio has
been reflected at its aggregate fair value in the accompanying consolidated
statements of financial condition.  The net unrealized securities gains
(losses), net of anticipated income tax effect, have been reflected as a
separate component of shareholders' equity.  Those investment securities which
the Bank has the positive intent and ability to hold until their maturity have
been classified as investments held-to-maturity.  These securities are carried
on an amortized cost basis.

    Amortization of premiums and accretion of discounts are recognized in
interest income as yield adjustments, in a manner which approximates the
interest method.  Realized gains and losses on disposition are recorded in
non-interest income on the trade date, based on the net proceeds from, and
adjusted cost of the security sold, using the specific identification method.

Allowance for Loan Losses

    The financial statements include an allowance for estimated losses on loans
based on management's evaluation of potential losses in the loan portfolio.
The allowance for loan losses is established by a provision charged to
operations based upon a continuing review of past loan loss experience, current
economic conditions that may affect the borrower's ability to pay and the
underlying collateral value of the loans.  Loans that are considered to be
uncollectible are charged-off and deducted from the allowance and subsequent
recoveries, if any, are credited to this allowance.

Uncollected Interest

    The Bank's policy is to discontinue accruing interest on a loan after it
has become 90 days delinquent as to payment of principal or interest unless, in
the determination of management, the principal and interest on the loan are
well secured and in the process of collection.  In addition, a loan is placed
on non-accrual status before 90 days delinquency occurs if management believes
that the borrower's financial condition, after giving consideration to economic
and business conditions and collection efforts, is such that collection of
interest or principal is doubtful.







                                     27

<PAGE>   30

Loan Impairment and Losses

    Effective January 1, 1995, the Bank adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan" ("FAS 114") and Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan, Income Recognition and
Disclosure" ("FAS 118").  These statements address the accounting by creditors
for impairment of certain loans.  The Statements generally require the Bank to
identify loans for which the Bank probably will not receive full repayment of
principal and interest, as impaired loans.  The Statements require that
impaired loans be valued at either (i) the present value of expected future
cash flows, discounted at the loan's effective interest rate, or (ii) at the
observable market price of the loan, or (iii) the fair value of the underlying
collateral if the loan is collateral dependent.  The Bank has implemented the
Statements by modifying its quarterly review of the adequacy of the allowance
for credit losses to also identify and value impaired loans in accordance with
guidance in these Statements.

    Management considers a variety of factors in determining whether a loan is
impaired, including (i) any notice from the borrower that the borrower will be
unable to repay all principal and interest amounts contractually due under the
loan agreement, (ii) any delinquency in the principal and interest payments
(other than minimum delays or shortfalls in payments), and (iii) other
information known by management which would indicate that full repayment of the
principal and interest is not probable.  In evaluating loans for impairment,
management generally considers delinquencies of 89 days or less to be minimum
delays, and accordingly does not consider such delinquent loans to be impaired
in the absence of other indications of impairment.

    Management evaluates smaller balance, homogeneous loans for impairment and
adequacy of allowance for loan losses collectively, and evaluates other loans
for impairment individually, on a loan-by-loan basis.  For this purpose, the
Bank considers its portfolios of commercial, mortgage and construction loans
with outstanding balances less than $500,000 and its installment and other loan
portfolios to be smaller balance, homogeneous loans.  The Bank evaluates each
of these loan portfolios for impairment on an aggregate basis, and utilizes its
own recent historical charge-off experience, as well as the charge-off
experience of its peer group and industry statistics to evaluate the adequacy
of the allowance for loan losses.  For all other loans, the Bank evaluates
loans for impairment on a loan-by-loan basis.  The Bank evaluates all
non-accrual loans as well as any accruing loans exhibiting collateral or other
credit deficiencies for impairment.  With respect to impaired,
collateral-dependent loans, any portion of the recorded investment in the loan
that exceeds the fair value of the collateral is charged-off.

    For impairment recognized in accordance with FAS 114 and FAS 118, the
entire change in the present value of expected cash flows, or the entire change
in estimated fair value of collateral for collateral dependent loans is
reported as a provision for loan losses in the same manner in which impairment
initially was recognized or as a reduction in the amount of the provision that
otherwise would be reported.

Other Real Estate Owned

    Other real estate owned, consists of real estate acquired through
foreclosure, is held for sale and is carried at the lower of the property's
fair value or the recorded investment in the related loan.  Fair value is net
of estimated selling costs.  The excess, if any, of the loan balance over the
fair value of the property at the date of acquisition is charged to the
allowance for loan losses.  Subsequent downward adjustments to carrying value,
if any, are recognized by a charge to non-interest expense.  Costs relating to
the development and improvement of the property are capitalized whereas those
relating to holding property are charged to expense.  Legal expenses associated
with foreclosure actions are included in the accompanying consolidated
statements of operations in legal expense.  Real estate property taxes,
appraisal costs and other expenses associated with holding other real estate,
as well as gains and losses arising from disposition are included in the
accompanying consolidated statements of operations as loan collection expenses.

Premises and Equipment

    Premises and equipment are stated at cost less accumulated depreciation.
Leasehold improvements are amortized on the straight-line method over the
shorter of their estimated useful lives or the lease terms which range from
seven to 15 years.  Depreciation expense is computed on the straight-line basis
over the estimated useful life of furniture and equipment which range from
three to seven years.  Additions to premises and equipment and major
improvements are capitalized.  Maintenance and repairs are expensed as
incurred.





                                       28
<PAGE>   31


Income Recognition

    Interest income on loans is accrued based upon the principal amount
outstanding.  Non-refundable fees and costs associated with the origination of
loans are deferred and recognized over the life of the loan using a method that
approximates the interest method.

Stock-Based Compensation

    Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("FAS
123") which requires certain disclosures about stock-based employee
compensation arrangements, regardless of the method used to account for them,
and defines a fair value based method of accounting for an employee stock
option or similar equity instrument and encourages all entities to adopt that
method of accounting for all of their employee stock compensation plans.
However, FAS 123 also allows an entity to continue to measure compensation cost
for stock-based compensation plans using the intrinsic value method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees."  Entities electing to continue using the accounting method in APB
Opinion No. 25 must make pro forma disclosures of net income and earnings per
share as if the fair value method of accounting had been adopted.  Under the
fair value method, compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period, which is usually
the vesting period.  Under the intrinsic value based method, compensation cost
is the excess, if any, of the quoted market price of the stock at grant date or
other measurement date over the amount an employee must pay to acquire the
stock.  The Company elected to continue using the accounting method in APB
Opinion No. 25.  The effect of using the fair value method of accounting on net
income for the years ended December 31, 1997 and 1996 would not have been
material.

Income Taxes

    Income tax expense or benefit consists of Federal and state income taxes
currently payable or refundable, and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities, net of related valuation allowance.  Temporary differences which
give rise to significant deferred tax assets and liabilities primarily relate
to the use of the cash basis for tax purposes, organizational expenditures, the
allowance for loan losses, fixed assets and operating loss carry forwards.

Net Income Per Share

    Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("FAS 128") which replaces
the presentation of primary earnings per share with basic earnings per share
and which requires dual presentation of basic and diluted earnings per share on
the Consolidated Statements of Income.  FAS 128 requires restatement of all
prior-period earnings per share data presented.  Basic net income per share is
computed by dividing net income by the weighted average number of shares of
common stock outstanding during the period, and diluted net income per share
includes the effect of unexercised stock options using the treasury stock
method.  The treasury stock method assumes that common stock was purchased at
the average market price during the period.  For the years ended December 31,
1997, 1996 and 1995, the reconciliation of the denominators of the basic and
diluted per-share computations was as follows:
<TABLE>
<CAPTION>
                                                                      1997             1996            1995    
                                                                  -----------      -----------      -----------
<S>                                                               <C>              <C>              <C>
Common shares ....................................                 1,210,975        1,207,696        1,002,875
Stock options ....................................                    27,351           11,202           ---   
                                                                   ---------        ---------        ---------
Diluted shares ...................................                 1,238,326        1,218,898        1,002,875
                                                                   =========        =========        =========
</TABLE>

    Due to the trading prices being less than the exercise price of the stock
options during 1995, the exercise of the stock options was not assumed during
1995 as such exercise would have an antidilutive effect on net income per share.

Cash Flows

    For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold, which are invested
overnight.  







                                      29

<PAGE>   32



NOTE B-INVESTMENTS AVAILABLE-FOR-SALE AND INVESTMENTS HELD-TO-MATURITY

    At December 31, 1997 and 1996, the carrying value, gross unrealized gains
and losses, and estimated market value of investments available-for-sale and
investments held-to-maturity were as follows:
<TABLE>
<CAPTION>
                                                                    GROSS            GROSS         CARRYING
                                                 AMORTIZED       UNREALIZED       UNREALIZED         VALUE
INVESTMENTS AVAILABLE-FOR-SALE:                    COST             GAINS           LOSSES         (FAIR VALUE)
                                               -------------     ------------     -----------      ------------
<S>                                            <C>               <C>              <C>              <C>
1997
----
U.S. Agency obligations due:
    In one year or less ...............           $ 2,502,245      $       70       $  (5,440)      $  2,496,875
    After one year through five years..            14,081,733          15,756          (9,864)        14,087,625
                                                  -----------      ----------       ---------       ------------
    Total investments
         available-for-sale ...........           $16,583,978      $   15,826       $ (15,304)      $ 16,584,500
                                                  ===========      ==========       =========       ============
1996
----
U.S. Treasury obligations due
    in one year or less ...............           $ 1,002,670      $    ---         $    (170)      $  1,002,500
U.S. Agency obligations due:
    In one year or less ...............             1,000,000           ---            (2,500)           997,500
    After one year through five years..             6,526,578           ---           (50,413)         6,476,165
                                                  -----------      ----------       ---------       ------------
    Total investments
         available-for-sale ...........           $ 8,529,248      $    ---         $ (53,083)      $  8,476,165
                                                  ===========      ==========       =========       ============
</TABLE>

<TABLE>
<CAPTION>
                                                 CARRYING
                                                   VALUE            GROSS            GROSS            ESTIMATED
                                                 (AMORTIZED       UNREALIZED       UNREALIZED          MARKET
INVESTMENTS HELD-TO-MATURITY:                      COST)             GAINS          LOSSES             VALUE   
                                               -------------     ------------    ------------      -----------
<S>                                            <C>               <C>             <C>               <C>
1997
----
U.S. Agency obligations due:
    In one year or less ................          $ 1,000,000       $    ---        $    ---        $ 1,000,000
    After one year through five years ..            5,125,282          12,536             (10)        5,137,808
Collateralized mortgage obligations
    due after ten years ................            1,841,986           4,016          (3,485)        1,842,517
                                                  ----------        ---------       ---------       -----------
Total investments held-to-maturity .....          $ 7,967,268       $  16,552       $  (3,495)      $ 7,980,325
                                                  ===========       =========       =========       ===========
1996
----
U.S. Agency obligations due
    after one year through five years...          $ 5,626,637       $  10,082       $ (22,500)      $ 5,614,219
Collateralized mortgage obligations
    due after ten years ................            2,536,374             126         (10,741)        2,525,759
                                                  -----------       ---------       ---------       -----------
Total investments held-to-maturity .....          $ 8,163,011       $  10,208       $ (33,241)      $ 8,139,978
                                                  ===========       ==========      =========       ===========

</TABLE>

    Expected maturities for the collateralized mortgage obligations will differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

    As of December 31, 1997, investments available-for-sale and
held-to-maturity with a carrying value of approximately $1.4 million were
pledged to collateralize securities sold under agreements to repurchase,
$700,000 were pledged for public deposits and $300,000 were pledged for
Treasury, Tax and Loan deposits.

NOTE C - LOANS AND ALLOWANCE FOR LOAN LOSSES

    Commercial loans included loans to businesses and individuals payable on
demand or within a specified period of time.  Mortgage construction loans
included loans to finance the construction of property and become payable upon
completion of construction.  Mortgage non-construction loans included primarily
intermediate-term loans collateralized by real estate and payable in periodic
installments.  Installment loans were made to both businesses and individuals
for the purpose of purchasing consumer goods.  These goods were generally
automobiles, mobile homes, equipment and other consumer products which
generally collateralize the loans.  Other loans included credit card loans,
deposit overdrafts and lines of credit to individuals.




                                      30

<PAGE>   33

    As of December 31, 1997 and 1996, loans consisted of the following:

<TABLE>
<CAPTION>
                                                                             1997             1996     
                                                                        ------------     ------------
<S>                                                                     <C>               <C>
Commercial ...........................................                   $ 9,289,611      $ 8,062,573
Mortgage:
    Construction .....................................                       961,264        1,029,003
    Non-construction .................................                    31,508,547       28,172,195
Installment ..........................................                     4,781,456        3,589,684
Other loans ..........................................                     3,165,509        3,186,813
                                                                         -----------      -----------
Total loans, net of unearned income ..................                    49,706,387       44,040,268
Less - allowance for loan losses .....................                       882,034          904,562
                                                                         -----------      -----------
    Loans, net .......................................                   $48,824,353      $43,135,706
                                                                         ===========      ===========


</TABLE>

    For the years ended December 31, 1997, 1996, and 1995, an analysis of the 
allowance for loan losses was as follows:


<TABLE>
<CAPTION>
  
                                                                              1997           1996             1995     
                                                                            --------         --------       ----------
<S>                                                                         <C>              <C>            <C>
Beginning balance ....................................                      $904,562         $852,270       $1,342,763
Provision for loan losses ............................                          ---              ---            28,000
Charge-offs ..........................................                       (72,116)         (98,341)        (815,193)
Recoveries ...........................................                        49,588          150,633          296,700
                                                                            --------         --------       ----------
    Ending balance ...................................                      $882,034         $904,562       $  852,270
                                                                            ========         ========       ==========

</TABLE>

    As discussed in Note A, the Company adopted the provisions of FAS 114 and
FAS 118 related to impaired loans, effective January 1, 1995.  As of December
31, 1997 and 1996, the total recorded investment in impaired loans was $687,000
and $1,134,000, respectively, and the Bank recorded an allowance for loan
losses of $128,000 and $170,000, respectively, related to its impaired loans.
As of December 31, 1997 and 1996, the net investment in impaired loans was
$559,000 and $964,000, respectively.  During the years ended December 31, 1997,
1996 and 1995, the recorded investment in impaired loans averaged $1,082,000,
$1,214,000 and $1,977,000, respectively, and interest income recognized on
impaired loans totalled $72,000, $113,000 and $131,000, respectively, and
interest income received on impaired loans totaled $39,000, $91,000 and
$86,000, respectively.

    A credit risk concentration results when the Company has a significant
credit exposure to an individual or a group engaged in similar activities or
having similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or
other conditions.  As of December 31, 1997 and 1996, no concentration of loans
within any portfolio category to any group of borrowers engaged in similar
activities or in a similar business, exceeded 10% of total loans, except that
as of such date loans collateralized with mortgages on real estate represented
65.32% and 66.31%, respectively, of the loan portfolio and were to borrowers in
varying activities and businesses.

    Most of the Company's business activity is with customers located within
the Lee County, Florida area.  The loan portfolio is diversified among
individuals and types of industries.  Loans are expected to be repaid from cash
flow or proceeds from the sale of selected assets of the borrowers.  The amount
of collateral obtained upon extension of credit is based on the Company's
credit evaluation of the customer.  Collateral primarily included income
producing commercial properties, residential homes and unimproved real estate,
in addition to accounts receivable, inventory, property and equipment.

NOTE D - PREMISES AND EQUIPMENT

    As of December 31, 1997 and 1996 premises and equipment were comprised of
the following:

<TABLE>
<CAPTION>
                                                                      1997             1996   
                                                                  ------------     -----------
<S>                                                              <C>              <C>
Leasehold improvements ..........................                  $   981,177      $   967,079
Furniture and equipment .........................                    1,091,997          924,662
                                                                   -----------      -----------
    Total .......................................                    2,073,174        1,891,741
Less - accumulated depreciation
    and amortization ............................                    1,483,293        1,483,307
                                                                   -----------      -----------
Premises and equipment, net .....................                  $   589,881      $   408,434
                                                                   ===========      ===========
</TABLE>


                                      31

<PAGE>   34


NOTE E - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

    As of December 31, 1997, the Company was party to financial instruments
with off-balance sheet risk in the normal course of business to meet the
financing needs of its customers.  These instruments were comprised of
commitments to extend credit and standby letters of credit and involved, to
varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the financial statements.  The contract amounts of those
instruments reflected the involvement the Bank had in particular classes of
financial commitments.

    The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit was represented by the contractual amount of those
instruments.  The Company used the same credit policies in making commitments
and conditional obligations as it did for balance sheet instruments.

    Commitments are agreements to lend to a customer as long as there are no
violations of any conditions established in the contract.  Commitments
generally have fixed-expiration dates or other termination clauses and may
require a fee.  Since many commitments expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements.
The Company evaluates each customer's creditworthiness on a case-by-case basis.
Fixed-interest rate commitments to extend credit are subject to market risk
should interest rates rise above contracted rates during the commitment period.
The amount of collateral obtained, if deemed necessary, is based on
management's credit evaluation of the borrower.  Collateral held varies but has
included accounts receivable, inventory, property, plant and equipment, and
residential and income producing commercial properties.  Total unfunded
commitments for loans and lines of credit were $7,193,000 and $5,972,000 at
December 31, 1997 and 1996, respectively.

    Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party.  Those guarantees are
primarily issued to support construction borrowing arrangements. The Bank's
guarantees are primarily short term, expiring within one year.  The credit risk
involved in issuing letters of credit is essentially the same as extending loan
facilities to customers.  The Bank held cash as collateral supporting those
commitments for which collateral is deemed necessary.  Outstanding letters of
credit were $1,106,000 and $719,000 at December 31, 1997 and 1996,
respectively.

NOTE F - INCOME TAXES

    As discussed in Note A, the Company adopted, effective January 1, 1993, the
provisions of FAS 109 for calculating income tax expense or benefit and related
deferred tax assets and liabilities.  During the years ended December 31, 1997,
1996 and 1995, the Company recorded $261,000, $108,000 and $260,000,
respectively, of income tax benefits resulting from the corresponding reduction
in the valuation allowance associated with the Company's tax loss
carryforwards.

    For the years ended December 31, 1997, 1996 and 1995, a reconciliation of
expected federal tax expense or benefit (calculated by applying appropriate
statutory federal income tax rates) to the net income tax expense or benefit
included in the accompanying consolidated statements of operations is as
follows:


<TABLE>
<CAPTION>
                                                        1997                       1996                  1995 
                                                ----------------------    --------------------    --------------------
                                                  AMOUNT          %          AMOUNT        %         AMOUNT        %
                                                ---------       ------     ---------     ------    ---------    -------
<S>                                             <C>            <C>         <C>          <C>        <C>         <C>
Expected expense using statutory rate ......     $ 441,751      38.00%     $ 339,038     38.00%    $ 126,473     38.00%
Utilization of net operating
  losses carried forward ...................      (488,042)    (41.98)      (356,430)   (39.95)         ---       ---
Decrease in valuation allowance ............      (286,910)    (24.68)       (94,361)   (10.57)     (448,333)  (134.70)
Other, net .................................        71,983       6.19          3,753       .42        61,860     18.58
                                                 ---------     ------      ---------    ------     ----------  -------

Total income tax expense ...................     $(261,218)    (22.47)%    $(108,000)   (12.10)%   $(260,000)   (78.12)%
                                                 =========     ======      =========    ======     =========   ======= 

</TABLE>
    As of December 31, 1997, the Company had net operating loss carryforwards
remaining for federal tax purposes of approximately $2,918,000, which may be
used to offset future taxable income or will expire, if unused, as follows:
$1,874,000 in 2007, $1,026,000 in 2008, and $18,000 in 2009.  Should certain
substantial changes (as defined by the 







                                      32

<PAGE>   35

federal income tax code), occur in the Company's ownership, an annual limitation
would be imposed on the amount of loss which could be utilized in any one year. 
Because realization of the Company's net operating losses carried forward is
uncertain, a valuation allowance has been established against the related
deferred tax assets.  The valuation allowance is used to reduce deferred tax
assets to the estimated amount that management believes is more likely than not
to be realized.  In determining the amount of any necessary valuation allowance,
management takes into consideration all available evidence and information, both
positive and negative, that a valuation allowance is needed.  Such evidence
includes the Company's current and historical financial condition, results of
operations and cumulative losses, as well as current and enacted future tax
laws.  Management also takes into consideration the length of its loss
carryforwards, its estimate of the likelihood and amount of earnings during the
carryforward period and the reduction in the benefit those carryforwards would
provide should substantial changes occur in the Company's ownership during the
carryforward period.  As of December 31, 1997 and 1996 the Company's deferred
tax assets and liabilities consisted of the following:

<TABLE>
<CAPTION>
                                                                         1997             1996     
                                                                     -----------      -----------
<S>                                                                  <C>              <C>
Gross deferred tax assets:
   Net operating loss carryforward .................                  $1,106,229       $1,581,066
   Fixed assets ....................................                     149,569          144,846
   Other real estate owned .........................                      46,302           22,971
   Other ...........................................                      49,296           42,117
   Valuation allowance .............................                    (655,974)      (1,411,000)
                                                                      ----------       ---------- 
      Total ........................................                     695,422          380,000
                                                                      ----------       ---------- 
Gross deferred tax liabilities:
   Allowance for loan losses .......................                      39,449            ---            
                                                                      ----------       ---------- 
      Total.........................................                      39,449            ---   
                                                                      ----------       ---------- 
Net deferred tax asset .............................                  $  655,973       $  380,000 
                                                                      ==========       ==========

</TABLE>

NOTE G - STOCK OPTIONS

    During 1994, the Company implemented a 401(k) defined contribution plan
entitled "South Florida Bank Savings Plan" (the "Savings Plan").  The Savings
Plan is contributory and covers all of the Company's officers and employees.
The Company's contributions are determined by the Board of Directors.  During
the years ended December 31, 1997, 1996 and 1995, the Company's expense for the
Savings Plan was $29,000, $24,000 and $19,000, respectively.

    The Company maintains a stock option plan for the Company's officers and
employees that provides a maximum grant of 100,000 shares of common stock.  As
of December 31, 1997, options totaling 50,000 expire on April 27, 2003, and
options totaling 9,000 expire on January 1, 2007.  Options granted, exercised
and exercisable were as follows:
<TABLE>
<CAPTION>
                                                         PRICE          NUMBER         EXERCISABLE
                                                         -----          ------         -----------
<S>                                                      <C>            <C>            <C>
Balance, December 31, 1994  ........................       5.00         70,000            42,500
    Granted ........................................       ---            ---
    Exercised ......................................       ---            ---  
                                                                        ------
Balance, December 31, 1995 .........................       5.00         70,000            56,250
    Granted ........................................       ---            ---
    Canceled .......................................       5.00         (5,000)
    Exercised ......................................       5.00        (15,000)
                                                                        ------
Balance, December 31, 1996 .........................       5.00         50,000            50,000
    Granted ........................................       5.00         10,000
    Canceled .......................................       5.00         (1,000)
    Exercised  .....................................       ---             ---  
                                                                        ------
Balance, December 31, 1997 .........................       5.00         59,000            52,250
                                                                        ======                  

</TABLE>

NOTE H - RELATED PARTIES

    Deposits of the Company's directors, officers and relatives of directors
totaled approximately $2,755,000, $1,922,000, and $1,921,000 at December 31,
1997, 1996 and 1995, respectively.  Several of the Company's directors,
officers, and relatives and affiliated entities of directors obtained loans and
lines of credit from the Bank. These loans and lines of credit were granted in
accordance with the normal lending policies of the Bank.  For the years ended



                                      33


<PAGE>   36
December 31, 1997, 1996, and 1995 the activity in loans and lines of credit
from related parties were as follows:

<TABLE>
<CAPTION>
                                                                      1997             1996             1995    
                                                                  -------------   --------------    -------------
<S>                                                               <C>              <C>              <C>
Beginning balance ...................................              $1,348,811       $1,274,714       $  964,371
New loans ...........................................                 939,127          584,747          643,410
Other changes .......................................                (492,025)         (11,256)           ---
Repayments ..........................................                (943,667)        (499,394)        (333,067)
                                                                   ----------       ----------       ---------- 
    Ending Balance ..................................              $  852,246       $1,348,811       $1,274,714
                                                                   ==========       ==========       ==========
</TABLE>

    During 1990, the Bank entered into a ground lease with a Florida general
partnership for the property on which the Metro branch office is located.  As
of December 31, 1997, various directors and affiliates of the directors owned a
minority interest of this partnership.  The lease matures on August 31, 1999
and the Bank pays $3,500 per month.  Total rent expense under this lease was
$35,000, $28,000 and $27,000 during the years ended December 31, 1997, 1996 and
1995, respectively.  During 1990, the Bank entered into a lease of office space
owned by one of the Company's Directors.  The lease matures on April 30, 1999
and the Bank currently pays $1,854 per month.  Total rent expense under this
lease was $23,000, $29,000 and $37,000 during the years ended December 31,
1997, 1996 and 1995, respectively.  The law firm in which one of the Company's
directors is a shareholder represents the Company as its legal counsel.
Professional fees incurred for these services during the years ended December
31, 1997, 1996, and 1995 totaled $45,000, $54,000, and $29,000, respectively.

NOTE I - COMMITMENTS AND CONTINGENCIES

    The Company leases building facilities under noncancellable operating
leases which expire at various dates through 2000.  These leases generally
provide for fixed rental payments and include renewal and purchase options at
amounts which are generally based on fair market value at expiration of the
lease.  Rent expense under operating leases totaled $233,000, $220,000, and
$221,000 during the years ended December 31, 1997, 1996, and 1995,
respectively.  As of December 31, 1997, future minimum lease payments under
leases with initial or remaining noncancellable lease terms in excess of one
year were as follows:

<TABLE>
    <S>                                                                       <C>
    1998  ..............................................                      $254,000
    1999  ..............................................                       194,000
    2000  ..............................................                        59,000
    2001  ..............................................                        33,000
    2002  ..............................................                        17,000
                                                                              --------
    Future minimum lease payments ......................                      $557,000
                                                                              ========

</TABLE>

    The Bank entered into an agreement to purchase the main office for $600,000
in cash to be paid in February, 1998.  The above table includes lease payments
for the main office lease, which expires in 1999, of $54,000 in 1998 and
$18,000 in 1999.

NOTE J - CAPITAL RATIOS

    As of December 31, 1997 and 1996, a comparison of the required minimum
capital ratios to actual capital ratios was as follows:

<TABLE>
<CAPTION>
                                                                BANK RATIOS               
                                                          -------------------------      REGULATORY            
                                                            1997             1996       REQUIREMENTS
                                                          --------         --------     ------------
<S>                                                       <C>              <C>          <C>
Total capital to risk weighted assets ................     15.46%           13.70%            8.00%
Tier 1 capital (common shareholders'
    equity) to risk-weighted assets ..................     14.20            12.45             4.00
Tier 1 capital to average total assets -
    Leverage ratio ...................................      8.55             8.82             4.00

</TABLE>

    Banking laws and regulations limit the amount of dividends that may be paid
by financial institutions, including the Company.  In addition, banking
regulations impose certain minimum capital ratios on financial institutions,
including the Company, which also restrict the Company's right to pay
dividends.






                                      34

<PAGE>   37

NOTE K - CONDENSED HOLDING CORPORATION FINANCIAL INFORMATION
(PARENT COMPANY ONLY)

STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                        DECEMBER 31,          
                                                                -----------------------------
                                                                     1997             1996    
                                                                -------------    -------------
<S>                                                              <C>             <C>                   
ASSETS
------
Cash and due from banks .......................................  $   447,393      $   453,193
Dividend receivable from the Bank .............................      246,908            ---
Investment in the Bank ........................................    7,170,380        5,954,532
                                                                 -----------        ---------
    Total assets ..............................................  $ 7,864,681      $ 6,407,725
                                                                 ===========      ===========
Dividend payable ..............................................  $   242,195      $     ---   
                                                                 -----------      ------------
SHAREHOLDERS' EQUITY                                           
--------------------                                           
Common stock, $.01 par value, 10,000,000 shares                
    authorized, 1,210,975 shares outstanding ..................       12,110           12,110
Additional paid-in capital ....................................   10,366,378       10,366,378
Net unrealized securities gains (losses) of the Bank ..........          324          (32,911)
Retained deficit ..............................................   (2,756,326)      (3,937,852)
                                                                 -----------      ----------- 
    Total shareholders' equity ................................    7,622,486        6,407,725
                                                                 -----------      -----------
    Total liabilities and shareholders' equity ................  $ 7,864,681      $ 6,407,725
                                                                 ===========      ===========
</TABLE>

<TABLE>
<CAPTION>


                                                                        FOR THE YEARS ENDED DECEMBER 31,       
                                                                  ---------------------------------------------
STATEMENTS OF OPERATIONS                                             1997             1996             1995   
------------------------                                          -----------      -----------      ----------
<S>                                                               <C>              <C>              <C>
Equity in the Bank's earnings .................................   $1,429,521       $1,007,316         $624,054
Interest income from the Bank .................................       12,974           11,865              991
Legal expenses ................................................        9,512            4,899            5,767
Non-interest expense - other ..................................        9,262           14,076           26,455
                                                                  ----------       ----------         --------
    Net income ................................................   $1,423,721       $1,000,206         $592,823
                                                                  ==========       ==========         ========
                                                               
STATEMENTS OF CASH FLOWS                                       
------------------------                                       
Cash flows used in operating activities:                       
    Other operating expenditures ..............................   $   (5,800)      $   (7,110)        $(27,712)
                                                                  ----------       ----------         -------- 
Cash flows used in investing activities:                       
    Contribution to the Bank ..................................         ---              ---          (700,000)
                                                                  ----------       ----------         -------- 
Cash flows provided by financing activities:                   
    Proceeds from issuance of common stock ....................         ---            75,000          920,359
                                                                  ----------       ----------         --------
Net increase (decrease) in cash and cash equivalents ..........       (5,800)          67,890          192,647
Cash and cash equivalents at beginning of period ..............      453,193          385,303          192,656
                                                                  ----------       ----------         --------
Cash and cash equivalents at end of period ....................   $  447,393       $  453,193         $385,303
                                                                  ==========       ==========         ========

Reconciliation of net income to net cash used in operating activities:
Net income ....................................................   $1,423,721       $1,000,206         $592,823
Equity in the Bank's earnings .................................   (1,429,521)      (1,007,316)        (624,054)
Decrease (Increase) in other assets ...........................         ---              ---             3,519
                                                                  ----------       ----------         --------
Net cash used in operating activities .........................   $   (5,800)      $   (7,110)        $(27,712)
                                                                  ==========       ==========         ======== 

</TABLE>

NOTE L - FAIR VALUE OF FINANCIAL INSTRUMENTS

    Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" ("FAS 107"), requires that the Company
disclose estimated fair values of financial instruments for which it is
practicable to estimate that value.  Fair value estimates, methods and
assumptions are set forth as follows for the Company's financial instruments.

    Cash and Due From Banks and Federal Funds Sold  For these short-term
investments, the carrying amount was a reasonable estimate of fair value,
primarily due to their relatively short period to maturity.

    Investments Available-for-Sale and Held-to-Maturity  For investments
available-for-sale and held-to-maturity, fair 






                                      35

<PAGE>   38

values were based on quoted market prices, if available.  If a quoted market
price was not available, fair value was estimated using quoted market prices for
similar securities.

    Loans  Fair values were estimated for groups of similar loans based upon
type of loan, credit quality and maturity.  For variable-interest rate loans,
the carrying amount was considered to approximate fair value.  The fair value
of fixed-interest rate mortgage loans was based on quoted market prices of
similar loans sold in conjunction with securitization transactions, adjusted
for any differences in loan characteristics, with servicing retained.  The
carrying amount of loans on non-accrual status was used as their fair value.
The fair value of all other loans was estimated by discounting estimated cash
flows using interest rates being charged by the Bank on December 31, 1997 and
1996, respectively, on comparable loans as to credit risk and terms.

    Deposits  The fair values of demand deposits, NOW, money market and savings
accounts were the carrying amounts payable on demand.  The fair value of
certificates of deposit was estimated by discounting the future cash flows
using interest rates offered on December 31, 1997 and 1996, respectively, for
deposits of similar remaining maturities.

    Securities Sold Under Agreements to Repurchase  The fair value of
securities sold under agreements to repurchase was the carrying amount payable
on demand.

    Commitments to Extend Credit and Standby Letters of Credit  Commitments to
extend credit and standby letters of credit are generally at variable-interest
rates or at interest rates at time of funding.  The fair value of commitments
to extend credit was estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the agreements
and the present credit worthiness of the counterparties. The fair value of
financial guarantees written and letters of credit was based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties.

    Limitations  The fair value estimates were made at a discrete point in time
based on relevant market information and information about the financial
instruments.  Because no market exits for a significant portion of the
Company's financial instruments, fair value estimates were based on judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors.  These
estimates were subjective in nature and involved uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

    In addition, the fair value estimates were based on existing on- and
off-balance sheet financial instruments without attempting to estimate the
value of anticipated future business and the value of assets and liabilities
that were not considered financial instruments.  Other significant assets and
liabilities that were not considered financial assets or liabilities included
core deposit intangibles, deferred tax assets, property, plant and equipment,
and goodwill.  In addition, the tax ramifications related to the realization of
the unrealized gains and losses on investment securities can have a significant
effect on fair value estimates and were not considered in the estimates.

    The carrying amount and estimated fair value of the Company's financial
instruments as of December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>

                                                              1997                              1996             
                                                    ---------------------------       ----------------------------
                                                      CARRYING         FAIR            CARRYING          FAIR
FINANCIAL ASSETS:                                      AMOUNT          VALUE            AMOUNT           VALUE    
-----------------                                   ----------      -----------       ----------       ------------
<S>                                                 <C>              <C>              <C>              <C>
Cash and due from banks ........................    $  5,001,112     $  5,001,112      $ 4,663,206      $ 4,663,206
Federal funds sold .............................       1,998,000        1,998,000        5,179,000        5,179,000
Investments available-for-sale .................      16,584,500       16,584,500        8,476,165        8,476,165
Investments held-for-maturity ................,.       7,967,268        7,980,325        8,163,011        8,139,978
Loans ..........................................      49,706,387       49,441,000       44,040,268       43,799,000
FINANCIAL LIABILITIES:
----------------------
Deposits .......................................      73,099,288       73,164,000       63,887,775       64,091,000
Securities sold under agreements
    to repurchase ..............................       1,326,473        1,326,473          749,057          749,057
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
----------------------------------------------------------
Commitments to extend credit ...................            ---              ---              ---              ---
Standby letters of credit ......................            ---              ---              ---              ---

</TABLE>





                                      36

<PAGE>   39

NOTE M - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

    For the years ended December 31, 1997 and 1996, the Company's condensed
quarterly financial information was as follows:
<TABLE>
<CAPTION>
                                                           FIRST           SECOND             THIRD          FOURTH  
                                                       -------------     -----------      ------------     ----------
<S>                                                    <C>              <C>              <C>              <C>
1997:
-----
Interest income .................................       $1,348,823       $1,420,103       $1,533,945       $1,536,289
Interest expense ................................          540,932          569,416          627,118          669,084
                                                        ----------       ----------       ----------       ----------
Net interest income .............................          807,891          850,687          906,827          867,205
Non-interest income .............................          137,210          147,092          143,171          148,605
Non-interest expense ............................          667,798          656,988          729,912          791,487
                                                        ----------       ----------       ----------       ----------
Income before income taxes ......................          277,303          340,791          320,086          224,323
Benefit for income taxes ........................           30,000           30,000           30,000          171,218
                                                        ----------       ----------       ----------       ----------
Net income ......................................       $  307,303       $  370,791       $  350,086       $  395,541
                                                        ==========       ==========       ==========       ==========
Net income per share:
    Basic .......................................           $ 0.25           $ 0.31           $ 0.29           $ 0.33
                                                            ======           ======           ======           ======
    Diluted .....................................           $ 0.25           $ 0.30           $ 0.29           $ 0.31
                                                            ======           ======           ======           ======

1996:
-----
Interest income .................................       $1,242,332       $1,168,560       $1,189,975       $1,268,805
Interest expense ................................          492,003          463,196          469,323          532,100
                                                        ----------       ----------       ----------       ----------
Net interest income .............................          750,329          705,364          720,652          736,705
Non-interest income .............................          131,899          142,264          191,868          145,482
Non-interest expense ............................          686,007          634,443          634,099          677,808
                                                        ----------       ----------       ----------       ----------
Income before income taxes ......................          196,221          213,185          278,421          204,379
Benefit for income taxes ........................           15,000           15,000           15,000           63,000
                                                        ----------       ----------       ----------       ----------
Net income ......................................       $  211,221       $  228,185       $  293,421       $  267,379
                                                        ==========       ==========       ==========       ==========
Net income per share:
    Basic .......................................           $ 0.18           $ 0.19           $ 0.24           $ 0.22
                                                            ======           ======           ======           ======
    Diluted .....................................           $ 0.18           $ 0.19           $ 0.24           $ 0.21
                                                            ======           ======           ======           ======


</TABLE>



                              OFFICERS OF THE BANK
<TABLE>

    <S>                                    <C>
    William P. Valenti                     President and Chief Executive Officer
    Harold S. Taylor, Jr.                  Executive Vice President/Senior Loan Officer
    Kathleen Taylor                        Senior Vice President/Loan Officer
    Deborah J. Boros                       Vice President/Operations
    Cynthia L. Doragh                      Vice President/Director of Sales and Marketing
    Christopher Ferrer                     Vice President/Branch Manager
    George A. Landon                       Vice President/Loan Officer
    Jeffrey J. Ritter                      Vice President/Loan Officer
    Suzanne Hummel                         Assistant Vice President/Branch Manager


</TABLE>






                                      37
<PAGE>   40


                               SOUTH FLORIDA BANK

                         LEE COUNTY'S BANKING ADVANTAGE
                                  MEMBER FDIC





                   BRANCH LOCATIONS


                   MAIN OFFICE
                   2017 MCGREGOR BOULEVARD
                   (941) 334-2020 O FAX (941) 334-6203

                   24 HOUR ADVANTAGE BANKING  (941) 334-7589



                   COLONIAL OFFICE
                   1500 COLONIAL BOULEVARD
                   (941) 278-0220 O FAX (941) 278-0387



                   METRO-DANIELS OFFICE
                   13391 METRO PARKWAY
                   (941) 768-5300 O FAX (941) 768-3877



                   IONA OFFICE
                   15280 MCGREGOR BOULEVARD
                   (941) 466-6100 



                   MAILING ADDRESS (ALL OFFICES)
                   P. O. BOX 2529
                   FORT MYERS, FL  33902-2529