<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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

For the Quarter Ended June 30, 1998                  Commission File No. 0-22361

                                 NET.B@NK, INC.
             (Exact name of registrant as specified in its charter)


     Georgia                                         58-2224352
-----------------------                  ---------------------------------------
(State of incorporation)                 (I.R.S. Employer Identification Number)


         950 North Point Parkway
         Suite 350
         Alpharetta, Georgia                                      30005
   ----------------------------------------                     ----------
   (Address of principal executive offices)                     (Zip Code)

     Registrant's telephone number, including area code:      (770) 343-6006
                                                               -------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO ___

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

<TABLE>
<CAPTION>

               Class                           Shares Outstanding at August 7, 1998
 -------------------------------------         ------------------------------------

<S>                                                     <C>      
   Common Stock, par value $.01                         6,147,637

</TABLE>

<PAGE>




FINANCIAL INFORMATION

Financial Statements

         The following financial statements are included in this report:

          1.   Consolidated balance sheets as of June 30, 1998 (unaudited)
               and as of December 31, 1997.

          2.   Consolidated statements of operations and comprehensive income
               (unaudited) for the three months and six months ended June 30, 
               1998 and 1997.

          3.   Statements of shareholders' equity (unaudited) from December 31,
               1997 to June 30, 1998.

          4.   Consolidated statements of cash flows (unaudited) for the six 
               months ended June 30, 1998 and 1997.

          5.   Notes to consolidated financial statements as of June 30, 1998 
               and December 31, 1997 and for the three-months and the 
               six-months ended June 30, 1998 and 1997.


<PAGE>



Submission of Matters to a Vote of Security Holders

         At the annual meeting of shareholders held on April 23, 1998, the
shareholders of the Company took the following actions by the votes indicated:

     1. Election of the following persons as directors of the Company for the
terms indicated:

<TABLE>
<CAPTION>

                                                         Votes         Votes                          Broker
         Class I (for a term expiring in 2001)            For         Withheld       Abstentions     Non-Votes
         -------------------------------------          -------       --------       -----------     ---------

<S>                                                     <C>                <C>             <C>             <C> 
         D.R. Grimes                                    4,930,537          4,910           N/A             N/A
         T. Stephen Johnson                             4,930,537          4,910           N/A             N/A
         Mack I. Whittle, Jr.                           4,930,537          4,910           N/A             N/A
         H. Bryce Solomon, Jr.                          4,927,862          7,585           N/A             N/A

         Class II (for a term expiring in 1999)

         Robert E. Bowers                               4,930,537          4,910           N/A             N/A
         Ward H. Clegg                                  4,930,537          4,910           N/A             N/A
         J. Stephen Heard                               4,930,337          5,110           N/A             N/A
         W. James Stokes                                4,929,837          5,610           N/A             N/A

         Class III (for a term expiring in 2000)

         Robin C. Kelton                                4,930,537          4,910           N/A             N/A
         John T. Moore                                  4,929,837          5,610           N/A             N/A
         Thomas H. Muller, Jr.                          4,930,337          5,110           N/A             N/A
         Donald S. Shapleigh, Jr.                       4,930,537          4,910           N/A             N/A

</TABLE>

2.   Increase the number of shares of Common Stock  issuable  under the 
     Company's  1996 Stock  Incentive  Plan from 397,500 to 600,000:

<TABLE>
<CAPTION>

                                                        Votes            Votes                        Broker
                                                         For            Against      Abstentions    Non-Votes

<S>                                                     <C>               <C>               <C>           <C>
                                                        4,883,932         43,330            8,185        -0-
</TABLE>

3. Ratification of Deloitte & Touche LLP as the Company's independent auditors:

<TABLE>
<CAPTION>

                                                        Votes            Votes                         Broker
                                                         For            Against      Abstentions    Non-Votes

<S>                                                     <C>                <C>             <C>             <C>
                                                        4,909,247          1,750           24,450         -0-

</TABLE>

                                       3

<PAGE>


Other Information

         Pursuant to Rule 14a-4(c)(1) promulgated under the Securities Exchange
Act of 1934, shareholders desiring to present a proposal for consideration at
the Company's 1999 Annual Meeting of Shareholders must notify the Company in
writing at its principal office, 950 North Point Parkway, Alpharetta, Georgia
30005, attn: Corporate Secretary, of the contents of such proposal no later than
February 8, 1999. Failure to timely submit such a proposal will enable the
proxies appointed by management to exercise their discretionary voting authority
if the proposal is raised at the Annual Meeting of Shareholders.

Exhibits and Reports on Form 8-K

                  (a)      Exhibits

                           27.1     Financial Data Schedule (for SEC use only)


                  (b)      No reports on Form 8-K were filed during the quarter 
for which this report is filed.


                                       4

<PAGE>



SIGNATURE


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


                                           NET.B@NK, INC.


                                           By: /s/ Robert E. Bowers
                                               ----------------------
                                                   Robert E. Bowers

                                                    Chief Financial Officer


Dated: August 11, 1998

<PAGE>

NET.B@NK, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                               JUNE 30,        DECEMBER 31,
ASSETS                                                           1998              1997
<S>                                                           <C>              <C>

CASH AND CASH
EQUIVALENTS:
  Cash                                                        $     162,310    $     250,535
  Federal Funds Sold                                              3,015,169       28,853,057
                                                              -------------    -------------
      Total cash and cash equivalents                             3,177,479       29,103,592

SECURITIES AVAILABLE FOR SALE - At fair value (amortized
  cost of $42,383,108 and $18,137,209)                           42,353,426       18,054,146

STOCK OF FEDERAL HOME LOAN BANK OF ATLANTA - At cost                251,500          225,000

LOANS RECEIVABLE - Net of allowance for doubtful
  accounts of $3,710,871 and $453,444                           188,134,408       44,479,963

ACCRUED INTEREST RECEIVABLE                                       1,448,796          372,237

FURNITURE AND EQUIPMENT - Net                                       793,573          388,508

BANK CHARTER                                                        337,167          344,167

DEFFERED TAXES                                                    3,058,476

OTHER ASSETS                                                      7,159,319          252,196
                                                              -------------    -------------
                                                              $ 246,714,144    $  93,219,809
                                                              -------------    -------------
                                                              -------------    -------------

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
   Deposits                                                   $ 186,845,624    $  58,726,763
   Short-term borrowings                                         20,500,000
   Other payables and accrued liabilities                         2,048,944          375,649
                                                              -------------    -------------
                                                                209,394,568       59,102,412
SHAREHOLDERS' EQUITY:
  Preferred stock, no par (10,000,000 shares authorized,
    none outstanding)
  Common stock, $.01 par (100,000,000 shares authorized,
    6,145,962 and 6,145,562 shares issued and outstanding)           61,460           61,456
  Additional paid-in capital                                     43,632,759       43,631,314
  Unamortized stock plan expense                                    (45,699)         (75,689)
  Accumulated deficit                                            (6,299,262)      (9,416,621)
  Accumulated other comprehensive loss, net of tax                  (29,682)         (83,063)
                                                              -------------    -------------
      Total shareholders' equity                                 37,319,576       34,117,397
                                                              -------------    -------------
      Total liabilities and shareholders' equity              $ 246,714,144    $  93,219,809
                                                              -------------    -------------
                                                              -------------    -------------
</TABLE>
See notes to financial statements.


                                       F-1
<PAGE>

NET.B@NK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (UNAUDITED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED           SIX MONTHS ENDED
                                                              JUNE 30,                    JUNE 30,
                                                        1998           1997          1998          1997
                                                    -----------    -----------    -----------   ----------- 
<S>                                                 <C>            <C>            <C>           <C>         
INTEREST INCOME:
  Loans                                             $ 3,442,783                   $ 4,801,018
  Investment securities                                 702,098                     1,155,475
  Short-term investments                                107,656    $       841        502,659   $     6,616
                                                    -----------    -----------    -----------   ----------- 
      Total interest income                           4,252,537            841      6,459,152         6,616

INTEREST EXPENSE:
  Deposits                                            2,279,515         37,482      3,583,143       140,007
  Short-term borrowings                                 434,333                       434,333
                                                    -----------    -----------    -----------   -----------  
     Total interest expense                          2,713,848         37,482      4,017,476       140,007
                                                    -----------    -----------    -----------   ----------- 
NET INTEREST INCOME (LOSS)                            1,538,689        (36,641)     2,441,676      (133,391)
PROVISION FOR LOAN LOSSES                                 6,011                         9,672
                                                    -----------    -----------    -----------   ----------- 
NET INTEREST INCOME (LOSS) AFTER
  PROVISION FOR LOAN LOSSES                           1,532,678        (36,641)     2,432,004      (133,391)

NON-INTEREST INCOME - Service charges and fees          103,727                       226,218

NON-INTEREST EXPENSES:
  Salaries and benefits                                 310,823        552,837        745,176     1,077,808
  Marketing                                             180,238         24,203        420,256        84,698
  Depreciation and amortization                          58,279          8,389         98,316        15,268
  Outside services                                      359,908         20,178        551,569        41,455
  Other                                                 302,150        135,614        389,022       255,607
  Data processing                                        78,888         53,812        170,114       125,318
  Occupancy                                              39,996          5,950         66,089        35,700
  Office expenses                                        42,792                        90,358
  Travel and entertainment                               23,584          6,481         39,026        10,885
  Amortization of service contract with affiliate                      576,000                    1,440,000
                                                    -----------    -----------    -----------   ----------- 
      Total non-interest expenses                     1,396,658      1,383,464      2,569,926     3,086,739
                                                    -----------    -----------    -----------   ----------- 

INCOME (LOSS) BEFORE INCOME TAXES                       239,747     (1,420,105)        88,296    (3,220,130)

INCOME TAX BENEFIT                                    3,029,063                     3,029,063
                                                    -----------    -----------    -----------   ----------- 

NET INCOME (LOSS)                                     3,268,810     (1,420,105)     3,117,359    (3,220,130)

OTHER COMPREHENSIVE INCOME, NET OF TAX:
  Unrealized holding gains (losses) on
securities arising during period                        (82,634)                       76,440
  Less reclassification adjustment
for gains (losses)included
    in net income (loss)                                 25,067                       (23,059)
                                                    -----------                    -----------
      Total other comprehensive income                  (57,567)                       53,381
                                                    -----------    -----------    -----------   ----------- 

COMPREHENSIVE INCOME (LOSS)                         $ 3,211,243    $(1,420,105)   $ 3,170,740   $(3,220,130)
                                                    -----------    -----------    -----------   ----------- 
                                                    -----------    -----------    -----------   ----------- 
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE:
          BASIC                                     $      0.53    $     (1.11)   $      0.51   $     (2.55)
          DILUTED                                   $      0.51    $     (1.11)   $      0.49   $     (2.55)
WEIGHTED AVERAGE COMMON AND COMMON
 EQUIVALENT SHARES
OUTSTANDING:
          BASIC                                       6,145,936      1,278,888      6,145,949     1,264,196
          DILUTED                                     6,446,303      1,278,888      6,422,794     1,264,196

</TABLE>

See notes to financial statements 


                                       F-2
<PAGE>


NET.B@NK, INC.

STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                         PREFERRED                   COMMON    ADDITIONAL    UNAMORTIZED                 
                                           STOCK        COMMON        STOCK     PAID-IN      STOCK PLAN    ACCUMULATED   
                                          (NO PAR)      SHARES     ($.01 PAR)   CAPITAL      EXPENSE         DEFICIT     
<S>                                       <C>          <C>        <C>           <C>          <C>           <C>           
BALANCE - December 31, 1997               $    --      6,145,562     $61,456    $43,631,314  $    (75,689) $(9,416,621)  

  Exercised stock options                                    400           4          1,445                              
  Net income for the six months
  ended June 30, 1998                                                                                       3,117,359    
  Other comprehensive income:
      Unrealized holding gains arising
      during the six-month
      period ended June 30, 1998                                                                                         
       Less reclassification adjustment
       for losses included
       in net income
  Amortization of stock plan expense                                                              29,990                 
                                          ----------   ---------     -------    -----------     --------   -----------    
BALANCE - June 30, 1998                     $     --   6,145,962     $61,460    $43,632,759    $(45,699)   $(6,299,262)   
                                          ----------   ---------     -------    -----------     --------   -----------    
                                          ----------   ---------     -------    -----------     --------   -----------    

</TABLE>

<TABLE>
<CAPTION>

                                            ACCUMULATED
                                              OTHER                     
                                           COMPREHENSIVE                
                                              INCOME                    
                                              (LOSS)          TOTAL     
<S>                                            <C>          <C>         

BALANCE - December 31, 1997                    $(83,063)    $34,117,397 
                                                                        
  Exercised stock options                                        1,449  
  Net income for the six months                                         
  ended June 30, 1998                                        3,117,359  
  Other comprehensive income:                                           
      Unrealized holding gains arising                                  
      during the six-month                                              
      period ended June 30, 1998                76,440          76,440  
       Less reclassification adjustment                                 
       for losses included                                              
       in net income                           (23,059)        (23,059) 
  Amortization of stock plan expense                            29,990  
                                              --------     -----------  
BALANCE - June 30, 1998                       $(29,682)    $37,319,576  
                                              --------     -----------  
                                              --------     -----------  
</TABLE>

                                       F-3
<PAGE>


NET.B@NK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                      SIX MONTHS ENDED
                                                                           JUNE 30,
                                                                   1998            1997
<S>                                                            <C>              <C>        
OPERATING ACTIVITIES:
  Net income (loss)                                            $3,117,359      $(3,220,130)
  Adjustments to reconcile net income 
  (loss) to net cash used in operating activities:
    Depreciation                                                   91,316           15,268
    Amortization of service contract                                             1,440,000
    Amortization of stock plan expense                             29,990          112,772
    Amortization of premiums on investment securities             169,379
    Amortization of premiums on purchased loans                   810,428
    Amortization of Bank Charter                                    7,000
    Provision for loan losses                                       9,672
   Changes in assets and liabilities which provide (use) cash:
    Accrued interest receivable                                (1,076,559)
    Other assets                                               (6,907,123)          13,368
    Offering costs                                                                (452,560)
    Organizational costs - net                                                     (57,793)
    Premier advance                                                                (55,000)
    License agreements                                                              76,564
    Payables and accrued liabilities                            1,673,295          363,828
    Deferred tax asset                                         (3,058,476)
                                                               ----------       ---------- 

        Net cash used in operating activities                  (5,133,719)      (1,763,683)

INVESTING ACTIVITIES:
  Purchases of securities available for sale                  (32,816,802)
  Purchase of Federal
  Home Loan Bank stock                                            (26,500) 
  Principal repayments on mortgage backed
  securities                                                    8,401,524 
  Purchase of loans and premiums                             (184,355,136) 
  Principal
  payments on loans                                            39,880,591 
  Capital expenditures                                           (361,381)          (8,255)
  Capitalized software costs                                     (135,000) 
  Proceeds from return of equipment                                                 17,738
                                                               ----------       ---------- 
     Net cash provided by (used in) 
      investing activities                                   (169,412,704)           9,483

FINANCING ACTIVITIES:

  Increase in deposits                                        128,118,861
  Advances from affiliate                                                        1,017,734
  Net proceeds from the sale of common stock                        1,449            4,185
  Short-term borrowing, net of repayments                      20,500,000
                                                               ----------       ---------- 
        Net cash provided by financing activities             148,620,310        1,021,919
                                                               ----------       ---------- 
NET DECREASE IN CASH AND CASH EQUIVALENTS                     (25,926,113)        (732,281)
CASH AND CASH EQUIVALENTS:
  Beginning of period                                          29,103,592          768,666
                                                               ----------       ---------- 
  End of period                                                $3,177,479          $36,385
                                                               ----------       ---------- 
                                                               ----------       ---------- 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION - Cash paid during the year for interest           $918,416        $      --
                                                               ----------       ---------- 
                                                               ----------       ---------- 

See notes to financial statements.

</TABLE>


                                       F-4

<PAGE>

NET.B@NK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997 AND FOR THE
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
--------------------------------------------------------------------------------


1.    ORGANIZATION AND BASIS OF PRESENTATION

      Net.B@nk, Inc. (the "Company") is a bank holding company that wholly owns
      the outstanding stock of Atlanta Internet Bank ("AIB"), a federally
      chartered savings and loan. The Company was incorporated February 20, 1996
      for the primary purpose of forming and, ultimately, operating AIB. As of
      January 1, 1997, pending regulatory approval and the acquisition of a bank
      charter, the Company was operating as a development stage enterprise under
      an agreement with Carolina First Bank ("CFB") whereby CFB agreed to hold
      and service the deposit accounts generated by the Internet banking
      operations of the Company in exchange for 1,325,000 shares of the
      Company's common stock valued at $3,840,000. In addition, as of January 1,
      1997, the Company was a party to an agreement with First Alliance/Premier
      Bancshares, Inc. ("First Alliance") pursuant to which the Company had
      agreed to purchase the charter of First Alliance's subsidiary, Premier
      Bank, $5 million of loans, $5 million of certificates of deposit, and $2
      million in unimpaired capital for $2,150,000 in cash, 41,406 shares of the
      Company's common stock valued at $125,000, and $75,000 in additional cash
      for reimbursement of direct out-of-pocket expenses.

      On July 11, 1997, the final regulatory approval from the Office of Thrift
      Supervision was received. On July 28, 1997, the Company sold 3,500,000
      shares of its common stock to the public in an Initial Public Offering
      (the "Offering"). On July 31, 1997, the Company received approximately
      $38.4 million in net proceeds from the Offering and consummated its
      agreements with both First Alliance and CFB. As a result AIB, a federal
      savings bank, became a wholly owned subsidiary of the Company.

      In the opinion of management, the unaudited condensed consolidated
      financial statements included herein reflect all adjustments, consisting
      only of normal recurring accruals, which are necessary for the fair
      statement of the results for the interim periods presented. Certain
      information and footnote disclosures normally included in financial
      statements have been condensed or omitted pursuant to applicable rules and
      regulations of the Securities and Exchange Commission ("SEC"). The
      financial statements included herein should be read in conjunction with
      the financial statements and notes thereto, included in the Company's Form
      10-K filed with the SEC on March 27, 1998. The results of operations for
      the interim periods reported herein are not necessarily indicative of
      results to be expected for the full year. Certain 1997 amounts have been
      reclassified for comparability with 1998 amounts.


                                       F-5
<PAGE>


2.    ACCOUNTING POLICIES

      Reference is made to the accounting policies of the Company described in
      the notes to financial statements contained in the Company's Form 10-K for
      the year ended December 31, 1997. The Company has followed those policies
      in preparing this report. In addition, the following accounting policies
      were adopted during the six-month period June 30, 1998:

      COMPREHENSIVE INCOME - As of January 1, 1998, the Company adopted
      Statement of Financial Accounting Standards No. 130, "Reporting
      Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new rules for the
      reporting and display of comprehensive income and its components. SFAS 130
      requires unrealized gains or losses on the Company's available-for-sale
      securities, which prior to adoption were reported separately in
      shareholders' equity, to be included in other comprehensive income. The
      adoption of the Statement had no impact on the Company's net income or
      shareholders' equity.

      CAPITALIZED SOFTWARE - As of April 1, 1998, the Company adopted Statement
      of Position No. 98-1, "Accounting for the Costs of Computer Software
      Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 allows for
      the capitalization of costs related to the development and implementation
      of software obtained for internal use including materials, payroll, and
      interest costs once the criteria of the SOP have been met. As of June 30,
      1998, $135,000 of these related costs have been capitalized.

3.    LOANS

      During the three-month period ended June 30, 1998, the Company purchased
      approximately $80 million in home equity loans. The purchase included a
      premium of $5 million. In connection with the purchase, an estimate of the
      loss inherent in the purchased portfolio was made and an allowance for
      loan losses of $1.2 million was recorded by adjusting the premium
      associated with the purchased loans. The interest rates range from 7.5% to
      13.5% on these loans.

      During the three-month period ended March 31, 1998, the Company purchased
      approximately $71 million in first and second mortgages, home equity
      loans, and construction loans. The purchases included premiums of
      approximately $4.8 million. In connection with these purchases, an
      estimate of the loss inherent in the purchased portfolio was made and an
      allowance for loan losses of $2.0 million was recorded by adjusting the
      premium associated with the purchased loans. Interest rates range from 6%
      to 16% on these loans.

      An analysis of the allowance for loan losses for the six-month period
      ended June 30, 1998 follows:


                                       F-6


<PAGE>


<TABLE>

      <S>                                                   <C>       
      Balance, January 1, 1998                                $453,444
      Allowance recorded in connection with the purchase
      of loan pools                                          3,335,498
      Provision for loan losses                                  9,672
      Loan charge-offs                                         (87,743)
                                                            ----------
      Balance, June 30, 1998                                $3,710,871
                                                            ----------
                                                            ----------
</TABLE>


4.    INCOME TAXES

      During the three months ended June 30, 1998, the Company reversed the
      valuation allowance previously associated with its deferred tax assets.
      The majority of the assets relate to future tax benefits associated with
      previous net operating losses of the Company. As the Company achieved
      profitability in the second quarter of 1998, management now believes that
      it is more likely than not that such assets will be realized, and thus
      reversed the valuation allowance in accordance with Statement of Financial
      Accounting Standard No. 109, "Accounting for Income Taxes."

      As of June 30, 1998, the Company has deferred tax assets and liabilities
      as follows:


<TABLE>

      <S>                                  <C>       
      Net operating loss carryforwards     $2,504,127
      Allowance for loan losses               154,171
      Loan premium amortization               153,996
      Start-up costs                          132,414
      Stock option compensation expense       118,896
      Other liability, net                     (5,128)
                                           ----------
      Total                                $3,058,476
                                           ----------

</TABLE>


5.    NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE

      In February 1997, Statement of Financial Accounting Standards No. 128,
      "Earnings Per Share" ("SFAS 128") was issued. SFAS 128 establishes
      standards for computing and presenting earnings per share information for
      entities with publicly held common stock. In accordance with SFAS 128, net
      loss per share is computed based on the weighted average number of common
      shares outstanding during the period. All previously reported per share
      amounts have been restated to conform to SFAS 128.

6.    STOCK OPTIONS

      The Company has a 1996 Stock Incentive Plan (the "Plan") which provides
      that key employees, officers, directors, and consultants of the Company
      may be granted nonqualified and incentive stock options to purchase shares
      of common stock of the Company, derivative securities related to the value
      of the common stock, or cash awards. Previously, the Plan limited the
      total number of shares which 


                                       F-7
<PAGE>

      could be awarded to 397,500. Effective with shareholder approval on
      April 23, 1998, the Plan was amended to increase the total number of
      shares reserved for the Plan to 600,000.

      During the six-month period ended June 30, 1998, the Company awarded
      23,000 incentive stock options at an exercise price of $11.25 per share on
      January 12, 1998, 3,000 incentive stock options at an exercise price of
      $16.75 per share on February 12, 1998, and 10,000 incentive stock options
      at an exercise price of $24.38 per share on June 18, 1998. Grant prices
      approximated fair value of the stock at the grant date. Also, during the
      six-month period ended June 30, 1998, 400 stock options were exercised at
      a price of $3.62. Subsequent to June 30, 1998, the Company granted 54,000
      options at an exercise price of $27.50, which approximated fair value,
      1,675 options were exercised at $3.62 per share, and 8,281 options were
      terminated.

7.    IMPACT OF NEW ACCOUNTING STANDARDS

      In June 1997, Statement of Financial Accounting Standards No. 131,
      "Disclosures about Segments of an Enterprise and Related Information"
      ("SFAS 131") was issued. SFAS 131 establishes annual and interim reporting
      standards for an enterprise's business segments and related disclosures
      about its products, services, geographic areas and major customers.
      Adoption of this statement will not impact the Company's consolidated
      financial position, results of operations or cash flows. The Company will
      adopt this Statement in its annual financial statements for the year
      ending December 31, 1998.

      In February 1998, Statement of Financial Accounting Standards No. 132,
      "Employers' Disclosures about Pensions and Other Postretirement Benefits"
      ("SFAS 132") was issued. SFAS 132 standardizes the disclosure requirements
      for pensions and other postretirement benefits to the extent practicable,
      requires additional information on changes in the benefit obligations and
      fair values of plan assets that will facilitate financial analysis, and
      eliminates certain disclosures that are no longer useful. SFAS 132 is
      effective for fiscal years beginning after December 15, 1997. The
      Statement is not expected to have an effect on the Company's financial
      statements.

      In June 1998, Statement of Financial Accounting Standards No. 133,
      "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
      133") was issued. SFAS 133 establishes standards for derivative
      instruments and hedging activities and requires that an entity recognize
      all derivatives as either assets or liabilities in the statement of
      financial position and measure those instruments at fair value. This
      statement is effective for all fiscal quarters of fiscal years beginning
      after June 15, 1999. The Statement is not expected to have an effect on
      the Company's financial statements.

8.    LOAN ORIGINATION AGREEMENT

      On April 1, 1998, the Company entered into an agreement with First
      Mortgage Network, Inc. ("FMN") whereby the Company acts as a loan
      originator on behalf of FMN. Under the terms of the agreement, FMN may
      purchase, at the Company's option, loans originated by the Company. As a
      result of the agreement's structure, loans originated for FMN for which
      the purchase price has not yet been received are accounted for as
      receivables.

9.    BORROWING AGREEMENTS

      During the quarter ended June 30, 1998, the Company and AIB entered into
      various line of credit agreements with Georgia Banker's Bank ("GBB").
      Under the terms of the Company's agreement, the 


                                       F-8
<PAGE>

      Company may borrow 50% of the tangible equity of AIB, up to $17
      million, using the stock of AIB as collateral. The line bears interest
      at a fixed rate of 8% per annum. During the quarter, the Company
      borrowed and repaid $12 million under the line.

      AIB entered into two line of credit agreements with GBB, one for a $5
      million unsecured general purpose line and one for 99% of the value of its
      investment securities. There were no amounts outstanding under the general
      purpose line of credit at June 30, 1998. During the quarter, AIB borrowed
      $45 million under the investment securities line of credit and repaid
      $24.5 million, leaving $20.5 million outstanding at June 30, 1998. Both of
      the lines bear interest 25 basis points above the Fed Funds rate, or 5.65%
      at June 30, 1998.


                                       F-9
<PAGE>



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

      General - The Company is a holding company that wholly owns Atlanta
      Internet Bank ("AIB"), a federally chartered savings and loan. The Company
      was incorporated as a Georgia corporation on February 20, 1996 for the
      purpose of forming and, ultimately, operating AIB as a wholly owned
      federal savings bank subsidiary. As of January 1, 1997, pending regulatory
      approval and the acquisition of a bank charter, the Company was operating
      as a development stage enterprise under an agreement with Carolina First
      Bank ("CFB") whereby CFB agreed to hold and service the deposit accounts
      generated by the Internet banking operations of the Company in exchange
      for 1,325,000 shares of the Company's common stock valued at $3,840,000.
      In addition, as of January 1, 1997, the Company was a party to an
      agreement with First Alliance/Premier Bancshares, Inc. ("First Alliance")
      pursuant to which the Company had agreed to purchase the charter of First
      Alliance's subsidiary, Premier Bank (the "Charter"), and $5 million in
      loans, $5 million in certificates of deposit, and $2 million in unimpaired
      capital for $2,150,000 in cash, 41,406 shares of the Company's common
      stock valued at $125,000, and $75,000 in additional cash for reimbursement
      of direct out-of-pocket expenses.

      On July 11, 1997, the final regulatory approval from the Office of Thrift
      Supervision ("OTS") was received. On July 28, 1997, the Company sold
      3,500,000 shares of its common stock to the public in an Initial Public
      Offering (the "Offering"). On July 31, 1997, the Company received
      approximately $38.4 million in net proceeds from the Offering and
      consummated its agreements with both First Alliance and CFB. As a result
      AIB, a federal savings bank, became a wholly owned subsidiary of the
      Company. As of June 30, 1998, the Company had 11,832 accounts and
      approximately $187 million in deposits.

      FINANCIAL CONDITION - The Company's assets were $246.7 million at June 30,
      1998, compared to $93.2 million at December 31, 1997, an increase of
      $153.5 million. This increase in total assets was primarily due to growth
      in the Company's loan portfolio resulting from the purchase of
      approximately $143.7 million in home equity loans, second mortgages,
      construction loans, and other participation loans. In addition, the
      Company recorded a $3.0 million deferred tax asset related primarily to
      previous net operating loss carryforwards expected to be realized for tax
      purposes. As the Company achieved profitability in the second quarter of
      1998, management now believes that it is more likely than not that its
      deferred tax assets will be realized. Receivables of $7.0 million related
      to a loan origination agreement with a third party have been recorded in
      other assets. See Note 8 of Notes to Consolidated Financial Statements.

      Total liabilities increased $150.3 million from December 31, 1997 to June
      30,1998 primarily due to the receipt of approximately $128 million in
      customer deposits as a result of marketing programs introduced by the
      Company in the fourth quarter of 1997 and continued through June 30, 1998.
      In addition, during the second quarter of 1998 the Company borrowed $20.5
      million under a new line of credit agreement. See Note 9 of Notes to
      Consolidated Financial Statements.

      Total shareholders' equity increased approximately $3.2 million from
      December 31, 1997 to June 30, 1998. The increase resulted from net income
      of approximately $3.1 million, $53,000 in other comprehensive income, and
      a reduction of $30,000 in unamortized stock plan expense.

      LIQUIDITY AND CAPITAL RESOURCES - The Company's liquidity, represented by
      cash and cash equivalents, is a product of its operating, investing, and
      financial activities. The Company's primary sources of funds are deposits,
      borrowings, prepayments and maturities of outstanding loans, sales of
      loans, 


                                      F-10
<PAGE>

      maturities of investment securities and other short-term
      investments, and funds provided from operations. While scheduled loan
      payments and maturing investment securities and short-term investments are
      relatively predictable sources of funds, deposit flows and loan
      prepayments are greatly influenced by general interest rates, economic
      conditions, and competition. The Company invests excess funds in overnight
      deposits and other short-term interest-earning assets. The Company can use
      cash generated through the retail deposit market, its traditional funding
      source, to offset the cash utilized in investing activities. The Company's
      available for sale securities and short term interest-earning assets can
      also be used to provide liquidity for lending and other operational
      requirements. As an additional source of funds, the Company has three 
      line of credit agreements. See Note 9 of Notes to Consolidated Financial
      Statements.

      AIB is required by OTS regulations to maintain tangible capital equal to
      at least 1.5% of adjusted total assets, core capital equal to at least
      3.0% of adjusted total assets, and total capital equal to at least 8.0% of
      risk-weighted assets. To be categorized as "well capitalized" under a
      prompt corrective action plan, AIB must maintain minimum Tier I, core, and
      risk-based capital ratios of at least 6%, 5%, and 10%, respectively. AIB
      exceeded such requirements with tangible, core, total, and Tier I capital
      ratios of 10.01%, 10.01%, 13.33%, and 11.84%, respectively, at June 30,
      1998.

       MARKET RISK.

       ASSET AND LIABILITY MANAGEMENT - The Company's principal business is the
       making of loans, funded primarily by customer deposits and, to the extent
       necessary, other borrowed funds. Consequently, a significant portion of
       the Company's assets and liabilities are monetary in nature and
       fluctuations in interest rates will affect the Company's future net
       interest income and cash flows. This interest rate risk is the Company's
       primary market risk exposure. The Company does not enter into derivative
       financial instruments such as futures, forwards, swaps, and options.
       Also, the Company has no market risk-sensitive instruments held for
       trading purposes. The Company's exposure to market risk is reviewed on a
       regular basis by its management.

       INTEREST RATE SENSITIVITY - The Company measures interest rate
       sensitivity as the difference between amounts of interest-earning assets
       and interest-bearing liabilities which either reprice or mature within a
       given period of time. The difference, or the interest rate repricing
       "gap," provides an indication of the extent to which an institution's
       interest rate spread will be affected by changes in interest rates. A gap
       is considered positive when the amount of interest-rate sensitive assets
       exceeds the amount of interest-rate sensitive liabilities and is
       considered negative when the amount of interest-rate sensitive
       liabilities exceeds the amount of interest-rate sensitive assets.
       Generally, during a period of rising interest rates, a negative gap
       within shorter maturities would adversely affect net interest income,
       while a positive gap within shorter maturities would result in an
       increase in net interest income, and during a period of falling interest
       rates, a negative gap within shorter maturities would result in an
       increase in net interest income while a positive gap within shorter
       maturities would have the opposite effect.

                                      F-11
<PAGE>


      The table below shows the interest rate sensitivity of the Company's
assets and liabilities as of June 30, 1998:

<TABLE>
<CAPTION>
                                                  Term to Repricing or Maturity
                                ------------------------------------------------------------------------
                                                Over Three       Over One        Over Five
                                  Less Than    Months Through   Year Through    Years and
                                 Three Months     One Year      Five Years      Insensitive     Total
<S>                             <C>            <C>            <C>              <C>           <C>        
Interest Earning Assets:
  Cash and cash equivalents    $    162,310                                                 $    162,310
  Federal fund sold               3,015,169                                                    3,015,169
  Investment securities           1,872,175                                  $ 40,481,251     42,353,426
  Stock of Federal Home
    Loan Bank of Atlanta            251,500                                                      251,500
  Other interest bearing
    receivable                    1,477,974                                                   1,477,974

  Loans receivable              133,460,144    $  3,705,436   $ 16,256,020     34,712,808    188,134,408
                               ------------    ------------   ------------   ------------   ------------
      Total interest
        earning assets          140,239,272       3,705,436     16,256,020     75,194,059    235,394,787

  Noninterest earning assets                                                   11,319,357     11,319,357
                               ------------    ------------   ------------   ------------   ------------
      Total assets             $140,239,272    $  3,705,436   $ 16,256,020   $ 86,513,416   $246,714,144
                               ------------    ------------   ------------   ------------   ------------
                               ------------    ------------   ------------   ------------   ------------

Interest Bearing Liabilities -
  Interest-bearing deposits    $ 58,239,557    $121,655,822   $  5,192,436                  $185,087,815
  Short-term borrowings          20,500,000                                                   20,500,000
  Interest free deposits                                                    $   1,757,809      1,757,809
  Other interest free
    liabilities and equity                                                     39,368,520     39,368,520
                               ------------    ------------   ------------   ------------   ------------
      Total liabilities
        and equity             $ 78,739,557    $121,655,822   $  5,192,436   $ 41,126,329   $ 246,714,144
                               ------------    ------------   ------------   ------------   ------------
                               ------------    ------------   ------------   ------------   ------------
Net Interest Rate
  Sensitivity Gap              $ 61,499,715   $(117,950,386)  $ 11,063,584   $ 45,387,087
                               ------------    ------------   ------------   ------------  
                               ------------    ------------   ------------   ------------  
Cumulative Gap                 $ 61,499,715   $ (56,450,671)  $(45,387,087)  $        --
                               ------------    ------------   ------------   ------------  
                               ------------    ------------   ------------   ------------  
Net Interest Rate
  Sensitivity Gap as a
  Percent of Interest
  Earning Assets                      43.85%       (3183.17)%        68.06%        52.46%

Cumulative Gap as a
  Percent of Cumulative
  Interest Earning Assets             43.85%       (1523.46)%      (279.20)%

</TABLE>

                                      F-12
<PAGE>


      RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 COMPARED
      TO THE THREE MONTHS ENDED JUNE 30, 1997.

      GENERAL - Net income for the three months ended June 30, 1998 amounted to
      $3.3 million, an increase of $4.7 million when compared to the $1.4
      million loss for the quarter ended June 30, 1997. A substantial portion of
      the income for the three months ended June 30, 1998 resulted from the
      recognition of approximately $3.0 million in tax benefits. The benefits
      resulted from the reversal of a valuation allowance previously associated
      with the Company's deferred tax assets. As the Company achieved
      profitability during the quarter, management now believes it is more
      likely than not that such deferred tax assets will be realized. The
      statement of operations for the quarter ended June 30, 1997 reflects the
      Company's operations before the acquisition of the bank charter. As the
      charter was not acquired until July 31, 1997, the Company had no earning
      assets.

      INTEREST INCOME - Interest income related to the Company's loan and
      investment portfolio for the three months ended June 30, 1998 was $4.3
      million. No significant amount of interest income was recorded for the
      three months ended June 30, 1997, as the Company had no significant
      investments or loans at that time.

      INTEREST EXPENSE - For the quarter ended June 30, 1998, $2.3 million in
      interest expense was recorded as a result of the Company's increase in
      customer deposits. As the Company did not maintain its own deposit
      accounts until July 31, 1997, $37,000 in interest expense was recorded for
      the quarter ended June 30, 1997 related to the CFB servicing agreement.
      This interest expense represents the difference between interest expense
      paid to customers and interest income paid to the Company by CFB at
      contractual rates prior to the transfer of customer deposits and was
      included in the Company's operations. In addition, in the quarter ended
      June 30, 1998, the Company recorded approximately $434,000 in interest
      expense associated with short-term borrowings under its line of credit
      agreement.

      NET INTEREST INCOME - Net interest income is determined by the Company's
      interest rate spread (i.e., the difference between the yields earned on
      its interest-earning assets and the rates paid on its interest-bearing
      liabilities) and the relative amounts of interest-earning assets and
      interest-bearing liabilities. Net interest income was $1.5 million for the
      three months ended June 30, 1998. As the Company did not have any
      significant investments, loans, or customer deposits during the three
      months ended June 30, 1997, no significant amount of net interest income
      was recorded for that period.

      PROVISION FOR LOAN LOSSES - In connection with the purchase of various
      loan portfolios, the Company assesses the inherent loss in the portfolio
      and records the necessary allowance by adjusting the premium associated
      with the portfolio. In addition to this allowance, the Company then
      records an additional allowance pervasive to all loans. The Company
      recorded a $6,000 provision for loan loss for the three months ended June
      30, 1998. As the Company had no loans for the three months ended June 30,
      1997, a provision was not recorded for that period. The allowance for loan
      losses is maintained at a level estimated to be adequate to provide for
      potential losses in the loan portfolio. Management determines the adequacy
      of the allowance based upon reviews of individual loans, recent loss
      experience, current economic conditions, the risk characteristics of the
      various categories of loans, and other pertinent factors.

      NON-INTEREST INCOME - For the three-month period ended June 30, 1998, the
      Company recorded approximately $104,000 in loan and deposit service
      charges and fees. As the Company did not have 

                                      F-13
<PAGE>

      any loans, or customer deposits during the three months ended June 30,
      1997, no such service fees were recorded. No amount of non-interest
      income was recorded for the three months ended June 30, 1997.

      NON-INTEREST EXPENSES - Non-interest expenses include all operating
      expenses including salaries and benefits, marketing, general and
      administrative expenses (excluding interest expense, provision for loan
      losses and income taxes) of the Company. Non-interest expenses increased
      less than 1%, only $13,000, for the three months ended June 30, 1998 as
      compared with the three months ended June 30, 1997 as the Company was able
      to leverage its existing infrastructure. From 1997 to 1998, the Company
      did replace many of its services provided by an affiliate with outside
      vendor relationships.


                                      F-14
<PAGE>


      RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 COMPARED
      TO THE SIX MONTHS ENDED JUNE 30, 1997.

      GENERAL - Net income for the six months ended June 30, 1998 amounted to
      $3.1 million, an increase of $6.3 million when compared to the $3.2
      million loss for the six months ended June 30, 1997. The statement of
      operations for the six months ended June 30, 1997 reflects the Company's
      operations before the acquisition of the bank charter. As the charter was
      not acquired until July 31, 1997, the Company had no earning assets. A
      substantial portion of the income for the six months ended June 30, 1998
      resulted from the recognition of approximately $3.0 million in tax
      benefits. The benefits resulted from the reversal of a valuation allowance
      previously associated with the Company's deferred tax assets. As the
      Company achieved profitability during the quarter, management now believes
      it is more likely than not that such deferred tax assets will be realized.

      INTEREST INCOME - Interest income related to the Company's loan and
      investment portfolio for the six months ended June 30, 1998 was $6.5
      million. No significant amount of interest income was recorded for the six
      months ended June 30, 1997, as the Company had no significant investments
      or loans at that time.

      INTEREST EXPENSE - For the six months ended June 30, 1998, $3.6 million in
      interest expense was recorded as a result of the Company's increase in
      customer deposits. As the Company did not maintain its own deposit
      accounts until July 31, 1997, $140,000 in interest expense was recorded
      for the six months ended June 30, 1997 related to the CFB servicing
      agreement. This interest expense represents the difference between
      interest expense paid to customers and interest income paid to the Company
      by CFB at contractual rates prior to the transfer of customer deposits and
      was included in the Company's operations. In addition, in the six months
      ended June 30, 1998, the Company recorded approximately $434,000 in
      interest expense associated with short-term borrowings under its line of
      credit agreement.

      NET INTEREST INCOME - Net interest income is determined by the Company's
      interest rate spread (i.e., the difference between the yields earned on
      its interest-earning assets and the rates paid on its interest-bearing
      liabilities) and the relative amounts of interest-earning assets and
      interest-bearing liabilities. Net interest income was $2.4 million for the
      six months ended June 30, 1998. As the Company did not have any
      significant investments, loans, or customer deposits during the six months
      ended June 30, 1997, no significant amount of net interest income was
      recorded for that period.

      PROVISION FOR LOAN LOSSES - In connection with the purchase of various
      loan portfolios, the Company assesses the inherent loss in the portfolio
      and records the necessary allowance by adjusting the premium or discount
      associated with the portfolio. In addition to this allowance, the Company
      then records an additional allowance pervasive to all loans. The Company
      recorded a $10,000 provision for loan loss for the six months ended June
      30, 1998. As the Company had no loans for the six months ended June 30,
      1997, a provision was not recorded for that period. The allowance for loan
      losses is maintained at a level estimated to be adequate to provide for
      potential losses in the loan portfolio. Management determines the adequacy
      of the allowance based upon reviews of individual loans, recent loss
      experience, current economic conditions, the risk characteristics of the
      various categories of loans, and other pertinent factors.

      NON-INTEREST INCOME - For the six-month period ended June 30, 1998, the
      Company recorded approximately $226,000 in loan and deposit service
      charges and fees. As the Company did not have 

                                      F-15
<PAGE>

      any loans, or customer deposits during the six months ended June 30,
      1997, no such service fees were recorded. No amount of non-interest
      income was recorded for the six months ended June 30, 1997.

      NON-INTEREST EXPENSES - Non-interest expenses decreased approximately
      $500,000 from $3.1 million to $2.6 million for the six months ended June
      30, 1998 as compared with the six months ended June 30, 1997. The primary
      component of the decrease during the six months ended June 30, 1998 was a
      $1.4 million decrease in the amortization of service contract with
      affiliate as the service contract was fully amortized during the second
      quarter of 1997. The decrease was offset by a $336,000 increase in
      marketing expense related to the Company's marketing campaign initiated in
      the fourth quarter of 1997, an increase of $511,000 in outside service
      fees related to the operation of the bank, and an increase of $133,000 in
      other miscellaneous expenses.

      STOCK OPTIONS.

      The Company has a 1996 Stock Incentive Plan (the "Plan"), which provides
      that key employees, officers, directors, and consultants of the Company
      may be granted nonqualified and incentive stock options to purchase shares
      of common stock of the Company, derivative securities related to the value
      of the common stock, or cash awards. Previously, the Plan limited the
      total number of shares that could be awarded to 397,500. Effective upon
      shareholder approval on April 23, 1998, the Plan was amended to increase
      the total number of shares reserved for the Plan to 600,000. These shares
      have been reserved for the Plan.

      During the six-month period ended June 30, 1998, the Company awarded
      23,000 incentive stock options at an exercise price of $11.25 per share on
      January 12, 1998, 3,000 incentive stock options at an exercise price of
      $16.75 per share on February 12, 1998, and 10,000 incentive stock options
      at an exercise price of $24.38 per share on June 18, 1998. Grant prices
      were determined to equal fair market value of the stock at the grant date.
      Also, during the six-month period ended June 30, 1998, 400 stock options
      were exercised at a price of $3.62. Subsequent to June 30, 1998, the
      Company granted 54,000 options at an exercise price of $27.50, which were
      determined to equal fair market value; 1,675 options were exercised at
      $3.62 per share; and 8,281 options were terminated.

      NEW ACCOUNTING STANDARDS.

      In June 1997, Statement of Financial Accounting Standards No. 131,
      "Disclosures about Segments of an Enterprise and Related Information"
      ("SFAS 131") was issued. SFAS 131 establishes annual and interim reporting
      standards for an enterprise's business segments and related disclosures
      about its products, services, geographic areas and major customers.
      Adoption of this statement will not impact the Company's consolidated
      financial position, results of operations or cash flows. The Company will
      adopt this Statement in its annual financial statements for the year
      ending December 31, 1998.

      In February 1998, Statement of Financial Accounting Standards No. 132,
      "Employers' Disclosures about Pensions and Other Post-retirement Benefits"
      ("SFAS 132") was issued. SFAS 132 standardizes the disclosure requirements
      for pensions and other post-retirement benefits to the extent practicable,
      requires additional information on changes in the benefit obligations and
      fair values of plan assets that will facilitate financial analysis, and
      eliminates certain disclosures that are no longer useful. SFAS 132 is
      effective for fiscal years beginning after December 15, 1997. The
      Statement is not expected to have an effect on the Company's financial
      statements.

                                      F-16
<PAGE>

      In June 1998, Statement of Financial Accounting Standards No. 133,
      "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
      133") was issued. SFAS 133 establishes standards for derivative
      instruments and hedging activities and requires that an entity recognize
      all derivatives as either assets or liabilities in the statement of
      financial position and measure those instruments at fair value. This
      statement is effective for all fiscal quarters of fiscal years beginning
      after June 15, 1999. The Statement is not expected to have an effect on
      the Company's financial statements.

      YEAR 2000

      The Company is working to resolve the potential impact of the Year 2000 on
      the ability of the computerized information systems it uses to accurately
      process information that may be date sensitive. Any of the programs it
      uses that recognize a date using "00" as the year 1900 rather than the
      year 2000 could result in errors or system failures that could ultimately
      cause AIB or its service providers to become unable to process customer
      transactions and could thereby require AIB to cease operations pending
      resolution of the problem. Such an eventuality would materially adversely
      affect the Company's business, financial condition and results of
      operations. Accordingly, management is devoting significant attention to
      identifying Year 2000 issues and testing its in-house and external systems
      for Year 2000 compliance. To date, the Company has incurred Year 2000
      remediation costs of approximately $7,000 and has budgeted approximately
      $25,000 for total remediation costs. The Company has been utilizing
      working capital to fund its Year 2000 compliance program and anticipates
      that it will continue to do so.

      The Company began testing its in-house information technology ("IT")
      systems during the second quarter of 1998 and is continuing such testing
      during the third and fourth quarters of 1998, with an OTS- mandated
      completion date of December 31, 1998. Management has not identified, and
      does not anticipate, any significant risks or issues relating to non-IT
      systems.

      The Company is also assessing the Year 2000 compliance of its outside
      vendors and service providers, who include but are not limited to BISYS
      and CheckFree. Because the Company primarily contracts with outside
      vendors for its computer application programs, management believes the
      Company's principal risk relating to Year 2000 issues lies in the
      potential inability of those vendors to process date sensitive information
      involving the Year 2000. The Company expects to begin testing the systems
      provided by these vendors for Year 2000 compliance beginning in the fourth
      quarter of 1998, with an OTS-mandated completion date of June 30, 1999. In
      addition, management is contacting each of the Company's vendors to obtain
      a commitment that they are or will timely be Year 2000 complaint. If such
      assurances are not forthcoming, or if management believes for any reason
      that any of its vendors will not be Year 2000 compliant when required,
      management plans to contract with other vendors that would be able to
      provide similar services at similar costs. Although no assurances can be
      given, management believes that such vendors are and will be available.
      Alternatively, the Company could bring the outsourced services in-house by
      licensing the applicable software and converting it to run on the
      Company's platforms or form a correspondent relationship with an
      unaffiliated Year 2000-compliant bank that could service AIB's customers
      and accounts until the Company could provide such services on a Year
      2000-compliant basis. Management believes that the Company could implement
      any of the forgoing contingency plans without a material interruption in
      its business and without a material adverse effect on the Company's
      results of operations.


                                      F-17