SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934

For the quarterly period ended July 31, 1999 or

[  ]  Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from  __________ to __________

Commission File No.   000-19372

                          CATHERINES STORES CORPORATION
             (exact name of registrant as specified in its charter)

          Tennessee                                          62-1350411
(State or other  jurisdiction of              (IRS Employer Identification No.)
  incorporation or organization)

                  3742 Lamar Avenue, Memphis, Tennessee, 38118
                    (Address of principal executive offices)

Registrant's telephone number, including area code (901) 363-3900

     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).

                                    Yes X No

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock as of the latest practicable date.

     As of September 1, 1999, there were 6,776,200  shares of Catherines  Stores
Corporation common stock outstanding.



<PAGE>



                          CATHERINES STORES CORPORATION

                                    FORM 10-Q

                                  July 31, 1999

                                Table of Contents

         PART 1 -          FINANCIAL INFORMATION

                           Consolidated Statements of Income

                           Consolidated Balance Sheets

                           Consolidated Statements of Cash Flows

                           Notes to Consolidated Financial Statements

                           Management's Discussion and Analysis of Financial
                           Condition and Results of Operations


         PART 2 -          OTHER INFORMATION



<PAGE>

PART 1 - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CATHERINES STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                    Thirteen weeks ended                     Twenty-six weeks ended
                                    July 31,         August 1,         July 31,                  August 1,
                                    1999             1998              1999                      1998
                                    -------          ---------         --------                  ---------
<S>                                 <C>              <C>               <C>                       <C>
Net sales                           $78,333,536      $74,826,611       $158,633,264              $151,279,005

Cost of sales,
including buying and
occupancy costs                     49,556,525        49,208,328        102,835,948               100,317,466
                                    ----------        ----------        -----------               -----------

Gross margin                        28,777,011        25,618,283         55,797,316                50,961,539

Selling, general and
administrative expenses             20,239,227        19,314,462         40,949,568                39,745,501

Amortization of
intangible assets                      249,523           275,072            502,714                   529,380
                                       -------           -------            -------                   -------

Operating income before
write-down of store
assets and store
closing costs                        8,288,261         6,028,749         14,345,034                10,686,658

Write-down of store
assets and store
closing costs                           22,659            11,099            237,132                   199,755
                                        ------            ------            -------                   -------

Operating income                     8,265,602         6,017,650         14,107,902                10,486,903

Interest and other, net                 91,552           154,139            194,923                   433,787
                                        ------           -------            -------                   -------

Income before
income taxes                         8,174,050         5,863,511         13,912,979                10,053,116

Provision for
income taxes                         3,273,000         2,405,000          5,565,000                 4,123,000
                                     ---------         ---------          ---------                 ---------

Net income                          $4,901,050        $3,458,511         $8,347,979                $5,930,116
                                    ==========        ==========         ==========                ==========


Net income per common
share                               $     0.71        $     0.48         $     1.19                 $    0.82
                                         =====             =====              =====                     =====

Net income per common share,
assuming dilution                   $     0.68         $    0.47          $    1.16                  $   0.80
                                         =====             =====              =====                     =====

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>



CATHERINES STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                                                     July 31,        January 30,
                                                      1999              1999
                                                     -------          ---------
ASSETS
Current Assets:
Cash and cash equivalents                         $  15,134,573    $  11,561,223
Receivables                                           2,504,309        2,457,333
Merchandise inventory                                49,357,364       50,355,267
Prepaid expenses and other                            4,164,501        3,398,562
Deferred income taxes                                 4,203,000        4,203,000
                                                  -------------    -------------
Total current assets                                 75,363,747       71,975,385
                                                  -------------    -------------

Property and Equipment, at cost:
Land                                                    500,000          500,000
Buildings and leasehold improvements                 27,801,210       25,751,524
Fixtures and equipment                               34,980,774       31,910,633
Equipment under capital leases                       15,184,895       13,588,016
Improvements in process                                 346,439        2,644,496
                                                  -------------    -------------
                                                     78,813,318       74,394,669
Less accumulated depreciation
 and amortization                                   (43,125,219)    (39,410,261)
                                                  -------------    -------------
                                                     35,688,099       34,984,408
                                                  -------------    -------------
Other Assets and Deferred Charges,
 less accumulated amortization of
 $2,159,279 and $1,997,082                            1,977,995        2,290,022
Goodwill, less accumulated amortization
 of  $5,837,114 and $5,534,646                       21,397,405       21,871,164
                                                  -------------    -------------
                                                  $ 134,427,246    $ 131,120,979
                                                  =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable                                  $  21,862,409    $  22,310,110
Accrued expenses                                     19,577,140       19,347,208
Current maturities of long-term bank
 and other debt                                       1,853,413        1,816,119
                                                  -------------    -------------
Total current liabilities                            43,292,962       43,473,437
                                                  -------------    -------------

Long-Term Bank and Other Debt,
 less current maturities                              9,518,758        9,517,067
Deferred Income Taxes                                   378,000          378,000
Stockholders' Equity:
Preferred stock, $.01 par value, 1,000,000
 shares authorized, none issued and outstanding             --               --
 Common stock, $.01 par value, 50,000,000 shares
 authorized, 6,806,262 and 7,279,949 shares
 issued and outstanding                                  68,063           72,800
Additional paid-in capital                           41,666,996       46,525,187
Retained earnings                                    39,502,467       31,154,488
                                                  -------------    -------------
Total stockholders' equity                           81,237,526       77,752,475
                                                  -------------    -------------
                                                  $ 134,427,246    $ 131,120,979
                                                  =============    =============

The  accompanying  notes  are an  integral  part of these  consolidated  balance
sheets.


<PAGE>



CATHERINES STORES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                Twenty-six weeks ended
                                           July 31, 1999     August 1, 1998
                                           -------------     --------------

Cash Flows from Operating Activities:
Net income                                 $  8,347,979    $  5,930,116
                                           ------------    ------------
Adjustments to reconcile net income to
 net cash provided by
 operating activities--
Depreciation and amortization                 4,442,897       4,514,293
Write-down of closed store assets               206,904            --
Change in reserve for store
 closing costs                                 (364,120)         29,869
Net change in current assets
 and liabilities                                171,492         653,893
Change in other noncash reserves                159,847         545,762
Change in other assets                          149,831         (71,147)
                                           ------------    ------------

Total adjustments                             4,766,851       5,672,670
                                           ------------    ------------

Net cash provided by
 operating activities                        13,114,830      11,602,786
                                           ------------    ------------

Cash Flows from Investing Activities:
Capital expenditures                         (3,644,457)     (2,366,131)
                                           ------------    ------------

Net cash used in investing activities        (3,644,457)     (2,366,131)
                                           ------------    ------------

Cash Flows from Financing Activities:
Sales of common stock                           423,723          99,139
Repurchases of common stock                  (5,286,651)           --
Proceeds from long-term bank
 and other debt                                    --         6,919,000
Principal payments of long-term bank
 and other debt                              (1,034,095)     (9,154,392)
                                           ------------    ------------

Net cash used in financing activities        (5,897,023)     (2,136,253)
                                           ------------    ------------

Net Increase in Cash and
 Cash Equivalents                             3,573,350       7,100,402
Cash and Cash Equivalents,
 beginning of period                         11,561,223       3,089,290
                                           ------------     -----------

Cash and Cash Equivalents, end of period   $ 15,134,573    $ 10,189,692
                                           ============    ============

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.




<PAGE>



                 CATHERINES STORES CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) General

     In the  opinion of  management,  the  accompanying  unaudited  consolidated
financial  statements  contain all adjustments  (consisting of normal  recurring
adjustments)  which  management   considers  necessary  to  present  fairly  the
consolidated  financial position of Catherines Stores Corporation ("Stores") and
its wholly owned  subsidiaries  as of July 31, 1999,  and January 30, 1999,  the
consolidated  results of their  operations for the thirteen and twenty-six weeks
ended July 31, 1999, and August 1, 1998, and their cash flows for the twenty-six
weeks ended July 31, 1999, and August 1, 1998.  Stores and its  subsidiaries are
collectively  referred to as the  "Company".  The results of operations  for the
thirteen and  twenty-six  week periods may not be  indicative of the results for
the entire year.

     These statements  should be read in conjunction with the Company's  audited
financial statements and related notes which have been incorporated by reference
in the  Company's  Form 10-K for the year ended  January 30, 1999.  Accordingly,
significant  accounting  policies and other  disclosures  necessary for complete
financial statements in conformity with generally accepted accounting principles
have been  omitted  since  such items are  reflected  in the  Company's  audited
financial statements and related notes thereto.

     Certain  prior  year  balances  have been  reclassified  to  conform to the
current year presentation.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted accounting principles requires management to make certain 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.

     (2)       Accounts Receivable

     The Company sells accounts receivable generated from its proprietary credit
card to a third-party  provider,  without  recourse.  Under the  agreement,  the
Company sells its  receivables  from in-house  credit sales on a daily basis. In
April 1999,  the agreement  was extended to January  2005. In addition,  certain
terms of the agreement were favorably  amended.  Also, as an incentive to extend
the agreement,  the  third-party  provider agreed to pay the Company an up-front
cash payment.  This amount will be amortized into income evenly over the life of
the new agreement.


 (3) Statements of Cash Flows

     The changes in current assets and  liabilities  reflected in the statements
of cash flows were as follows:


<PAGE>




                                                       Twenty-six weeks ended
                                                       -----------------------
                                                    July 31,          August 1,
                                                     1999               1998
                                                    --------          ---------
Increase (decrease) in cash and
 cash equivalents-
Receivables                                      $   (60,822)       $    55,130
Merchandise inventory                                833,902          1,987,376
Prepaid expenses and other                          (765,939)           177,728
Accounts payable                                    (447,701)        (4,507,652)
Accrued expenses                                     612,052          2,941,311
                                                 -----------        -----------
Total                                            $   171,492        $   653,893
                                                 ===========        ===========

     Interest paid during the  twenty-six  weeks ended July 31, 1999, and August
1, 1998, was approximately $445,000 and $527,000, respectively. Interest expense
is net of interest  income of  approximately  $275,000 and $77,000 for the first
six months of fiscal 1999 and 1998,  respectively.  Income taxes paid during the
twenty-six  weeks ended July 31, 1999,  and August 1, 1998,  were  approximately
$5,228,000 and $2,568,000, respectively.

 (4) Accrued Expenses

         Accrued expenses consisted of the following:

                                                      July 31,       January 30,
                                                       1999              1999
                                                      --------       ----------

Payroll and related benefits                       $ 3,964,482       $ 5,012,439
Taxes other than income taxes                        1,522,863         1,761,964
Rent and other related costs                         2,453,803         2,427,805
Deferred revenues                                    3,713,241         1,836,298
Reserve for customer awards                          1,203,975         1,513,900
Reserve for store closing costs                        746,225         1,110,345
Income taxes                                         1,308,881         1,000,333
Other                                                4,663,670         4,684,124
                                                   -----------       -----------
Total                                              $19,577,140       $19,347,208
                                                   ===========       ===========

(5) Long-Term Bank and Other Debt

         Long-term bank and other debt consisted of the following:

                                                   July 31,         January 30,
                                                     1999               1999
                                                   --------         ----------
Due to banks:
Mortgage note                                    $  6,737,342      $  6,784,599
Working capital notes                                    --                --
Other:
Capital lease and other obligations                 4,634,829         4,548,587
                                                   ----------        -----------
                                                   11,372,171        11,333,186
Less current maturities                            (1,853,413)       (1,816,119)
                                                 ------------      ------------
Total                                            $  9,518,758      $  9,517,067
                                                 ============      ============

     The mortgage financing  agreement  provides a $6,919,000  mortgage facility
with a seven-year term and a 20-year  amortization  period. The interest rate on
the mortgage  note is fixed at 7.5%.  The working  capital  facility has a total
availability  of $28 million,  including the swing line of credit.  The interest
rate fluctuates  based on the Company's debt coverage  ratio.  The interest rate
can range from LIBOR plus 1 1/4 to LIBOR plus 2 1/4, or the agent bank's prime

<PAGE>
rate,  at the  Company's  option.  Based on the  formula in the  agreement,  the
Company's current borrowing cost would be LIBOR plus 1 1/4%, or the agent bank's
prime rate, at the Company's  option.  Amounts available under this facility are
based on the Company's eligible receivables and inventories.


     At July 31, 1999, the Company had approximately $21,000,000 available under
its combined  working  capital and swing line facility.  Outstanding  letters of
credit were  approximately  $7,000,000 at July 31, 1999.  During the  twenty-six
weeks ended July 31, 1999, the Company entered into capital lease agreements for
the  purpose  of  obtaining  computer  equipment,  at a  cost  of  approximately
$1,100,000.

 (6) Leases

     During the  twenty-six  weeks ended July 31,  1999,  the  Company  entered,
amended or extended leases for 51 stores,  which increased future minimum rental
payments by  approximately  $14,187,000  since  January 30,  1999.  Total future
minimum rental payments under all noncancelable operating leases with initial or
remaining lease terms of one year or more are approximately $75,025,000.

     Total rent expense for all operating leases was as follows:

                                                       Twenty-six weeks ended
                                                       ----------------------
                                                 July 31,             August 1,
                                                   1999                 1998
                                                 --------             --------

Minimum rentals                                 $10,524,924          $10,421,365
Contingent rentals                                  220,676              153,285
                                                -----------          -----------
Total                                           $10,745,600          $10,574,650
                                                ===========          ===========

(7) Net Income Per Common Share

     The reconciliation of net income per common share and net income per common
share, assuming dilution, is as follows:

<TABLE>
<CAPTION>
                                                                                                Net Income
                                                     Net Income                                    Per
                                                        Per                   Stock            Common Share,
                                                    Common Share             Options          Assuming Dilution
                                                    -------------            --------         ------------------
<S>                                                  <C>                     <C>                <C>
Twenty-six weeks ended July 31, 1999:
Net income                                           $8,347,979                  --              $8,347,979
Weighted average shares                               7,010,438               196,316             7,206,754
                                                     ----------                                  ----------
Per share amount                                     $     1.19                                  $     1.16
                                                     ==========                                  ==========

Twenty-six weeks ended August 1, 1998:
Net income                                           $5,930,116                  --              $5,930,116
Weighted average shares                               7,237,835               143,490             7,381,325
                                                     ----------                                  ----------
Per share amount                                     $     0.82                                  $     0.80
                                                     ==========                                  ==========

Thirteen weeks ended July 31, 1999:
Net income                                           $4,901,050                  --              $4,901,050
Weighted average shares                               6,914,409               258,167             7,172,576
                                                     ----------                                  ----------
Per share amount                                     $     0.71                                  $     0.68
                                                     ==========                                  ==========

Thirteen weeks ended August 1, 1998:
Net income                                           $3,458,511                  --              $3,458,511
Weighted average shares                               7,242,973               161,731             7,404,704
                                                     ----------                                  ----------
Per share amount                                     $     0.48                                  $     0.47

                                                     ==========                                  ==========
</TABLE>

<PAGE>

(8) Store Closing Costs

     In late fiscal 1997, the Company adopted a plan to close  approximately  30
underperforming  stores upon lease termination or settlement with the landlords.
During fiscal 1998, 14 unprofitable  stores were closed,  including seven during
the  first  half.  In  addition,  based on  financial  performance  evaluations,
management  added 10 stores to the store closing plan and removed 11 stores from
the store closing plan,  bringing the number of stores in the store closing plan
to 15 at January 30, 1999. The Company closed six unprofitable stores during the
first half of fiscal 1999.

     The Company has scheduled  three  additional  stores for closing during the
remainder of fiscal 1999. Terminations of the remaining stores' leases are still
being  negotiated  with the  landlords.  Write-down  of store  assets  and store
closing costs were approximately  $237,000 and $200,000 during the first half of
1999 and 1998, respectively.

(9)  Stockholders' Equity

The change in stockholders' equity was as follows:

<TABLE>
<CAPTION>
                                                              Additional
                                            Common            Paid-In           Retained
                                            Stock             Capital           Earnings         Total
                                            ------            ----------        --------         ------

<S>                                       <C>              <C>               <C>              <C>
Balance at January 30, 1999                $72,800          $46,525,187       $31,154,488      $77,752,475
Net proceeds from the sale
 of 57,729 common shares                       577              423,146           ---              423,723
Repurchase of 531,416
 common shares                              (5,314)          (5,281,337)          ---           (5,286,651)
Net income                                     ---               ---            8,347,979        8,347,979
                                            ------            ---------         ---------        ---------
Balance July 31, 1999                      $68,063          $41,666,996       $39,502,467      $81,237,526
                                            ======          ===========       ===========      ===========
</TABLE>

     The Company  began a stock  repurchase  initiative  in late  January  1999.
During the six months ended July 31, 1999, the Company  repurchased  and retired
531,416  shares of its  outstanding  common  stock for  approximately  $9.95 per
share.  The Company has repurchased a total of 616,416 shares since inception of
this initiative.  Additionally,  48,126 common stock options have been exercised
during  the  first  half of 1999 and 9,603  common  shares  have been  purchased
through the employee stock purchase plan.



<PAGE>


Item 2.


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

Forward-Looking Statements

     This outlook contains forward-looking  statements within the meaning of the
Private  Securities   Litigation  Reform  Act  of  1995.  Such   forward-looking
statements  are based on  current  expectations  that are  subject  to known and
unknown risks,  uncertainties  and other factors that could cause actual results
to differ materially from those contemplated by the forward-looking  statements.
Such  factors  include,  but  are not  limited  to,  the  following:  Year  2000
information systems issues; general economic conditions; competitive factors and
pricing  pressures;  the Company's  ability to predict fashion trends;  consumer
apparel buying patterns;  adverse weather  conditions and inventory risks due to
shifts in market  demand.  The Company does not undertake to publicly  update or
revise the forward-looking  statements even if experience or future changes make
it clear  that  projected  results  expressed  or  implied  therein  will not be
realized.

Overview

     The  Company's net income for the thirteen week period ended July 31, 1999,
was  $4,901,000  compared to $3,459,000 in the thirteen week period ended August
1, 1998.  Operating  income  margins  were 10.6% for the second  quarter of 1999
compared to 8.0% in 1998.

     Net  income  for the  twenty-six  week  period  ended  July 31,  1999,  was
$8,348,000  compared to $5,930,000 in the twenty-six week period ended August 1,
1998. Operating income for the first half of 1999 increased 34.5% over the first
half of 1998.  Operating  income  margins  were 8.9% for the first  half of 1999
compared to 6.9% for the first half of 1998.

     The  improvement  in  operating  income  margin  over  the  prior  year  is
attributable to improved sales and  merchandise  margins,  leveraged  buying and
occupancy  costs,  savings  generated  from the  amendment  and extension of the
contract  with the  Company's  third party  credit  processor  and a decrease in
consulting  fees,  which were incurred in 1998 to  re-engineer  the  merchandise
planning and distribution functions.

Liquidity and Capital Resources

     The  Company's  cash  provided by  operations  was  $13,115,000  during the
twenty-six weeks ended July 31, 1999, compared to cash provided by operations of
$11,603,000  during the  twenty-six  weeks ended August 1, 1998. The increase in
cash flow provided by operations is primarily attributable to an increase in net
income. The Company's working capital was $32,100,000 at July 31, 1999, compared
to $28,500,000 at January 30, 1999. The Company's internally generated cash flow
financed  its  operating  requirements,  capital  expenditures  and debt service
during the twenty-six week period ended July 31, 1999.



<PAGE>



     The Company  maintains  a merchant  services  agreement  with a third party
credit  processor.  This  agreement  provides  for the Company to sell,  without
recourse,  accounts  receivable from private label credit card sales.  The third
party  provides all  authorization,  billing and  collection  services for these
accounts.  The  agreement  was amended and extended  during the first quarter of
1999, allowing the Company to obtain more favorable terms. Also, as an incentive
to extend the agreement,  the third-party  provider agreed to pay the Company an
up-front cash payment. This amount will be amortized evenly into income over the
life of the new agreement. The agreement expires in January 2005.

Capital Expenditures

     The  Company  incurred  approximately  $3,200,000  to open new  stores  and
relocate,  remodel or expand  existing stores during the first half of 1999. The
Company  estimates that fiscal 1999 capital  expenditures  will be approximately
$8,000,000 to $9,000,000 of which an estimated  $7,200,000  will be used for the
opening of 12 new  locations  and the  remodeling,  relocation  and expansion of
approximately 44 other locations.  The remainder of capital  expenditures are to
upgrade existing computer  systems,  add additional  software  technology and to
maintain existing facilities.

Banking Arrangements

     The mortgage financing  agreement  provides a $6,919,000  mortgage facility
with a seven-year term and a 20-year  amortization  period. The interest rate on
the mortgage  note is fixed at 7.5%.  The existing  bank credit  facility has an
availability  of $28,000,000,  including the swing line of credit.  The interest
rate fluctuates  based on the Company's debt coverage  ratio.  The interest rate
can range from LIBOR plus 1 1/4 to LIBOR plus 2 1/4, or the agent  bank's  prime
rate,  at the  Company's  option.  Based on the  formula in the  agreement,  the
Company's current borrowing cost would be LIBOR plus 1 1/4%, or the agent bank's
prime rate, at the Company's option. The agreement expires June 30, 2001.

     At July 31, 1999, the Company had approximately $21,000,000 available under
its  combined  working  capital  and  swing  line  facility  and   approximately
$7,000,000 in outstanding letters of credit.

     The Company believes that its internally generated cash flow, together with
borrowings  under the bank  credit  agreement,  will be  adequate to finance the
Company's operating  requirements,  debt repayments and capital needs during the
foreseeable future.

Results of Operations

Thirteen  Weeks Ended July 31, 1999, Compared to Thirteen  Weeks Ended August 1,
1998

     Net sales in the second quarter of 1999 increased 4.7% to $78,334,000  from
$74,827,000 in the second quarter of 1998.  Comparable  stores' sales  increased
5.0%,  primarily due to an increase in the number of  saleschecks  generated and
the average  number of units per  salescheck.  The average  unit price  declined
slightly. During the second quarter, five stores were closed and two stores were
opened,  reducing the number of stores  operated by the Company on July 31, 1999
to 433. At August 1, 1998, the Company operated 436 stores.


<PAGE>


     Gross margin,  after buying and occupancy costs,  increased as a percentage
of sales to 36.7% in the second quarter of 1999 from 34.2% in the second quarter
of 1998.  The increase is  attributable  to an increase in  merchandise  margin,
which  increased as a percentage of sales by 176 basis  points.  The increase in
merchandise margin was driven primarily by a decrease in merchandise  markdowns.
Additionally,  the Company  leveraged its buying and occupancy costs as a result
of  increased  sales.  Buying  and  occupancy  costs  as a  percentage  of sales
decreased by 74 basis points.

     Selling,  general and  administrative  expenses increased to $20,239,000 in
the second  quarter of 1999  compared to  $19,314,000  in the second  quarter of
1998. As a percentage of sales, the selling, general and administrative expenses
remained  flat at 25.8%.  The expense  increase  is  primarily  attributable  to
increased  management  bonuses,  software  modifications  and freight to stores,
offset by the income generated from the amended third-party credit agreement.

     In late fiscal 1997, the Company adopted a plan to close  approximately  30
underperforming  stores upon lease termination or settlement with the landlords.
During fiscal 1998, 14 unprofitable  stores were closed,  including seven during
the  first  half.  In  addition,  based on  financial  performance  evaluations,
management  added 10 stores to the store closing plan and removed 11 stores from
the store closing plan,  bringing the number of stores in the store closing plan
to 15 at January 30, 1999.

     The Company  closed five  unprofitable  stores during the second quarter of
1999, bringing the total number of stores closed in 1999 to six. The Company has
scheduled  three  additional  stores for closing  during the remainder of fiscal
1999.  Terminations of the remaining  stores' leases are still being  negotiated
with the  landlords.  Write-down  of store assets and store  closing  costs were
approximately  $23,000 and $11,000 during the second  quarters of 1999 and 1998,
respectively.

     Interest  expense was  approximately  $92,000 in the second quarter of 1999
compared to $154,000 in the second  quarter of 1998.  The  decrease is primarily
attributable to an increase in interest income.

     Income taxes were  provided at  effective  rates of 40.0% and 41.0% for the
thirteen  weeks  ended July 31,  1999,  and August 1,  1998,  respectively.  The
statutory rate is affected primarily by non-deductible goodwill amortization and
state income taxes.

     Net income  for the  second  quarter  of 1999 was  $4,901,000  compared  to
$3,459,000 for the second quarter of 1998. Net income per common share, assuming
dilution,  ("Net  income  per common  share")  was $0.68 per share in the second
quarter of 1999 and $0.47 per share in the second quarter of 1998.


<PAGE>

Twenty-Six Weeks Ended July 31, 1999, Compared to Twenty-Six Weeks Ended August
1, 1998


     Net sales in the first half of 1999  increased  4.9% to  $158,633,000  from
$151,279,000 in the first half of 1998. Comparable stores' sales increased 5.5%,
primarily  due to an increase  in the number of  saleschecks  generated  and the
average  number  of units  per  salescheck.  The  average  unit  price  declined
slightly.  During the first six months of 1999, six stores were closed and seven
stores were opened bringing the number of stores operated by the Company on July
31, 1999 to 433. At August 1, 1998, the Company operated 436 stores.

     Gross margin,  after buying and occupancy costs,  increased as a percentage
of sales to 35.2% in the first  half of 1999 from  33.7% in the first six months
of 1998.  The increase is  attributable  to an increase in  merchandise  margin,
which  increased as a percentage of sales by 101 basis  points.  The increase in
merchandise margin was driven primarily by a decrease in merchandise  markdowns.
Additionally,  the Company  leveraged its buying and occupancy costs as a result
of  increased  sales.  Buying  and  occupancy  costs  as a  percentage  of sales
decreased by 48 basis points.

     Selling,  general and  administrative  expenses increased to $40,950,000 in
the first six months of 1999 compared to  $39,746,000 in the first six months of
1998. As a percentage of sales, the selling, general and administrative expenses
decreased  to 25.8%  from  26.3% in the first six  months of 1998.  The  expense
increase is primarily  attributable to increased management bonuses and employee
benefits  earned based on  increased  profits and  increased  freight to stores,
offset  by the  income  generated  from the  third-party  credit  agreement  and
consultant  services  incurred to  re-engineer  the  merchandise  assortment and
planning and distribution functions in 1998.

     In late fiscal 1997, the Company adopted a plan to close  approximately  30
underperforming  stores upon lease termination or settlement with the landlords.
During fiscal 1998, 14 unprofitable  stores were closed,  including seven during
the  first  half.  In  addition,  based on  financial  performance  evaluations,
management  added 10 stores to the store closing plan and removed 11 stores from
the store closing plan,  bringing the number of stores in the store closing plan
to 15 at January 30, 1999.

     The Company closed six  unprofitable  stores during the first half of 1999.
The  Company  has  scheduled  three  additional  stores for  closing  during the
remainder of fiscal 1999. Terminations of the remaining stores' leases are still
being  negotiated  with the  landlords.  Write-down  of store  assets  and store
closing  costs were  approximately  $237,000 and  $200,000  during the first six
months of 1999 and 1998, respectively.

     Interest expense was approximately $195,000 in the first six months of 1999
compared to $434,000 in the first six months of 1998.  The decrease is primarily
attributable to an increase in interest income.

     Income taxes were  provided at an effective  rate of 40.0% in the first six
months of 1999 and 41% in 1998.  The  statutory  rate is affected  primarily  by
non-deductible goodwill amortization and state income taxes.

     Net  income  for the first six months of 1999 was  $8,348,000  compared  to
$5,930,000  for the first six months of 1998.  Net  income per common  share was
$1.16 compared to $0.80 per share reported in the first six months of 1998.



<PAGE>



Year 2000 Compliance

     The Company has developed a plan to ensure its systems are  compliant  with
the  requirements to process  transactions in the year 2000. The majority of the
Company's  information  systems are provided and serviced by outside vendors who
are in the  process of  completing  all  necessary  updates to ensure  they will
continue to be effective in the year 2000.  Management  currently  believes that
any other minor technological  equipment,  if not year 2000 compliant,  will not
have a material impact on the Company's business operations.

     The   Company  has   requested,   from  its  key   third-party   providers,
certifications of year 2000 compliance.  The Company is developing plans to test
the systems where the  third-party  responded as being compliant by December 31,
1999.  Contingency plans to address unexpected year 2000 scenarios are currently
being  developed  to address  the  material  risks and  uncertainties  for those
third-parties  who either did not respond or who responded that they will not be
compliant.  The Company  expects the majority of its  information  systems to be
year 2000  compliant  by 2000;  however,  no  assurances  can be given  that the
efforts by the Company and its  third-parties  will be  successful.  The Company
does not  currently  estimate  that the cost to remedy  year  2000  noncompliant
technologies will be significant.












<PAGE>


PART 2 - OTHER INFORMATION

Item 1.   Legal Proceedings
            None

Item 2.   Changes in Securities and Use of Proceeds
            Not applicable

Item 3.   Defaults by the Company on its Senior Securities
            Not applicable

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

     See Quarterly Report on Form 10-Q for the period ended May 1, 1999, for the
results of the Company's Annual Meeting of Stockholders held on June 2, 1999.

Item 5.   Other Information
            Not applicable

Item 6.   Exhibits and Reports on Form 8-K
           (A) Exhibits:
              1.10.38 Second Amendment to Amended and Restated Credit Agreement
              2.27.1 Financial Data Schedule (for EDGAR filing only)
           (B) Reports on Form 8-K:
                None

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

                                                    SIGNATURES


                     September 1, 1999
                           (Date)           /s/ David C. Forell
                                            -------------------------
                                            David C. Forell,
                                            Executive Vice President,
                                            Chief Financial Officer



<PAGE>

EXHIBIT 10.38

                                SECOND AMENDMENT
                                       TO
                      AMENDED AND RESTATED CREDIT AGREEMENT



     THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Second
Amendment") effective as of June 3, 1999, is made by and among CATHERINES, INC.,
a  Delaware  corporation  (the  "Company"),  CATHERINES  STORES  CORPORATION,  a
Tennessee  corporation  (the  "Parent"),  CATHERINES  OF  PENNSYLVANIA,  INC., a
Tennessee corporation ("PA Co."),  CATHERINES OF CALIFORNIA,  INC., a California
corporation  ("RT  Co."),   CATHERINES  PARTNERS,   L.P.,  a  Tennessee  limited
partnership  ("Intex"),  and FIRST AMERICAN  NATIONAL  BANK, a national  banking
association  ("FANB"),  individually and in its capacity as agent for the Banks,
defined  below  (together  with  any of its  successors  in such  capacity,  the
"Agent"),  HIBERNIA NATIONAL BANK, a national banking  association  ("Hibernia")
and BANK ONE, N.A., a national banking association ("Bank One");  (together with
their successors, transferees and assigns from time to time parties hereto shall
be  referred to  collectively  as the  "Banks"  and each  individually  shall be
referred to as a "Bank").

                              W I T N E S S E T H:

     A. The Company,  Catherines Stores Corporation, a Delaware corporation (the
"Predecessor   Parent"),   Virginia  Specialty  Stores,   Inc.  ("VSS"),   Added
Dimensions,  Inc. ("Added  Dimensions"),  Linda Karan-Large Size Factory Outlet,
Inc. ("Linda Karan"),  The Answer-The Elegant Large Size Discounter,  Inc. ("The
Answer") (Added Dimensions,  Linda Karan and The Answer collectively called "VSS
Subsidiaries")  and FANB entered into a Credit  Agreement  dated as of March 31,
1994 (the "Original  Credit  Agreement")  pursuant to which FANB provided a term
loan and a working capital loan facility to the Company.  In connection with the
execution of the Original Credit Agreement the Company,  the Predecessor Parent,
VSS  and  the  VSS  Subsidiaries   executed  a  number  of  ancillary  documents
(collectively  the  "Original  Loan  Documents")  including  without  limitation
various security  agreements,  pledge agreements and mortgages in favor of Agent
for the benefit of the Banks (collectively the "Original Security Documents").

     B.  Hibernia  and The Hongkong and  Shanghai  Banking  Corporation  Limited
("Hongkong") became parties to the Original Credit Agreement by the execution of
certain Commitment Transfer Supplements dated as of March 31, 1994.

     C. Subsequent to the execution of the Original Credit Agreement, PA Co., RT
Co., Intex and CSC Sub, Inc., a Tennessee  corporation  ("CSC Sub") were formed,
the VSS  Subsidiaries  merged with VSS and certain assets were  transferred from
the Company to PA Co., RT Co., Intex and CSC Sub. The corporate  restructure and
the transfer of assets were  contemplated  by the terms of the  Original  Credit
Agreement  and were subject to the  execution by the  Company,  the  Predecessor
Parent,  VSS, PA Co., RT Co.,  Intex and CSC Sub of a First  Amendment to Credit
Agreement (the "First  Amendment to Credit  Agreement")  dated as of January 29,
1995,  whereby PA Co.,  RT Co.,  Intex and CSC Sub  became  Credit  Parties  and
certain ancillary documents were executed in connection therewith (collectively,
the "First Amendment Loan Documents") including but not limited to security


<PAGE>



agreements  and  pledge  agreements  in favor of Agent for the  benefit of FANB,
Hibernia and Hongkong (collectively, the "First Amendment Security Documents").

     D. Subsequent to the execution of the First Amendment to Credit  Agreement,
VSS merged  into the Company and the Parent  became a successor  corporation  by
virtue of a merger between CSC Sub and the Predecessor Parent. As of December 6,
1995, the Company,  Parent, PA Co., RT Co., Intex,  FANB,  Hibernia and Hongkong
executed a Second Amendment to Credit Agreement (the "Second Amendment") whereby
(a) the working  capital loan  facility was  increased  from  $20,000,000.00  to
$25,000,000.00; (b) a $3,000,000.00 swingline loan subfacility was provided; (c)
the  term of the  working  capital  loan  facility  was  extended;  (d)  certain
collateral  was  released  as  security  for the  Loans  and (e)  certain  other
amendments  were made to the credit  facilities.  In  connection  therewith  the
Credit Parties executed certain ancillary documents  (collectively,  the "Second
Amendment Loan Documents") including, but not limited to, amendments to security
agreements,  amendments to pledge agreements and amendments to deeds of trust in
favor of Agent (collectively, the "Second Amendment Security Documents").

     E. As of April 26, 1996, the Credit  Parties,  FANB,  Hibernia and Hongkong
executed a Third  Amendment  to Credit  Agreement  (the  "Third  Amendment")  to
reflect certain changes to the financial covenants of the Credit Agreement.

     F. As of September 4, 1996, the Credit Parties, FANB, Hibernia and Hongkong
executed a Fourth Amendment to Credit Agreement (the "Fourth  Amendment") (a) to
extend the term of the swingline loan subfacility, (b) to extend the term of the
working  capital  loan  facility  and  (c) to  reflect  certain  changes  to the
financial covenants of the Credit Agreement.  In connection therewith the Credit
Parties  executed  certain  ancillary  documents   (collectively,   the  "Fourth
Amendment  Loan  Documents")  including but not limited to the amendments to the
deeds of trust (collectively, the "Fourth Amendment Security Documents").

     G. As of December 4, 1996, the Credit Parties,  FANB, Hibernia and Hongkong
executed a Fifth  Amendment  to Credit  Agreement  (the  "Fifth  Amendment")  to
reflect certain changes to the Credit Agreement.

     H. The  Original  Credit  Agreement  as amended by the First  Amendment  to
Credit Agreement,  Second Amendment, Third Amendment, Fourth Amendment and Fifth
Amendment is referred to herein as the "Prior  Credit  Agreement".  The Original
Loan Documents,  the First Amendment Loan Documents,  the Second  Amendment Loan
Documents,  the Third  Amendment Loan Documents,  and the Fourth  Amendment Loan
Documents  are  collectively  referred  to as the "Prior  Loan  Documents".  The
Original Security Documents,  the First Amendment Security Documents, the Second
Amendment  Security  Documents,  and the Fourth Amendment Security Documents are
collectively referred to as the "Prior Security Documents".

     I. Pursuant to the Prior Credit Agreement, FANB, Hibernia and Hongkong made
Loans and issued Letters of Credit  pursuant to their  Commitments  under and as
defined in the Prior Credit  Agreement.  The  obligations of the Company and the
other Credit Parties  pursuant to the Prior Credit Agreement are embodied within
the Prior Loan  Documents and are evidenced by the Term Notes,  certain  working
capital  promissory  notes,  as amended and restated (the "Prior Working Capital
Notes") and a certain swingline note, as amended (the "Prior Swingline Note")


<PAGE>



(the Term Notes,  the Prior Working  Capital Notes and the Prior  Swingline Note
being  collectively  referred  to  herein  as the  "Prior  Notes")  and  certain
guaranties  of the  Parent,  PA Co.,  RT Co. and Intex,  as amended  (the "Prior
Guaranties").

     J. As of February 27, 1998, the Company paid and satisfied the indebtedness
evidenced by the Term Notes, the Term Loan Commitment  terminated,  the liens of
the  Deeds  of  Trust  were  released,  Bank  One  acquired  all  of  Hongkong's
participating  interest  in the  Working  Capital  Loan  and  all of  Hongkong's
participating  interest in the Letters of Credit  pursuant to the execution of a
Commitment Transfer Supplement dated as of February 27, 1998.

     K. As of February 27, 1998, the Credit Parties, FANB, Hibernia and Bank One
executed an Amended and Restated  Credit  Agreement  (the  "Amended and Restated
Credit  Agreement")  whereby  Bank One  became a Bank party to the  Amended  and
Restated  Credit  Agreement.  In addition and among other  things,  the "Working
Capital  Commitments"  as defined in the Prior Credit  Agreement were reduced to
$22,000,000 and the Credit Parties' obligations were amended and restated.

     L. As of January 12,  1999,  the Credit  Parties  and the Banks  executed a
First Amendment to Amended and Restated Credit Agreement (the "First Amendment")
(the First  Amendment  together with the Amended and Restated  Credit  Agreement
being hereinafter  collectively  referred to as the "Amended and Restated Credit
Agreement")  whereby,  among other things, the working capital loan facility was
increased from $22,000,000 to $25,000,000.

     M. The Credit Parties have requested that the Banks make certain changes to
the Amended and  Restated  Credit  Agreement  with  respect to stock  repurchase
rights.  The Banks  consent to and approve the  foregoing  request of the Credit
Parties, subject to the terms and conditions of this Second Amendment.


SECTION ONE: DEFINITIONS

     1.01  Definitions.  All capitalized terms used but not defined herein shall
have the meanings provided in the Amended and Restated Credit Agreement.


SECTION TWO: AMENDMENTS

     2.01  Amendment  to  Subsection  9.12.  Subsection  9.12 to the Amended and
Restated Credit Agreement is amended by deleting subsection 9.12 in its entirety
and by substituting in lieu thereof the following:

     9.12 Limitation on Dividends/Stock  Repurchase.  Declare any cash dividends
on any shares of any class of stock of the Credit Parties or make any payment on
account of, or set apart  assets for a sinking or other  analogous  fund for the
purchase, redemption, retirement or other acquisition of any shares of any class
of stock of the Credit Parties,  whether now or hereafter  outstanding,  or make
any other  distribution  in respect  thereof,  either  directly  or  indirectly,
whether in cash or property or in obligations of the Credit Parties, except that
the Company or the Parent may declare  dividends on any Class or series of stock
of the Company or the Parent,  and the Parent may repurchase up to the lesser of
$6,500,000  or ten percent  (10%) of its  outstanding  stock  provided  that, in
either event,  no Default or Event of Default  exists and the Dividend Ratio for
such Fiscal Year exceeds 1.05 to 1.0.


<PAGE>


SECTION THREE: CONDITIONS PRECEDENT.

     3.01 Conditions to the Execution of the Second Amendment. The obligation of
the Banks to enter into the Second  Amendment  shall be subject to the following
conditions to the satisfaction of the Agent:

     (a) Second  Amendment.  Each Bank shall have  received  an  original of the
Second  Amendment  duly  executed  by a duly  authorized  officer of each of the
Credit Parties.

     (b) No Default or Event of  Default.  No Default or Event of Default  shall
have occurred and be continuing on the date of the Second Amendment. No Event of
Default (or condition which would constitute an Event of Default with the giving
of notice, the lapse of time, or both) under material (in the reasonable opinion
of the Company and the Agent)  contracts of the Credit  Parties such as, but not
limited to,  agreements with respect to capital stock,  financing  documents and
lease agreements shall have occurred and be continuing on the date of the Second
Amendment.

     (c) Representations  and Warranties.  The  representations,  warranties and
disclosures made by the Credit Parties in the Amended and Restated Agreement, as
amended by the Second Amendment,  or in any Basic Document or made by any of the
Credit  Parties in any  certificate,  document or financial  or other  statement
furnished in connection herewith or therewith,  shall be true and correct in all
material  respects on and as of the date of the Second  Amendment  with the same
effect as if made on such date.


SECTION FOUR:  REPRESENTATIONS AND WARRANTIES.

     4.01 Entity Existence; Compliance with Law.

     (a) Each of the corporate  Credit  Parties (i) is duly  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation, (ii) has the corporate power and authority and the legal right to
own or lease and operate its  property,  and to conduct the business in which it
is currently  engaged,  (iii) is duly qualified as a foreign  corporation and in
good standing  under the laws of each  jurisdiction  where failure so to qualify
and remain in good standing would materially and adversely affect its ability to
own or lease and operate its  property or to conduct the business in which it is
currently  engaged or intends to engage in the future and (iv) is in  compliance
with  all  Requirements  of Law,  except  where  non-compliance  would  not have
material  adverse  effect  on the  business,  operations,  assets  or  financial
conditions of each such Credit Party.


<PAGE>



     (b) Intex (i) is duly  organized,  validly  existing  and in good  standing
under the laws of Tennessee,  (ii) has the  partnership  power and authority and
the legal  right to own or lease and operate  its  property,  and to conduct the
business in which it is currently engaged,  (iii) is duly qualified as a foreign
limited  partnership  and in good standing  under the laws of each  jurisdiction
where failure so to qualify and remain in good  standing  would  materially  and
adversely  affect its  ability to own or lease and  operate  its  property or to
conduct the  business in which it is  currently  engaged or intends to engage in
the future and (iv) is in compliance with all  Requirements of Law, except where
non-compliance   would  not  have  material  adverse  effect  on  the  business,
operations, assets or financial conditions of Intex.

     4.02 Entity Power; Authorization; Enforceable Obligations.

     (a) Each of the  corporate  Credit  Parties  has the  corporate  power  and
authority,  and Intex has the partnership power and authority,  to make, deliver
and perform all of its respective obligations in connection with the Amended and
Restated  Credit  Agreement as amended by the Second  Amendment;  each corporate
Credit Party has taken all necessary  corporate action,  and Intex has taken all
necessary   partnership  action,  to  authorize  the  execution,   delivery  and
performance  of the Second  Amendment.  No consent or  authorization  of, filing
with,  or other act by or in  respect  of,  any  other  Person  is  required  in
connection  with the  execution,  delivery or  performance by each of the Credit
Parties or the validity of or enforceability against each of the Credit Parties,
of the Second Amendment (except such filings as are necessary in connection with
perfection of the Liens created by such documents,  which filings have been duly
made and/or obtained and are in full force and effect). The Second Amendment has
been duly executed and delivered on behalf of each such Credit Party. The Second
Amendment  constitutes  a legal,  valid and  binding  obligation  of each Credit
Party,  enforceable against each such Credit Party in accordance with its terms,
except as enforceability  may be limited by applicable  bankruptcy,  insolvency,
moratorium or other similar laws  affecting  creditors'  rights  generally,  and
except as enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).

     4.03 No Legal Bar. The execution,  delivery and  performance by each of the
Credit  Parties  of the  Second  Amendment  do not  and  will  not  violate  any
Requirement of Law or any Contractual  Obligation  applicable to or binding upon
the  Credit  Parties  or  any  of  their  properties  or  assets,  except  where
noncompliance  would not have a  material  effect on the  business,  operations,
property,  assets or financial  condition of the Credit Parties taken as a whole
and  will not  result  in the  creation  or  imposition  of any Lien on any such
properties or assets pursuant to the provisions of any Requirement of Law or any
Contractual Obligations other than the Lien of the Security Documents.

     4.04 No Default. None of the Credit Parties is in default in the payment or
performance  of any of its  Contractual  Obligations  in  any  respect  that  is
material to the Credit Parties,  and no Default or Event of Default has occurred
and is continuing.  None of the Credit Parties is in default in any respect that
is material to it under any order, award or decree of any Governmental Authority
or arbitrator  binding upon or affecting it or by which any of its properties or
assets may be bound or affected.
SECTION FIVE: MISCELLANEOUS.

     5.01 Governing Law; No Third-Party  Rights.  THIS SECOND  AMENDMENT AND THE
RIGHTS AND DUTIES OF THE PARTIES UNDER THIS AGREEMENT  SHALL BE GOVERNED BY, AND
CONSTRUED  AND  INTERPRETED  IN  ACCORDANCE  WITH,  THE  LAWS  OF THE  STATE  OF
TENNESSEE.



<PAGE>

     5.02 Counterparts.  This Second Amendment may be executed by one or more of
the parties to this Second Amendment on any number of separate counterparts, and
all of said  counterparts  taken  together shall be deemed to constitute one and
the same instrument.

     5.03 No Other Amendments. All other terms and provisions of the Amended and
Restated  Credit  Agreement not modified or amended  hereby shall remain in full
force and effect.

     IN WITNESS  WHEREOF,  the parties have  executed  this Second  Amendment to
Amended  and  Restated  Credit  Agreement  as of the day and  year  first  above
written.

                                       CATHERINES, INC.

                                       By:________________________________
                                                David C. Forell
                                                Executive Vice President



                                       CATHERINES STORES CORPORATION

                                       By:________________________________
                                                David C. Forell
                                                Executive Vice President


                                         CATHERINES OF PENNSYLVANIA, INC.


                                        By:________________________________
                                                David C. Forell
                                                Executive Vice-President



                                           CATHERINES OF CALIFORNIA, INC.

                                        By:________________________________
                                                David C. Forell
                                                Executive Vice-President


                                           CATHERINES PARTNERS, L.P.

                                         By:  CATHERINES, INC.,
                                              its general partner

                                        By: __________________________
                                                David C. Forell
                                                Executive Vice President


                                            FIRST AMERICAN NATIONAL BANK,
                                             individually and as Agent

                                        By:________________________________

                                        Title:_____________________________

                                             HIBERNIA NATIONAL BANK


                                        By:________________________________

                                        Title:_____________________________


                                                     BANK ONE, N.A.


                                        By:________________________________

                                        Title:_____________________________



<PAGE>

                                  SCHEDULE 1.2

                                   Commitments


                            Working                    Swingline
                Working     Capital       Swingline    Loan
                Capital     Commitment    Loan         Commitment
Bank            Commitment  Percentage    Commitment  Percentage      Commitment

First American
National Bank   $ 7,955,000   31.82%      $3,000,000     100%        $10,955,000

Hibernia
National Bank   $ 8,522,500   34.09%         -0-          -0-        $ 8,522,500

Bank One, N.A.  $ 8,522,500   34.09%         -0-          -0-        $ 8,522,500




<PAGE>