SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB
(Mark One)

[X]               QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998
                                                 -------------

                                       OR

|_|               TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934

                  For the transition period from            to           .
                                                 ----------    ----------

                           Commission File No. 0-23763


                              Quitman Bancorp, Inc.
--------------------------------------------------------------------------------
        (Exact name of Small Business Issuer as Specified in Its Charter)


         Georgia                                            58-2365866
--------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation             (I.R.S. Employer
 or Organization)                                        Identification No.)


                 100 West Screven Street, Quitman, Georgia 31643
                 -----------------------------------------------
                    (Address of Principal Executive Offices)


                                 (912) 263-7538
--------------------------------------------------------------------------------
                 Issuer's Telephone Number, Including Area Code

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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
                                 -----                    -----
 
    Number of shares of Common Stock outstanding as of June 30, 1998: 661,250

Transitional Small Business Disclosure Format (check one)

                          YES                       NO      X
                                 -----                    -----  

                                                 

<PAGE>

                              QUITMAN BANCORP, INC.

                                    Contents

                                                                       Page(s)
PART I - FINANCIAL INFORMATION

     Item 1.  Financial Statements........................................3

     Item 2.  Management's Discussion and Analysis or Plan of Operation..10


PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings..........................................13

     Item 2.  Changes in Securities and Use of Proceeds..................13

     Item 3.  Defaults upon Senior Securities............................13

     Item 4.  Submission of Matters to a Vote of Security Holders........13

     Item 5.  Other Information..........................................13

     Item 6.  Exhibits and Reports on Form 8-K...........................13

     Signatures..........................................................14

                                      - 2 -

<PAGE>

                          PART I. FINANCIAL INFORMATION
                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 ----------------------------------------------

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>

                                                                            JUNE 30,                 SEPTEMBER 30,
                                                                              1998                       1997
                                                                              ----                       ----
                                                                           (Unaudited)                 (Audited)
<S>                                                                        <C>                        <C>    
Cash and Cash Equivalents:
   Cash and amounts due from depository
      institutions                                                         $    249,309                    108,650
   Interest-bearing deposits in other banks                                   2,485,650                    548,158
                                                                           ------------              -------------
         Total Cash and Cash Equivalents                                      2,734,959                    656,808
Investment securities:
   Available-for-sale                                                         4,917,801                  3,046,109
   Held-to-maturity                                                             200,000                    804,706
Loans receivable - net of allowance for loan
   losses and deferred origination fees                                      34,781,139                 33,325,719
Office properties and equipment, at cost, net of
   accumulated depreciation                                                     661,201                    322,527
Real estate and other property acquired
   in settlement of loans                                                           -0-                     63,915
Accrued interest receivable                                                     416,101                    381,218
Investment required by law-stock in Federal
   Home Loan Bank, at cost                                                      239,800                    227,700
Cash value of life insurance                                                    320,665                    218,106
Other assets                                                                    158,045                    145,356
                                                                           ------------               ------------
         Total Assets                                                      $ 44,429,711                 39,192,164
                                                                           ============               ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
Liabilities:
   Deposits                                                                $ 34,585,454                 34,470,803
   Advances from Federal Home Loan Bank                                             -0-                  1,300,000
   Accrued interest payable                                                     310,351                    272,346
   Income taxes payable                                                          78,768                    114,766
   Other liabilities                                                             90,211                     75,696
                                                                           ------------               ------------
      Total Liabilities                                                      35,064,784                 36,233,611
                                                                           ------------               ------------

Stockholders' Equity:
   Common stock, $.10 par value, 4,000,000
      shares authorized, 661,250 shares
      issued and outstanding                                                     66,125                        -0-
   Preferred stock, no par value, 1,000,000
      shares authorized, no shares issued
      or outstanding                                                                -0-                        -0-
   Additional paid in capital                                                 6,134,619
   Retained Earnings                                                          3,151,451                  2,952,560
   Unrealized gains (losses) on available-
      for-sale securities, net of deferred
         income taxes                                                            12,732                      5,993
                                                                           ------------               ------------
      Total Equity                                                            9,364,927                  2,958,553
                                                                           ------------               ------------
         Total Liabilities and Retained Earnings                           $ 44,429,711                 39,192,164
                                                                           ============               ============
</TABLE>

                                      - 3 -

<PAGE>
                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
<TABLE>
<CAPTION>

                                                                (UNAUDITED)                      (UNAUDITED)
                                                            THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                 JUNE 30,                         JUNE 30,
                                                        ---------------------------      ----------------------------
                                                            1998            1997             1998            1997
                                                        -----------     -----------      -----------     ------------
<S>                                                      <C>             <C>            <C>             <C>      
Interest Income:
   Loans receivable:
      First mortgage loans                               $  753,663         712,305        2,252,991       2,111,234
      Consumer and other loans                               33,067          27,221           90,787          78,748
   Interest on FHLMC Pool                                        62              86              204             178
   Investment securities                                     66,848          59,686          192,406         174,194
   Interest-bearing deposits                                 52,784           5,208           79,037          17,279
   Federal funds sold                                           351             -0-              419             -0-
                                                         ----------     -----------       ----------      ----------
         Total Interest Income                              906,775         804,506        2,615,844       2,381,633
                                                         ----------     -----------       ----------      ----------

Interest Expense:
   Deposits                                                 511,219         481,762        1,552,550       1,413,928
   Interest on Federal Home Loan
      Bank advances                                             -0-          17,151           36,621          46,465
                                                         ----------      ----------       ----------      ----------
         Total Interest Expense                             511,219         498,913        1,589,171       1,460,393
                                                         ----------      ----------       ----------      ----------

Net Interest Income                                         395,556         305,593        1,026,673         921,240

Provision for loan losses                                     6,000           9,000           24,000          27,000
                                                         ----------      ----------       ----------      ----------
Net Interest Income After Provision for Losses              389,556         296,593        1,002,673         894,240
                                                         ----------      ----------       ----------      ----------


Non-Interest Income:
   Gain (loss) on sale of securities                            -0-             -0-               18              (2)
   Other income                                              14,475          10,534           40,294          33,983
                                                         ----------      ----------       ----------      ----------
         Total Non-Interest Income                           14,475          10,534           40,312          33,981
                                                         ----------      ----------       ----------      ----------

Non-Interest Expense:
   Compensation                                              82,202          64,169          232,848         187,822
   Other personnel expenses                                  71,254          39,283          152,532         114,563
   Occupancy expenses of premises                             5,079           4,677           15,509          14,863
   Furniture and equipment expenses                          32,746          17,049           80,005          54,607
   Federal deposit insurance                                  5,432           4,018           16,137          24,345
   Other operating expenses                                  61,249          45,158          233,852         171,771
                                                         ----------      ----------       ----------      ----------
         Total Non-Interest Expense                         257,962         174,354          730,883         567,971
                                                         ----------      ----------       ----------      ----------

Income Before Income Taxes                                  146,069         132,773          312,102         360,250
Provision for Income Taxes                                   50,829          45,061          113,211         123,305
                                                         ----------      ----------       ----------      ----------
Net Income                                              $    95,240          87,712          198,891         236,945
                                                        ===========      ==========       ==========      ==========

Earnings Per Share (Basic and Diluted)                  $       .14         N/A                  .30         N/A
                                                        ===========      ==========       ==========      ==========
</TABLE>

                                      - 4 -

<PAGE>
                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                                             UNREALIZED
                                                                                GAINS
                                                                              (LOSS) ON
                                                                             AVAILABLE-
                                                                              FOR-SALE
                                                                             SECURITIES
                                                                               NET OF
                                             ADDITIONAL                      APPLICABLE
                                 COMMON        PAID IN      RETAINED          DEFERRED
                                  STOCK        CAPITAL      EARNINGS        INCOME TAXES       TOTAL
                                  -----        -------      --------        ------------     ---------
<S>                             <C>           <C>            <C>                  <C>        <C>      
Balance, September 30, 1996     $      -0-          -0-      2,689,761           (22,921)    2,666,840

Net Income                             -0-          -0-        236,945               -0-       236,945

Change In Unrealized Gains
   (Losses) On Available-For-
   Sale Securities Net Of
   Applicable Deferred
   Income Taxes                        -0-          -0-            -0-            14,433        14,433
                                ----------   ----------     ----------        ----------    ----------

Balance, June 30, 1997
   (Unaudited)                  $      -0-   $      -0-      2,926,706            (8,488)    2,918,218
                                ==========   ==========     ==========        ==========    ==========

Balance, September 30, 1997     $      -0-          -0-      2,952,560             5,993     2,958,553

Net Income                             -0-          -0-        198,891               -0-       198,891

Common stock issued,
   661,250 shares                   66,125    6,134,619            -0-               -0-     6,200,744

Change In Unrealized Gains
   (Losses) On Available-For-
   Sale Securities Net Of
   Applicable Deferred
   Income Taxes                        -0-          -0-            -0-             6,739         6,739
                                ----------   ----------     ----------        ----------    ----------

Balances, June 30, 1998
   (Unaudited)                  $   66,125    6,134,619      3,151,451            12,732     9,364,927
                                ==========   ==========     ==========        ==========    ==========
</TABLE>


                                      - 5 -

<PAGE>
                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                             NINE MONTHS ENDED JUNE 30,
                                                                       -------------------------------------------
                                                                          1998                             1997
                                                                       -----------                      ----------
                                                                       (Unaudited)                     (Unaudited)
<S>                                                                     <C>                             <C>    
Cash Flows From Operating Activities:
   Net income                                                           $  198,891                         236,945
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation                                                          55,934                          35,610
      Provision for loan losses                                             24,000                          27,000
      Amortization (Accretion) of securities and loans                       9,756                           7,543
      Gain on sale of foreclosed assets                                     (7,102)                            -0-

   Change in Assets and Liabilities:
      (Increase) Decrease in accrued interest receivable                   (34,883)                            (51)
      Increase (Decrease) in accrued interest payable                       38,005                          30,118
      Increase (Decrease) in other liabilities                              14,515                        (207,629)
      Increase (Decrease) in income taxes payable                          (42,556)                         11,604
      (Increase) Decrease in other assets                                  (12,689)                         63,976
                                                                        ----------                      ----------
         Net cash provided by operating activities                         243,871                         205,116
                                                                        ----------                      ----------
Cash Flows From Investing Activities:
   Capital expenditures                                                   (394,608)                            -0-
   Purchase of available-for-sale securities                            (2,432,535)                     (1,542,325)
   Proceeds from sale of foreclosed property                               256,709                             -0-
   Proceeds from maturity of held-to-maturity securities                   600,000                         750,000
   Proceeds from maturity of available-for-sale securities                 550,000                         100,000
   Proceeds from sale of available-for-sale securities                         -0-                         599,844
   Purchase of stock in Federal Home Loan Bank                             (12,100)                         (8,600)
   Net (increase) decrease in loans                                     (1,665,112)                     (2,074,519)
   Principal collected on mortgage-backed securities                        19,090                             -0-
   Increase in cash value of life insurance                               (102,559)                        (92,979)
                                                                        ----------                      ----------
         Net cash provided (used) by investing activities               (3,181,115)                     (2,268,579)
                                                                        ----------                      ----------
Cash Flows From Financing Activities:
   Net increase (decrease) in deposits                                     114,651                       1,891,814
   Proceeds from Federal Home Loan Bank advances                           300,000                         400,000
   Payments on Federal Home Loan advances                               (1,600,000)                       (300,000)
   Common stock issued                                                   6,200,744                             -0-
                                                                        ----------                      ----------
         Net cash provided (used) by financing activities                5,015,395                       1,991,814
                                                                        ----------                      ----------
Net Increase (Decrease) in cash and cash equivalents                     2,078,151                         (71,649)
Cash and Cash Equivalents at Beginning of Period                           656,808                         765,250
                                                                       -----------                      ----------
Cash and Cash Equivalents at End of Period                              $2,734,959                         693,601
                                                                        ==========                      ==========
Supplemental Disclosures of Cash Flows Information:
   Cash Paid During The Period:
      Interest                                                          $1,551,166                       1,430,275
      Income taxes                                                         163,435                          61,000
   Non-Cash Investing Activities:
      Increase in unrealized gains on available-
         for-sale securities                                                 6,739                          14,443
</TABLE>

                                      - 6 -

<PAGE>



                      QUITMAN BANCORP, INC. AND SUBSIDIARY

                          Notes to Financial Statements
                                   (Unaudited)

1.       Basis of Preparation
         --------------------

         The financial statements included herein for the periods ended June 30,
         1998 are for  Quitman  Bancorp,  Inc.  and  Subsidiary.  All  financial
         statements included herein for periods ended prior to April 2, 1998 are
         for Quitman Federal Savings Bank (the "Bank").

         The  accompanying  unaudited  financial  statements  were  prepared  in
         accordance  with  instructions  for Form  10-QSB and  therefore  do not
         include all  disclosure  necessary for a complete  presentation  of the
         statements of financial condition,  statements of income and statements
         of  cash  flow  in  conformity  with  generally   accepted   accounting
         principles.  However,  all  adjustments  which are,  in the  opinion of
         management,   necessary  for  the  fair  presentation  of  the  interim
         financial statements have been included.  All such adjustments are of a
         normal  recurring  nature.  The  statement of income for the nine month
         period ended June 30, 1998 is not necessarily indicative of the results
         which may be expected for the entire year.

         It is suggested that these  unaudited  financial  statements be read in
         conjunction with the audited financial statements and notes thereto for
         the Bank for the year ended September 30, 1997.

2.       Plan of Conversion
         ------------------

         On October 14,  1997,  the Bank's  Board of  Directors  approved a plan
         ("Plan") to convert from a federally-chartered mutual savings bank to a
         federally-chartered  stock  savings  bank  subject to  approval  by the
         Bank's  members.  The Plan,  which  included  formation  of the holding
         company,  Quitman Bancorp,  Inc., was subject to approval by the Office
         of Thrift  Supervision  (OTS) and included the filing of a registration
         statement  with the SEC. The conversion was completed on April 2, 1998.
         Actual  conversion  costs were  accounted  for as a reduction  in gross
         proceeds.

         The Plan called for the common stock of the Bank to be purchased by the
         holding  company and for the common stock of the holding  company to be
         offered to  various  parties  in an  offering  at a price of $10.00 per
         share.

         The  stockholders  of the  holding  company  will be asked to approve a
         proposed  stock option plan and a proposed  restricted  stock plan at a
         meeting of the  stockholders  after the  conversion.  Shares  issued to
         directors and employees  under these plans may be from  authorized  but
         unissued  shares of common  stock or they may be  purchased in the open
         market.  In the event that  options or shares  are issued  under  these
         plans,  such  issuances  will be  included  in the  earnings  per share
         calculation;  thus,  the  interests of existing  stockholders  would be
         diluted.

         The Bank may not declare or pay a cash  dividend if the effect  thereof
         would  cause its net  worth to be  reduced  below  either  the  amounts
         required for the liquidation  account discussed below or the regulatory
         capital requirements imposed by federal regulations.

         At the time of conversion,  the Bank established a liquidation  account
         (which is a  memorandum  account  that does not  appear on the  balance
         sheet) in an amount  equal to its  retained  income as reflected in the
         latest  balance  sheet  used in the final  conversion  prospectus.  The
         liquidation  account  will be  maintained  for the  benefit of eligible
         account holders who continue to maintain their deposit  accounts in the
         Bank after

                                      - 7 -

<PAGE>



         the conversion. In the event of a complete liquidation of the Bank (and
         only in such an event),  eligible  depositors  who continue to maintain
         accounts  shall  be  entitled  to  receive  a  distribution   from  the
         liquidation  account before any liquidation may be made with respect to
         common stock.

                                      - 8 -

<PAGE>



       ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


         Quitman  Bancorp,  Inc.  (the  "Company")  may from  time to time  make
written or oral  "forward-looking  statements" including statements contained in
the Company's  filings with the  Securities and Exchange  Commission  (including
this  report  on Form  10-QSB),  in its  reports  to  stockholders  and in other
communications  by the  Company,  which  are made in good  faith by the  Company
pursuant to the "safe harbor"  provisions of the Private  Securities  Litigation
Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,   objectives,   expectations,   estimates  and  intentions  expressed  in
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the Board of  Governors of the
Federal  Reserve  System,  inflation,  interest  rate and  market  and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the Company and the perceived  overall  value of these  products and
services by users,  including  the  features,  pricing  and quality  compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial services' laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological changes,  acquisitions;  changes in consumer spending
and  saving  habits;  and the  success  of the  Company  at  managing  the risks
described above involved in the foregoing.

         The Company  cautions that these  important  factors are not exclusive.
The Company does not undertake to update any forward-looking statement,  whether
written  or oral,  that may be made  from  time to time by or on  behalf  of the
Company.

Comparison of Financial Condition at June 30, 1998 and September 30, 1997

Total assets  increased by $5.2 million or 13.36% due  primarily to the increase
in cash and cash  equivalents,  investment  securities and loans  resulting from
funds  received from capital stock issued by Quitman  Bancorp,  Inc., the Bank's
newly formed holding company.

Advances  from the  Federal  Home Loan Bank in the amount of $1.6  million  were
repaid.

Total equity increased by $5,877,374 as result of net income for the nine months
ended   June   30,   1998,   changes   in  the   unrealized   gain  or  loss  on
available-for-sale  securities,  and capital stock issued, reduced by a guaranty
of a loan to the Bank's employee stock ownership plan.

                                      - 9 -

<PAGE>
Non-Performing Assets and Delinquencies

Loans accounted for on a non-accrual basis decreased to $16,000 at June 30, 1998
from $124,000 at September  30, 1997.  The decrease was the result of five loans
being   reclassified  to  performing  loans  and  three  loans  being  added  to
non-accrual. The allowance for loan losses was $370,000 at June 30, 1998.

     Comparison of the Results of Operations for the Three Months Ended June 30,
     1998 and 1997

Net Income.  Net income  increased  by $7,000 or 8.6% from net income of $88,000
for the three  months ended June 30, 1997 to net income of $95,000 for the three
months ended June 30, 1998.  This  increase is primarily the result of increased
interest  income and  non-interest  income  that were  reduced by  increases  in
interest  expense  and  non-interest  expense.  The  return  on  average  assets
decreased  from .93% to .90% for the three  months ended June 30, 1997 and 1998,
respectively.

Net  Interest  Income.  Net interest  income  increased  $90,000 or 29.4%,  from
$306,000  for the three  months  ended June 30, 1997 to  $396,000  for the three
months ended June 30, 1998.  The  increase was  primarily  due to an increase in
loans.

Interest Income.  Interest income increased  $102,000 for the three months ended
June 30,  1998  compared  to the same  three  months  ended June 30,  1997.  The
increase  in  interest  income was  primarily  due to an increase in the average
balance of  interest-earning  assets.  The average  balance of  interest-earning
assets  increased by 11.6%.  This  increase in average  interest-earning  assets
added  an  additional   $102,000  of  interest  income.  The  average  yield  on
interest-earning  assets  increased  moderately  to 9.0% from 8.9% for the three
months ended June 30, 1998 and 1997, respectively.

Interest Expense. Interest expense increased $12,000 from $499,000 for the three
months ended June 30, 1997 to $511,000 for the three months ended June 30, 1998.
The  increase  in interest  expense  was due to an increase in  interest-bearing
liabilities  of $1.2  million  and a slight  increase in the cost of funds of 20
basis points (100 basis points equals 1%). The average  balances of deposits and
advances from the Federal Home Loan Bank increased by $1.8 million and decreased
by $1.1 million, respectively,  from the three months ended June 30, 1997 to the
three months ended June 30, 1998.

Non-Interest Income. Non-interest income increased by $3,900 primarily from gain
realized on the sale of foreclosed property in the amount of $4,100.

Non-Interest Expense. Non-interest expense increased by $84,000 primarily due to
increased  compensation  and other  personnel  expense,  furniture and equipment
expense and other  operating  expenses . Our  compensation  and other  personnel
expense  increased an  aggregate  of $50,000  between the periods as a result of
year-end  pay raises,  hiring of  additional  part time  employees,  and accrued
contributions  in the amount of $30,000 to our employees  stock  ownership plan.
These accrued contributions commenced in April 1998. Our furniture and equipment
expense  increased by $16,000  between the periods as a result of acquisition of
new equipment which increased our  depreciation  cost by $11,000 and our repairs
and  maintenance  cost increased by a $5,000.  The increases in other  operating
expenses were primarily  attributable to an increase in office supplies  expense
in the amount of $7,000,  and  expense of the  holding  company in the amount of
$9,000.  We expect  non-interest  expense to  increase  in the future due to the
employee  stock  ownership  plan and the  holding  company's  expense of being a
public company.

Income Taxes.  Income tax expense amounted to $45,000 for the three months ended
June 30, 1997 compared to $51,000 for the three months ended June 30, 1998.

Comparison of the Results of Operations  for the Nine Months Ended June 30, 1998
and 1997

                                     - 10 -

<PAGE>



Net Income.  Net income  decreased by $38,000 or 16% from net income of $237,000
for the nine months  ended June 30, 1997 to net income of $199,000  for the same
nine months of fiscal 1998.  This  decrease is primarily the result of increased
non-interest  expense that more than offset increases in net interest income and
non-interest  income.  The return on average assets  decreased from .85% to .63%
for the nine months ended June 30, 1997 and 1998, respectively.

Net Interest  Income.  Net interest  income  increased  $105,433 or 11.4%,  from
$921,240  for the nine  months  ended June 30, 1997 to  $1,026,673  for the nine
months ended June 30, 1998.  The  increase was  primarily  due to an increase in
residential mortgages and consumer loans.

Interest Income.  Interest income  increased  $234,000 for the nine months ended
June 30, 1998  compared to the nine months ended June 30, 1997.  The increase in
interest income was primarily attributable to an increase in the average balance
of  interest-earning  assets.  The average  balance of  interest-earning  assets
increased by 12.75%. This increase in average  interest-earning  assets added an
additional  $234,000 of interest income.  The average yield on  interest-earning
assets decreased moderately to 8.7% from 8.9% for the nine months ended June 30,
1998 and 1997, respectively.

Interest Expense.  Interest expense  increased  $129,000 from $1,460,000 for the
nine months ended June 30, 1997 to $1,589,000 for the nine months ended June 30,
1998. The increase in interest  expense was  attributable  to an increase in the
average  balance of  interest-bearing  liabilities  of $1.7 million and a slight
increase in the cost of funds of 20 basis points (100 basis  points  equals 1%).
The average  balances of deposits and  advances  from the Federal Home Loan Bank
increased by $1.8 million and decreased by $.6 million,  respectively,  from the
nine months ended June 30, 1997 to the nine months ended June 30, 1998.

Non-Interest Income. Non-interest income increased by $6,000 primarily from gain
on the sale of other real estate of $7,100,  and partially  offset by a decrease
in late charges.

Non-Interest  Expense.  Non-interest expense increased by $163,000 primarily due
to  increased   compensation  and  other  personnel  expense,   advertising  and
contributions to local charitable and volunteer organizations.  Our compensation
and other  personnel  expense  increased  an  aggregate  of $83,000  between the
periods as a result of year-end pay raises,  our hiring of additional  employees
and  accrual of $30,000 in  contributions  to our newly  formed  employee  stock
ownership  plan. Our  advertising  increased  between the two periods  primarily
because the cost for our annual gift to  customers (a form of  advertising)  was
unusually  low during the 1997 period.  During the 1997 period,  we were able to
secure a bulk  quantity of gifts at a large  discount.  We did not obtain such a
favorable  price  during  the 1998  period and we do not expect in the future to
have as low an  advertising  expense  as we did  during  the  1997  period.  Our
contributions  during  the nine  months  ended  June 30,  1997 were  smaller  by
comparison due to the one-time  deposit premium to recapitalize the SAIF that we
expensed  during the 1996 fiscal year and paid during  November 1997.  Furniture
and equipment expense  increased  between the two periods by $25,000,  primarily
due to depreciation on new equipment and increased repair and maintenance costs.

Income Taxes.  Income tax expense amounted to $123,000 for the nine months ended
June 30, 1997 compared to $113,000 for the nine months ended June 30, 1998.

Liquidity and Capital Resources

Management  monitors our risk-based capital and leverage capital ratios in order
to assess compliance with regulatory guidelines. At March 31, 1998, the Bank had
tangible capital,  leverage,  and total risk-based capital of 13.11%, 13.11% and
24.95%,  respectively,  which exceeded the OTS's minimum  requirements of 1.50%,
3.00% and 8.00%, respectively.


                                     - 11 -

<PAGE>



We have received a letter from our computer  service vendor assuring us that the
computer  services of our vendor will properly  function on January 1, 2000, the
date that  computer  problems  are  expected  to develop  worldwide  on computer
systems that incorrectly identify the year 2000 as the year 1900 and incorrectly
compute  interest,  payment  or  delinquency.  However,  our  vendor,  and other
vendors,  have not yet eliminated the year 2000 computer problem.  Accurate data
processing is essential to our operations  and a lack of accurate  processing by
our vendor or by us could have a  significant  adverse  impact on our  financial
condition  and results of  operation.  We have also  examined  our  computers to
determine  whether  they will  properly  function  on January 1, 2000 and do not
believe that we will experience  material costs to upgrade our computers to meet
our requirements.

We ordered  an upgrade to our  computer  system  that is  intended  to solve our
internal  year 2000  computer  problem.  This upgrade was  installed  during the
second  calendar  quarter of 1998 with year 2000  testing to occur by the end of
the third  calendar  quarter  of 1998.  We are also  awaiting  updates  from our
computer  service vendor  concerning  their progress with the year 2000 computer
program.  In the event our computer  service vendor indicates that the year 2000
computer  problem  cannot be solved  in time,  we will try to locate a  computer
service vendor who has solved the year 2000 computer problem,  or if that is not
possible, to identify what steps we can take to minimize the negative impact the
year 2000 computer problem could have on us. Our estimated cost of the year 2000
compliance is $10,000. The amount paid as of June 30, 1998 is $2,688.


                                     - 12 -

<PAGE>



                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
         -----------------
 
                  Not applicable.

Item 2.  Changes in Securities and Use of Proceeds
         -----------------------------------------

                  As  described in the  beginning of Part I of this report,  the
                  Conversion,  including  the  initial  public  offering  of the
                  shares of the  registrant,  was not  completed  until April 2,
                  1998.

                  The  Conversion  resulted in the issuance of 661,250 shares of
                  common stock,  $0.10 par value per share,  at $10.00 per share
                  for  gross  proceeds  of  $6,612,500.  The  referenced  shares
                  constitute  all of the  shares  registered  by means of a Form
                  SB-2  (file no.  333-43063)  that was  declared  effective  on
                  February 11, 1998.  The  offering of  securities  commenced on
                  February 20, 1998 and ended on March 17, 1998.  The registrant
                  was  assisted by Trident  Securities,  Inc. on a best  efforts
                  basis.  Fees and  expenses  paid to Trident  Securities,  Inc.
                  totaled $150,054.

                  Total  expenses  were  $411,756,  resulting in net proceeds of
                  $6,200,744. One half of the net proceeds, $3,100,372, was paid
                  directly by the  registrant to its  subsidiary  bank in return
                  for  100,000  shares  (100%  of  the  issued  and  outstanding
                  securities of the subsidiary  bank).  Of this amount,  $10,000
                  constitutes   capital   stock  of  the  bank  and   $3,090,372
                  constitutes  paid in capital of the bank.  The  remaining  one
                  half of the net  proceeds,  $3,090,372,  was  retained  by the
                  registrant.  Of this amount,  $529,000 was a direct payment in
                  the form of a loan by the registrant to its subsidiary bank to
                  fund the purchase by the employee stock  ownership plan of the
                  bank of 52,900 shares of common stock of the  registrant.  The
                  remaining amount,  $2,561,372, was deposited by the registrant
                  into an account at the subsidiary bank.

Item 3.  Defaults Upon Senior Securities
         -------------------------------

                  Not applicable.

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

                  Not applicable.

Item 5.  Other Information
         -----------------

                  Not applicable.

Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

         (a)      None.

         (b) No reports on Form 8-K were filed during the quarter ended June 30,
1998.


                                     - 13 -

<PAGE>


                                   SIGNATURES


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


                             QUITMAN BANCORP, INC.



Date: August 12, 1998        By:  /s/Melvin E. Plair
                                  ----------------------------------------------
                                  Melvin E. Plair
                                  President and Chief Executive Officer
                                  (Principal Executive and Financial Officer)
                                  (Duly Authorized Officer)



Date: August 12, 1998        By:  /s/Peggy L. Forgione
                                  ----------------------------------------------
                                  Peggy L. Forgione
                                  Vice President and Controller
                                  (Chief Accounting Officer)


                                     - 14 -