SECURITIES AND EXCHANGE COMMISSION                      
                           Washington, D.C. 20549                            

                                 FORM 10-K                                   

  [ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES     
                            EXCHANGE ACT OF 1934                             
                For the fiscal year ended September 30, 1998                 

                                     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 number  1-13842                        

                   Texarkana First Financial Corporation                     
          (Exact name of registrant as specified in its charter)             

               Texas                                  71-0771419             
  (State or other jurisdiction of                 (I.R.S. Employer           
    incorporation or organization)                 Identification No.)       

      3rd and Olive Streets                                                  
       Texarkana, Arkansas                              71854                
          (Address)                                   (Zip Code)             

  Registrant's telephone number, including area code: (870) 773-1103         

  Securities registered pursuant to Section 12(b) of the Act: None           

  Securities registered pursuant to Section 12(g) of the Act:                
                 Common Stock (par value $.01 per share)                     
                            (Title of Class)                                 

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 
405 of Regulation S-K is not contained herein, and will not be contained, to 
the best of Registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K. [ X ]

The aggregate market value of the 1,342,217 shares of voting stock held by 
non-affiliates of the registrant was $32.2 million, based on the closing sale 
price of $24.00 per share on December 1, 1998.  For purposes of this 
calculation only, affiliates are deemed to be directors, executive officers 
and certain beneficial owners.

Number of shares of Common Stock outstanding at December 1, 1998: 1,642,792

                    DOCUMENTS INCORPORATED BY REFERENCE                    
(1) Portions of the Annual Report to Stockholders for the year ended 
    September 30, 1998 are incorporated into Part II, Items 5 through 8.
(2) Portions of the definitive proxy statement for the 1998 Annual Meeting 
    of Stockholders are incorporated into Part III, Items 10 through 13.

<PAGE>


                      TEXARKANA FIRST FINANCIAL CORPORATION

                                    Form 10-K

                                TABLE OF CONTENTS

                                                                       Page
                                     PART 1

     Item 1   Business................................................   1

     Item 2   Properties..............................................  36

     Item 3   Legal Proceedings.......................................  36

     Item 4   Submission of Matters To Vote of Security Holders.......  36

                                    PART II

     Item 5   Market for Registrant's Common Equity
              and Related Stockholder Matters.........................  37

     Item 6   Selected Financial Data.................................  37

     Item 7   Management's Discussion and Analysis of 
              Financial Condition and Results of Operations...........  37

     Item 8   Financial Statements and Supplementary Data.............  37

     Item 9   Changes in and Disagreements With Accountants
              on Accounting and Financial Disclosure..................  37

                                    PART III

     Item 10  Directors and Executive Officers of the Registrant......  38

     Item 11  Executive Compensation..................................  38

     Item 12  Security Ownership of Certain
              Beneficial Owners and Management........................  38

     Item 13  Certain Relationships and Related Transactions..........  38

                                    PART IV

     Item 14  Exhibits, Financial Statement Schedules
              and Reports on Form 8-K.................................  39


<PAGE>
PART I.


Item 1.  Business.

General

Texarkana First Financial Corporation (the "Company") is a Texas corporation 
organized in March 1995 by First Federal Savings and Loan Association of 
Texarkana ("First Federal" or the "Association") for the purpose of becoming a 
unitary holding company of the Association.  In July 1995, the Association 
converted from a federally chartered mutual savings and loan association to a 
federally chartered stock savings and loan association (the "Conversion").  
The Association is the only subsidiary of the Company and the Company's 
investment in the subsidiary is its only significant asset.

The business and management of the Company consists primarily of the business 
and management of the Association which is a federally chartered stock savings 
and loan association conducting business through its main office and four full 
service branch offices.

First Federal is primarily engaged in attracting deposits from the general 
public and using such deposits primarily to originate single-family (one-to-
four units) residential loans and to a significantly lesser extent, 
nonresidential or commercial real estate loans, construction loans on 
primarily residential properties, consumer loans and multi-family loans.  To a 
limited extent, the Association also invests in securities issued by the 
United States ("U.S.") Government and agencies thereof and mortgage-backed 
securities.  The Association derives its income principally from interest 
earned on loans and investments and, to a lesser extent, from fees received in 
connection with the origination of loans and for other services.  The 
Association's primary expenses are interest expense on deposits and general 
operating expenses.  Funds for activities are provided primarily by deposits, 
amortization and prepayments of outstanding loans and other sources.

The Association serves its market area of southwest Arkansas and northeast 
Texas as a community oriented, independent financial institution dedicated 
primarily to financing home ownership while providing needed financial 
services to its customers in an efficient manner.

The Association is subject to regulation by the Office of Thrift Supervision 
(the "OTS"), as its chartering authority and primary regulator, and by the 
Federal Deposit Insurance Corporation (the "FDIC"), which insures the 
Association's deposits up to applicable limits.  The Association also is 
subject to certain reserve requirements established by the Board of Governors 
of the Federal Reserve System ("Federal Reserve Board") and is a member of the 
Federal Home Loan Bank ("FHLB") of Dallas, which is one of the 12 banks which 
comprise the FHLB System.

The Company's executive offices are located at 3rd and Olive Streets, 
Texarkana, Arkansas 71854, and its telephone number is (870) 773-1103.

                                        1
<PAGE>
Market Area

First Federal is headquartered in Texarkana, Arkansas which is located where 
the southwest corner of Arkansas and the northeast corner of Texas meet.  It 
is approximately 70 miles north of Shreveport, Louisiana, 140 miles southwest 
of Little Rock, Arkansas and 180 miles northeast of Dallas, Texas.  Texarkana, 
Arkansas and Texarkana, Texas are the focal points of this general market area 
and serve as the hub of economic activity.  The Association's market area is 
comprised of Little River, Hempstead, Miller, Sevier and Howard Counties in 
Arkansas and Bowie County, Texas ("market area").  The Association conducts 
business through its five offices in the Arkansas cities of Texarkana, 
Ashdown, DeQueen, Hope and Nashville.  The Association's market area is 
characterized by a limited number of major employers or industries with a 
significantly higher level of residents employed in manufacturing and a lower 
level of people employed in the wholesale/retail trade industry.  The 
Association's market area has also been characterized by higher unemployment 
rates than Texas, Arkansas and the United States.  At September 30, 1998, the 
unemployment rate for the Association's principal market area of Miller 
County, Arkansas and Bowie County, Texas was 7.8%.  The unemployment rate of 
Miller County, Arkansas and Bowie County, Texas was 4.8% and 8.1%, 
respectively, and the statewide unemployment rate for both Arkansas and Texas 
was 5.0%.




Lending Activities

General.  At September 30, 1998, the Association's total portfolio of loans 
receivable, net of unearned income, amounted to $155.8 million or 82.2% of the 
Company's $189.5 million of total assets at such time.  

The Association has traditionally concentrated its lending activities on 
conventional first mortgage loans secured by single-family residential 
property.  Consistent with such approach, $105.4 million or 65.2% of the total 
loan portfolio consisted of one-to-four family residential loans.  The 
Association also originates multi-family residential loans, nonresidential 
real estate and land loans, construction loans, commercial business loans and 
consumer loans.  For each of these loan categories, the amount and percent of 
the total loan portfolio at September 30, 1998 was $1.6 million or 1.0% of 
multi-family residential loans, $25.5 million or 15.8% of nonresidential real 
estate and land loans, $13.0 million or 8.0% of construction loans, $2.8 
million or 1.7% of commercial business loans, and $13.4 million or 8.3% of 
consumer loans.

                                        2
<PAGE>
Loan Portfolio Composition.  The following table sets forth the composition of 
First Federal's loan portfolio by type of loan at the dates indicated.

                                              September 30,
                           __________________________________________________
                                 1998             1997             1996      
                            _______________  _______________  _______________
   (Dollars in Thousands)    Amount    %      Amount    %      Amount    %   
                            ________ ______  ________ ______  ________ ______
Real estate loans:
 One-to-four family.........$105,369  65.16% $105,163  69.27% $ 98,031  69.78%
 Multi-family...............   1,582    .98       806    .53     1,503   1.07
 Nonresidential and land....  25,517  15.78    25,889  17.05    19,765  14.07
 Construction...............  13,000   8.04     5,620   3.70     7,818   5.56
                             _______ ______   _______ ______   _______ ______
  Total real estate loans... 145,468  89.96   137,478  90.55   127,117  90.48
Commercial loans............   2,841   1.76     2,384   1.57     3,264   2.32
Consumer loans..............  13,394   8.28    11,966   7.88    10,107   7.20
                             _______ ______   _______ ______   _______ ______
   Total loans.............. 161,703 100.00%  151,828 100.00%  140,488 100.00%
                                     ======           ======           ======
Less:
 Loans in process...........   5,801            3,241            3,571       
 Deferred fees and discounts     121              116              112       
                             _______          _______          _______       
   Net loans................$155,781         $148,471         $136,805       
                             =======          =======          =======       



Contractual Maturities.  The following table presents the scheduled maturities 
of First Federal's loans at September 30, 1998.  Demand loans, loans having no 
stated schedule of repayment and no stated maturity, and overdraft loans are 
reported as due in one year or less.  The amounts shown for each maturity 
period do not take into consideration loan prepayments but do reflect normal 
amortization.

                             Amounts Due After September 30, 1998 in Years    
                          ____________________________________________________
                            One      Two     Three     Six     After          
                             or             through  through    Ten           
   (Dollars in Thousands)   Less             Five      Ten              Total 
                          _______  _______  _______  _______  _______  _______
Real estate loans:
 One-to-four family......$  1,124 $    165 $  4,481 $ 15,750 $ 83,849 $105,369
 Multi-family............       7       --       --      105    1,470    1,582
 Nonresidential and land.     338      627    2,329    5,806   16,417   25,517
 Construction............  13,000       --       --       --       --   13,000
Commercial loans.........     519       20      453    1,849       --    2,841
Consumer loans...........   4,310    2,010    5,530    1,177      367   13,394
                          _______  _______  _______  _______  _______  _______
  Total loans............$ 19,298 $  2,822 $ 12,793 $ 24,687 $102,103 $161,703
                          =======  =======  =======  =======  =======  =======

                                        3
<PAGE>
The following table sets forth the dollar amount of total loans at September 
30, 1998 which have fixed interest rates or which have floating or adjustable 
interest rates.

                                               September 30, 1998         
                                      ____________________________________
                                                  Floating or             
                                       Fixed      Adjustable              
          (Dollars in Thousands)        Rate         Rate           Total 
                                      _______     ___________     ________
   Real estate loans:
    One-to-four family...............$ 12,088       $ 93,281      $105,369
    Multi-family.....................       7          1,575         1,582
    Nonresidential and land..........   4,120         21,397        25,517
    Construction.....................   6,402          6,598        13,000
   Commercial loans..................   1,182          1,659         2,841
   Consumer loans....................  12,913            481        13,394
                                      _______        _______       _______
     Total loans.....................$ 36,712       $124,991      $161,703
                                      =======        =======       =======



Origination, Purchase and Sale of Loans.  The lending activities of the 
Association are subject to the written, non-discriminatory, underwriting 
standards and loan origination procedures established by the Association's 
Board of Directors and management.  Loan originations are obtained by a 
variety of sources, including builders, realtors, walk-in customers, branch 
managers and advertising.  The Association stresses its community ties, 
customized, personal service and an efficient underwriting and approval 
process.  The Association uses either an in-house or independent appraiser on 
all loans and typically uses an independent appraiser for nonresidential real 
estate loans over $400,000.  In addition, the Association requires hazard, 
title and, to the extent applicable, flood insurance on all secured property.
 
Loan applications are initially processed by loan officers or branch managers.  
Generally, loan officers and branch managers may approve loans up to $100,000 
and all other loans up to $300,000 are approved by the Association's Loan 
Committee consisting of the Association's Chief Executive Officer, president, 
Executive Vice President and certain other employees.  The Chief Executive 
Officer and one outside director may jointly approve loans between $300,000 
and $500,000, and loans over $500,000 must be approved by the Board of 
Directors.  All loans are ratified by the Association's Board of Directors.

Since 1985, the Association has not been an active purchaser of loans.  No 
loans were purchased in fiscal 1998 and fiscal 1997, and a $1.0 million 
participation interest in a local retirement center construction loan was 
purchased in fiscal 1996.

As part of its asset/liability management, the Association typically sells its 
conventional fixed-rate residential loans to the Federal Home Loan Mortgage 
Corporation ("FHLMC") with servicing retained and without recourse.  Sales of 
loans produce future servicing income if servicing is retained and provide 
funds for additional lending and other purposes.  The Association sold $13.3 
million, $2.2 million and $2.2 million of fixed-rate loans during fiscal 1998, 
1997 and 1996, respectively.

                                        4
<PAGE>
Loans sold to the FHLMC are not sold pursuant to forward sales commitments.  
Some loans have an interest rate that is set at the origination date and 
others have a rate that is set at the closing date.  For those loans with a 
rate set at origination, the Association assumes some interest rate risk since 
the market rate at date of sale could differ from the rate set at the 
origination date.

When loans are sold to the FHLMC, the Association retains the responsibility 
for servicing the loans, including collecting and remitting mortgage loan 
payments, accounting for principal and interest and holding and disbursing 
escrow or impound funds for real estate taxes and insurance premiums.  The 
Association receives a servicing fee for performing these services for others.  
At September 30, 1998, mortgage loans serviced for others amounted to $32.5 
million.

The Association also originates mortgage loans insured by the Federal Housing 
Administration ("FHA") and mortgage loans guaranteed by the Office of Veterans 
Affairs ("VA").  Such loans are sold to an independent mortgage company with 
servicing rights and without recourse.

The following table shows total loans originated, purchased, sold and repaid 
during the periods indicated.

                                                 Year Ended September 30, 
                                               ___________________________
              (Dollars in Thousands)             1998      1997      1996 
                                                ______    ______    ______
   Loan originations:
    One-to-four family residential.............$33,005   $18,172   $19,747
    Multi-family residential...................  1,291       193        --
    Nonresidential and land....................  2,990     7,173     3,737
    Construction............................... 13,854     8,543     8,216
    Commercial.................................    751       714     2,783
    Consumer................................... 11,363     9,448     7,137
                                                ______    ______    ______
     Total loan originations................... 63,254    44,243    41,620
                                                ______    ______    ______

   Loan purchases..............................     --        --     1,000
                                                ______    ______    ______

     Total loan originations and purchases..... 63,254    44,243    42,620
                                                ______    ______    ______

   Less sales and loan principal repayments:
    Loans sold................................. 13,643     2,160     2,179
    Loan principal repayments.................. 39,358    29,948    24,737
                                                ______    ______    ______
     Total loans sold and principal repayments. 53,001    32,108    26,916
                                                ______    ______    ______

   Increase (decrease) due to other items, net.   (378)     (794)   (1,087)
                                                ______    ______    ______
   Net increase (decrease) in total loans......$ 9,875   $11,341   $14,617
                                                ======    ======    ======

                                        5
<PAGE>
Loans-to-One Borrower.  A savings institution generally may not make loans to 
one borrower and related entities in an amount which exceeds 15% of its 
unimpaired capital and surplus, although loans in an amount equal to an 
additional 10% of unimpaired capital and surplus may be made to a borrower if 
the loans are fully secured by readily marketable securities.  At September 
30, 1998, the Association's limit on loans-to-one borrower was approximately 
$4.2 million.  The Association's largest loan or group of loans-to-one 
borrower, including persons or entities related to the borrower, is an 
aggregate of four loans with total outstanding balances of $3.3 million and 
includes two commercial real estate loans totaling $3.2 million, one 
commercial business loan of $9,000 and one consumer loan of $120,000.  The 
Association also has outstanding loans to three different borrowers in Ft. 
Worth, Texas secured by three commercial buildings with total outstanding 
balances of $2.5 million.  As of September 30, 1998, these loans are current 
as to payments of principal and interest and are performing according to the 
terms of the loan documents.

One-to-Four Family Residential Real Estate Loans.  The Association has 
historically concentrated its lending activities on the origination of loans 
secured by first mortgage liens on existing one-to-four family residences.  At 
September 30, 1998, $105.4 million or 65.2% of the total loan portfolio 
consisted of one-to-four family residential real estate loans.  The 
Association originated $33.0 million, $18.2 million and $19.7 million of one-
to-four family residential loans in fiscal 1998, 1997 and 1996, respectively, 
and intends to continue to emphasize the origination of permanent loans 
secured by first mortgage liens on one-to-four family residential properties 
in the future.  Of the $105.4 million of such loans at September 30, 1998, 
$93.3 million or 88.5% had adjustable-rates of interest and $12.1 million or 
11.5% had fixed-rates of interest.  The Association's fixed-rate loans are 
originated primarily with terms of 15, 20 and 30 years.  Most of the 
Association's fixed-rate residential loans are originated pursuant to 
commitments to sell such loans to the FHLMC with servicing retained.

The Association currently originates for its portfolio one-to-four family 
residential mortgage loans which typically provide for an interest rate which 
adjusts every year in accordance with a designated index (the weekly average 
yield on U.S. Treasury securities adjusted to a constant comparable maturity 
of one year) plus a margin.  Such loans are typically based on a 15 to 30-year 
amortization schedule.  The Association does not offer "teaser" rates, and, 
generally, the amount of any increase or decrease in the interest rate after 
the initial one year period is limited to 2% per year, with a limit of 5% over 
the life of the loan.  The Association also originates residential mortgage 
loans with an interest rate which is fixed for three or five years and adjusts 
every three or five year period thereafter.  Generally, such loans have a 
lifetime ceiling of 5% over the initial rate.  The Association's adjustable-
rate loans are assumable and do not contain prepayment penalties.  The 
Association underwrites its adjustable rate loans on the basis of the 
borrowers ability to pay at the rate after the first adjustment.

Adjustable-rate loans decrease the risks associated with changes in interest 
rates but involve other risks, primarily because as interest rates rise, the 
payment by the borrower rises to the extent permitted by the terms of the 
loan, thereby increasing the potential for default.  At the same time, the 
marketability of the underlying property may be adversely affected by higher 
interest rates.  The Association believes that these risks, which have not had 
a material adverse effect on the Association to date, generally are less than 
the risks associated with holding fixed-rate loans in an increasing interest 
rate environment.

                                        6
<PAGE>
The Association's residential mortgage loans typically do not exceed 80% of 
the appraised value of the security property.  However, the Association is 
permitted to lend up to 100% of the appraised value of the real property 
securing a residential loan; however, if the amount of a residential loan 
originated or refinanced exceeds 90% of the appraised value, the Association 
is required by federal regulations to obtain private mortgage insurance on the 
portion of the principal amount that exceeds 80% of the appraised value of the 
security property.  Pursuant to underwriting guidelines adopted by the Board 
of Directors, the Association can lend up to 95% of the appraised value of the 
property securing a one-to-four family residential loan, and generally 
requires borrowers to obtain private mortgage insurance on the portion of the 
principal amount of the loan that exceeds 80% of the appraised value of the 
security property.

Multi-Family Residential Real Estate Loans.  Although the Association does not 
emphasize multi-family residential loans and has not been active in this area, 
the Association has, in the past, originated mortgage loans for the 
acquisition and refinancing of existing multi-family residential properties.  
At September 30, 1998, $1.6 million or 1.0% of the total loan portfolio 
consisted of loans secured by existing multi-family residential real estate 
properties.  Such amount primarily represents loans secured by apartment 
buildings located in the Association's primary market area. 

Multi-family loans are made on terms up to 25 years with adjustable rates.  
Loan to value ratios on the Association's multi-family real estate loans are 
currently limited to 75%.  It is also the Association's general policy to 
obtain corporate or personal guarantees, as applicable, on its multi-family 
residential real estate loans from the principals of the borrower.

Multi-family real estate lending entails significant additional risks as 
compared with one-to-four family residential property lending.  Such loans 
typically involve large loan balances to single borrowers or groups of related 
borrowers.  The payment experience on such loans is typically dependent on the 
successful operation of the real estate project.  The success of such projects 
is sensitive to changes in supply and demand conditions in the market for 
multi-family real estate as well as economic conditions generally.  

Nonresidential Real Estate and Land Loans.  The Association originates 
mortgage loans for the acquisition and refinancing of nonresidential or 
commercial real estate properties and land development loans to local 
developers and individuals.  At September 30, 1998, $22.1 million or 13.7% of 
the total loan portfolio consisted of loans secured by existing commercial 
real estate properties and $3.4 million or 2.1% of the total loan portfolio 
consisted of land loans.  Management currently anticipates that commercial 
real estate loans will continue to comprise a substantial portion of the loan 
portfolio in the future. 

The majority of the Association's commercial real estate loans are secured by 
office buildings, churches, retail shops and manufacturing facilities.  
Substantially all of the Association's commercial real estate loans are 
secured by property located in the Association's market area.

                                        7
<PAGE>
The Association requires appraisals of all properties securing commercial real 
estate loans.  Appraisals are performed by an in-house appraiser or an 
independent appraiser designated by the Association, depending upon the size 
of the loan, all of which are reviewed by management.  The Association 
considers the quality and location of the real estate, the credit of the 
borrower, cash flow of the project and the quality of management involved with 
the property.

The Association will originate commercial real estate loans with fixed 
interest rates or interest rates which adjust in accordance with a designated 
index.  Such loans are typically based on a 10 to 20 year amortization 
schedule.  Loan to value ratios on the Association's commercial real estate 
loans are generally limited to 85%.  As part of the criteria for underwriting 
multi-family and commercial real estate loans, the Association generally 
imposes a debt coverage ratio (the ratio of net cash from operations before 
payment of debt service to debt service) of not less than 1.25.  It is also 
the Association's policy to typically obtain corporate or personal guarantees, 
as applicable, on its commercial real estate loans from the principals of the 
borrower.

Commercial real estate lending entails significant additional risks as 
compared with single-family residential property lending.  Such loans 
typically involve large loan balances to single borrowers or groups of related 
borrowers.  The payment experience on such loans is typically dependent on the 
successful operation of the real estate project.  The success of such projects 
is sensitive to changes in supply and demand conditions in the market for 
commercial real estate as well as regional and economic conditions generally.

The Association originates land loans to local developers for the purpose of 
developing the land (i.e., roads, sewer and water).  In addition, the 
Association originates lot loans to individuals for the purpose acquiring home 
sites.  Such loans are secured by a lien on the property and are typically 
limited to 80% of the value of the secured property.  Land loans to developers 
are limited to a term of eight years while lot loans to individuals are 
limited to a term of 15 years.

Construction Loans.  The Association also originates primarily residential 
construction loans, although the Association has originated nonresidential 
construction loans to a limited degree.  Construction loans are classified as 
either residential or nonresidential at the time of origination, depending on 
the nature of the property securing the loan.  The Association's construction 
lending activities are limited to the Association's primary market area.  At 
September 30, 1998, construction loans amounted to $13.0 million or 8.0% of 
the total loan portfolio, of which $10.5 million consisted of residential 
construction loans and $2.5 million consisted of nonresidential construction 
loans.  The Association's construction loans generally have fixed interest 
rates for a term of six months, with payments being made monthly on an 
interest-only basis.  However, the Association is permitted to extend a 
construction loan up to two years under its loan policy.  Construction loans 
to builders are made with a maximum loan to value ratio of 75%.  Construction 
loans to individuals are typically made with a loan to value ratio of 80%, 
although the Association will make such loans with a loan to value ratio up to 
95% with private mortgage insurance.

                                        8
<PAGE>
With limited exceptions, the Association's construction loans are made to 
individual homeowners and a limited number of local real estate builders and 
developers for the purpose of constructing one-to-four family residential 
homes.  Upon application, credit review and analysis of personal and corporate 
financial statements, the Association will make loans to local builders.  
These loans may be used for the purpose of construction of speculative (or 
unsold) residential properties although a majority of the loans to builders 
are for the construction of pre-sold single-family homes.  Once approved for a 
construction line, draws are granted on a percentage of completion basis.  The 
Association also inspects construction projects as draws are requested.

Construction lending is generally considered to involve a higher level of risk 
as compared to one-to-four family residential lending, due to the 
concentration of principal in a limited number of loans and borrowers and the 
effects of general economic conditions on developers and builders.  Moreover, 
a construction loan can involve additional risks because of the inherent 
difficulty in estimating both a property's value at completion of the project 
and the estimated cost (including interest) of the project.  The nature of 
these loans is such that they are generally more difficult to evaluate and 
monitor.  In addition, speculative construction loans to a builder are not 
pre-sold and thus pose a greater potential risk to the Association than 
construction loans to individuals on their personal residences.

The Association has attempted to minimize the foregoing risks by, among other 
things, limiting the extent of its construction lending generally and by 
limiting its construction lending to primarily residential properties.  In 
addition, the Association has adopted underwriting guidelines which impose 
stringent loan-to-value, debt service and other requirements for loans which 
are believed to involve higher elements of credit risk, by limiting the 
geographic area in which the Association will do business and by working with 
builders with whom it has established relationships.

Commercial Business Loans.  The Association offers commercial business loans 
which include working capital lines of credit and term loans for financing 
inventory, accounts receivable, equipment and acquisitions.  Depending on the 
collateral pledged to secure the extension of credit, maximum loan to value 
ratios range from 50% of used equipment value to 90% of pledged deposits at 
the Association.  Also, personal guarantees are generally obtained from the 
principals of the borrower.  Loan terms vary from one year for lines of credit 
to 10 years for equipment and business acquisition loans.  The interest rates 
can be fixed or adjustable.  At September 30, 1998, commercial business loans 
amounted to $2.8 million or 1.7% of the total loan portfolio.

Consumer Loans.  The Association offers consumer loans in order to provide a 
full range of financial services to its customers.  The consumer loans offered 
by the Association include home improvement loans, automobile loans, deposit 
account secured loans and other personal loans.  At September 30, 1998, 
consumer loans amounted to $13.4 million or 8.3% of the total loan portfolio 
with $2.8 million in home improvement loans, $5.3 million in automobile loans, 
$1.0 million in loans secured by deposit accounts and $4.3 million in other 
personal loans..

The Association's home improvement loans are typically adjustable rate loans 
with terms of between five and ten years.   Although the Association does not 
require that it hold the first mortgage on the secured property, the 
Association does hold the first mortgage on a significant majority of its home 
improvement loans.  The Association generally limits the mortgages on the 
secured property to 80% of the value of the secured property.

                                        9
<PAGE>
The Association's automobile loans are originated by the Association and are 
typically for the purchase of new and used cars and trucks.  Such loans are 
generally originated with a maximum term of five years.

Loans secured by deposit accounts are originated for up to 90% of the account 
balance, with a hold placed on the account restricting the withdrawal of the 
account balance.

Asset Quality

When a borrower fails to make a required payment on a loan, the Association 
attempts to cure the deficiency by contacting the borrower and seeking the 
payment.  Depending upon the type of loan, late notices are sent and/or 
personal contacts are made.  In most cases, deficiencies are cured promptly.  
While the Association generally prefers to work with borrowers to resolve such 
problems, when a mortgage loan becomes 90 days delinquent, the Association 
institutes foreclosure or other proceedings, as necessary, to minimize any 
potential loss.

Loans are placed on non-accrual status when, in the judgment of management, 
the probability of collection of interest is deemed to be insufficient to 
warrant further accrual.  When a loan is placed on non-accrual status, 
previously accrued but unpaid interest is deducted from interest income.  The 
Association does not accrue interest on real estate loans past due 90 days or 
more unless, in the opinion of management, the value of the property securing 
the loan substantially exceeds the outstanding balance of the loan (principal, 
interest and escrows) and collection is probable.  Loans may be reinstated to 
accrual status when all payments are brought current and, in the opinion of 
management, collection of the remaining balance can be reasonably expected.

Real estate acquired by the Association as a result of foreclosure or by deed-
in-lieu of foreclosure is classified as other real estate owned until sold.  
Pursuant to a statement of position ("SOP 92-3") issued by the AICPA in April 
1992, which provides guidance on determining the balance sheet treatment of 
foreclosed assets in annual financial statements for periods ending on or 
after December 15, 1992, there is a rebuttable presumption that foreclosed 
assets are held for sale and such assets are recommended to be carried at the 
lower of fair value minus estimated costs to sell the property, or cost 
(generally the balance of the loan on the property at the date of 
acquisition).  After the date of acquisition, all costs incurred in 
maintaining the property are expended and costs incurred for the improvement 
or development of such property are capitalized up to the extent of their net 
realizable value.  The Association's accounting for its real estate acquired 
by foreclosure complies with the guidance set forth in SOP 92-3.

Under generally accepted accounting principles, the Association is required to 
account for certain loan modifications or restructurings as "troubled debt 
restructurings."  In general, the modification or restructuring of a debt 
constitutes a troubled debt restructuring if the Association, for economic or 
legal reasons related to the borrower's financial difficulties, grants a 
concession to the borrower that the Association would not otherwise consider.  
Debt restructurings or loan modifications for a borrower do not necessarily 
always constitute troubled debt restructurings, however, and troubled debt 
restructurings do not necessarily result in non-accrual loans.  The 
Association did not have any troubled debt restructurings as of September 30, 
1998.

Delinquent Loans.  The following table sets forth information concerning 
delinquent loans as of September 30, 1998, in dollar amounts and as a 
percentage of First Federal's total loan portfolio.  The amounts presented 
represent the total outstanding principal balances of the related loans, 
rather than the actual payment amounts which are past due.

                                        10
<PAGE>
                                          September 30, 1998
                           _________________________________________________
                                            Days Delinquent
                           _________________________________________________
                              30-59 Days       60-89 Days    90 or More Days
                           _______________  _______________  _______________
                                   Percent          Percent          Percent
                                  of Total         of Total         of Total
  (Dollars in Thousands)   Amount  Loans    Amount  Loans    Amount  Loans  
                           ______ ________  ______ ________  ______ ________
Real estate loans:
 One-to-four family........$  844    .52%   $  192    .12%   $  177    .11% 
 Multi-family..............    --     --        --     --        --     --  
 Nonresidential and land...   139    .09       635    .39        10    .01  
 Construction..............   194    .12       203    .13        84    .05  
Commercial loans...........    --     --        --     --         9     --  
Consumer loans.............   223    .14        21    .01        13    .01  
                            _____            _____            _____         
  Total delinquent loans...$1,400    .87%   $1,051    .65%   $  293    .18% 
                            =====            =====            =====         



The following table sets forth the amounts and categories of First Federal's 
nonperforming assets and troubled debt restructurings and other selected 
statistics at the dates indicated.

                                                      September 30,
                                                _________________________
                (Dollars in Thousands)           1998      1997      1996
                                                _____     _____     _____
     Non-accruing loans:
       One-to-four family residential..........$   --    $   --    $   66
       Multi-family residential................    --        --        --
       Nonresidential and land.................    --        --        --
       Construction............................    --        --        --
       Commercial..............................    --        --        --
       Consumer................................    --        --         2
                                                _____     _____     _____
         Total non-accruing loans..............    --        --        68
     Accruing loans 90 days or 
       more delinquent.........................   293       280       144
     Restructured debt.........................    --        --        --
                                                _____     _____     _____
         Total nonperforming loans.............   293       280       212
                                                _____     _____     _____
     Real estate owned, net....................    56       127        72
                                                _____     _____     _____
         Total nonperforming assets............$  349    $  407    $  284
                                                =====     =====     =====


     Loans, net of unearned income...........$155,781  $148,471  $136,805
     Total assets............................ 189,451   178,710   165,747


     Total nonperforming loans to
       total loans.............................  .19%      .19%      .15%
     Total nonperforming assets to
       total assets............................  .18%      .23%      .17%

                                        11
<PAGE>
Interest income that would have been recorded under the original terms of the 
Association's non-accruing loans for fiscal years 1998, 1997 and 1996 amounted 
to $0, $0 and $6,000, respectively, and the interest recognized during fiscal 
years 1998, 1997 and 1996 amounted to $0, $0 and $2,000, respectively.

The $56,000 of REO at September 30, 1998 consists of one single-family 
residence located within our market area.


Classified Assets.  Federal regulations require that each insured savings 
association classify its assets on a regular basis.  In addition, in 
connection with examinations of insured institutions, federal examiners have 
authority to identify problem assets and, if appropriate, classify them.  
There are three classifications for problem assets: "substandard," "doubtful" 
and "loss."  Substandard assets have one or more defined weaknesses and are 
characterized by the distinct possibility that the insured institution will 
sustain some loss if the deficiencies are not corrected.  Doubtful assets have 
the weaknesses of substandard assets with the additional characteristic that 
the weaknesses make collection or liquidation in full on the basis of 
currently existing facts, conditions and values questionable, and there is a 
high possibility of loss.  An asset classified loss is considered 
uncollectible and of such little value that continuance as an asset of the 
institution is not warranted.  At September 30, 1998, the Association had 
$859,000 of loans which were classified as substandard.


Allowance for Loan Losses.  It is management's policy to maintain an allowance 
for estimated losses based on the perceived risk of loss in the loan portfolio 
and the adequacy of the allowance.  Management's periodic evaluation of the 
adequacy of the allowance is based on the Association's past loan loss 
experience, known and inherent risks in the portfolio, adverse situations that 
may affect the borrower's ability to repay, the estimated value of the 
underlying collateral and current economic conditions.  The allowance is 
increased by provisions for loan losses which are charged against income.

Although management uses the best information available to make determinations 
with respect to the provisions for loan losses, additional provisions for loan 
losses may be required to be established in the future should economic or 
other conditions change substantially.  In addition, the OTS and the FDIC, as 
an integral part of their examination process, periodically review the 
Association's allowance for possible loan losses.  Such agencies may require 
the Association to recognize additions to such allowance based on their 
judgments about information available to them at the time of their 
examination.

                                        12
<PAGE>
The following table summarizes changes in the allowance for possible loan 
losses and other selected statistics for the periods presented.

                                               Year Ended September 30,
                                          __________________________________
         (Dollars in Thousands)             1998         1997         1996  
                                          ________     ________     ________
Allowance for loan losses, beginning
 of period................................$  1,124     $  1,145     $  1,149
                                           _______      _______      _______
Loans charged-off:
  Residential real estate.................      (1)          (2)          --
  Nonresidential real estate..............      --           --           --
  Commercial loans........................      --           --           --
  Consumer loans..........................     (20)         (19)          (4)
                                           _______      _______      _______
   Total charge-offs......................     (21)         (21)          (4)
                                           _______      _______      _______
Recoveries of loans 
 previously charged-off:
  Residential real estate.................      --           --           --
  Nonresidential real estate..............      --           --           --
  Commercial loans........................      --           --           --
  Consumer loans..........................      --           --           --
                                           _______      _______      _______
   Total recoveries.......................      --           --           --
                                           _______      _______      _______
   Net charge-offs........................     (21)         (21)          (4)
                                           _______      _______      _______
Provision for loan losses.................    (100)          --           --
                                           _______      _______      _______
Allowance for loan losses, end
 of period................................$  1,003     $  1,124     $  1,145
                                           =======      =======      =======


Loans, net of unearned income.............$155,781     $148,471     $136,805
Total nonperforming loans.................     293          280          212
Average total loans....................... 149,774      141,830      129,182


Allowance for loan losses to
 total loans..............................     .64%         .76%         .84%
Allowance for loan losses to
 nonperforming loans......................  342.32%      401.43%      540.09%
Net charge-offs to
 average total loans......................    .014%        .015%        .003%

                                        13
<PAGE>
The following table presents the allocation of First Federal's allowance for 
possible loan losses by loan classification at each of the dates indicated.

                                                September 30,
                                    _____________________________________
          (Dollars in Thousands)       1998          1997          1996  
                                    _________     _________     _________
   Real estate loans:
    One-to-four family.............. $  207        $  205        $  246  
    Multi-family....................      8             6            20  
    Nonresidential and land.........    540           542           494  
    Construction....................     18            12            10  
   Commercial loans.................     28            34            34  
   Consumer loans...................     99            86            52  
   Unallocated/general..............    103           239           289  
                                      _____         _____         _____  
     Total allowance................ $1,003        $1,124        $1,145  
                                      =====         =====         =====  


The following table presents, for each of the dates indicated, the percentage 
of the allowance for loan losses allocated to each loan classification, and 
the percentage of total loans applicable to each loan classification.

                                              September 30,
                            __________________________________________________
                                  1998             1997             1996      
                            ________________ ________________ ________________
                            Allowance Loans  Allowance Loans  Allowance Loans 
                            _________ ______ _________ ______ _________ ______
Real estate loans:
 One-to-four family.........   20.6%   65.1%    18.2%   69.3%    21.5%   69.8%
 Multi-family...............     .8     1.0       .5      .5      1.8     1.1 
 Nonresidential and land....   53.8    15.8     48.2    17.0     43.1    14.1 
 Construction...............    1.8     8.0      1.1     3.7       .9     5.5 
Commercial loans............    2.8     1.8      3.0     1.6      3.0     2.3 
Consumer loans..............    9.9     8.3      7.7     7.9      4.5     7.2 
Unallocated/general.........   10.3      --     21.3      --     25.2      -- 
                              _____   _____    _____   _____    _____   _____ 
  Total.....................  100.0%  100.0%   100.0%  100.0%   100.0%  100.0%
                              =====   =====    =====   =====    =====   ===== 


Investment Activities

Mortgage-Backed Securities.  Mortgage-backed securities (which also are known 
as mortgage participation certificates or pass-through certificates) typically 
represent a participation interest in a pool of single-family or multi-family 
mortgages, the principal and interest payments on which are passed from the 
mortgage originators, through intermediaries (generally U.S. Government 
agencies and government sponsored enterprises) that pool and repackage the 
participation interests in the form of securities, to investors such as the 
Association.  Such U.S. Government agencies and government sponsored 
enterprises, which guarantee the payment of principal and interest to 
investors, primarily include the FHLMC, the Federal National Mortgage 
Association ("FNMA") and the Government National Mortgage Association 
("GNMA").

                                        14
<PAGE>
The FHLMC is a public corporation chartered by the U.S. government and 
guarantees the timely payment of interest and the ultimate return of principal 
within one year.  The FHLMC mortgage-backed securities are not backed by the 
full faith and credit of the United States, but because the FHLMC is a U.S. 
government sponsored enterprise, these securities are considered high quality 
investments with minimal credit risks.  The GNMA is a government agency within 
the Department of Housing and Urban Development which is intended to help 
finance government assisted housing programs.  The GNMA guarantees the timely 
payment of principal and interest, and GNMA securities are backed by the full 
faith and credit of the U.S. Government.  The FNMA guarantees the timely 
payment of principal and interest, and FNMA securities are indirect 
obligations of the U.S. Government.

Mortgage-backed securities typically are issued with stated principal amounts, 
and the securities are backed by pools of mortgages that have loans with 
interest rates that are within a range and have varying maturities.  The 
underlying pool of mortgages, i.e., fixed rate or adjustable rate, as well as 
the prepayment risk, are passed on to the certificate holder.  Accordingly, 
the life of a mortgage-backed pass-through security approximates the life of 
the underlying mortgages.  At September 30, 1998, $8.0 million of the 
mortgage-backed securities were classified as available for sale and $.8 
million were classified as held to maturity.

The following table presents the composition of the mortgage-backed securities 
portfolio at each of the dates indicated.

                                               September 30,
                              ________________________________________________
                                   1998             1997             1996     
                              ______________   ______________   ______________
                                      Market           Market           Market
    (Dollars in Thousands)     Cost    Value    Cost    Value    Cost    Value
                              ______  ______   ______  ______   ______  ______
Mortgage-backed securities:
Held to maturity:
  FHLMC...................... $  437  $  452   $  588  $  619   $  709  $  734
  FNMA.......................    412     416      705     711      809     804
                               _____   _____    _____   _____    _____   _____
    Total held to maturity...    849     868    1,293   1,330    1,518   1,538
                               _____   _____    _____   _____    _____   _____
Available for sale:
  FNMA.......................    578     581       --      --       --      --
  GNMA.......................  7,378   7,320    5,460   5,460       --      --
                               _____   _____    _____   _____    _____   _____
    Total available for sale.  7,956   7,901    5,460   5,460       --      --
                               _____   _____    _____   _____    _____   _____
    Total Mortgage-backed
    securities............... $8,805  $8,769   $6,753  $6,790   $1,518  $1,538
                               =====   =====    =====   =====    =====   =====

                                        15
<PAGE>
The following table sets forth the contractual maturities of the mortgage-
backed securities portfolio at September 30, 1998.

                               Amounts at September 30, 1998 Which Mature In
                              ________________________________________________
                               1 Year    1 to 5    5 to 10   Over 10          
    (Dollars in Thousands)     or Less    Years     Years     Years     Total 
                              ________  ________  ________  ________  ________
Mortgage-backed securities:
Held to maturity:
  FHLMC....................... $   --    $   --    $  437    $   --    $  437 
  FNMA........................     --       412        --        --       412 
                                _____     _____     _____     _____     _____ 
    Total held to maturity....     --       412       437        --       849 
                                _____     _____     _____     _____     _____ 
Available for sale:
  FNMA........................     --        --        --       578       578 
  GNMA........................     --        --        --     7,378     7,378 
                                _____     _____     _____     _____     _____ 
    Total available for sale..     --        --        --     7,956     7,956 
                                _____     _____     _____     _____     _____ 
    Total mortgage-backed
    securities................ $   --    $  412    $  437    $7,956    $8,805 
                                =====     =====     =====     =====     ===== 


Mortgage-backed securities generally increase the quality of the Association's 
assets by virtue of the insurance or guarantees that back them, are more 
liquid than individual mortgage loans and may be used to collateralize 
borrowings or other obligations of the Association.  At September 30, 1998, 
$8.0 million of the Association's mortgage-backed securities were pledged to 
secure obligations of the Association. 

The actual maturity of a mortgage-backed security may be less than its stated 
maturity due to prepayments of the underlying mortgages.  Prepayments that are 
faster than anticipated may shorten the life of the security and adversely 
affect its yield to maturity.  The yield is based upon the interest income and 
the amortization of any premium or discount related to the mortgage-backed 
security.  In accordance with generally accepted accounting principles, 
premiums and discounts are amortized over the estimated lives of the loans, 
which decrease and increase interest income, respectively.  The prepayment 
assumptions used to determine the amortization period for premiums and 
discounts can significantly affect the yield of the mortgage-backed security, 
and these assumptions are reviewed periodically to reflect actual prepayments.  
Although prepayments of underlying mortgages depend on many factors, including 
the type of mortgages, the coupon rate, the age of mortgages, the geographical 
location of the underlying real estate collateralizing the mortgages and 
general levels of market interest rates, the difference between the interest 
rates on the underlying mortgages and the prevailing mortgage interest rates 
generally is the most significant determinant of the rate of prepayments.  
During periods of falling mortgage interest rates, if the coupon rate of the 
underlying mortgages exceeds the prevailing market interest rates offered for 
mortgage loans, refinancing generally increases and accelerates the prepayment 
of the underlying mortgages and the related security.  Under such 
circumstances, the Association may be subject to reinvestment risk because to 
the extent that the Association's mortgage-backed securities amortize or 
prepay faster than anticipated, the Association may not be able to reinvest 
the proceeds of such repayments and prepayments at a comparable rate.

                                        16
<PAGE>
Investment Securities.  The investment policy, as established by the Board of 
Directors, is designed primarily to provide and maintain liquidity and to 
generate a favorable return on investments without incurring undue interest 
rate risk, credit risk, and investment portfolio asset concentrations.  The 
investment policy is currently implemented by the Chairman, President and 
Chief Financial Officer within the parameters set by the Board of Directors.

The Company and the Association are authorized to invest in obligations issued 
or fully guaranteed by the U.S. Government, certain federal agency 
obligations, certain time deposits, negotiable certificates of deposit issued 
by commercial banks and other insured financial institutions, investment grade 
corporate debt securities and other specified investments.

Securities that management has the intent and positive ability to hold to 
maturity are classified as held to maturity and are reported at amortized 
cost.  Securities classified as available for sale are reported at fair value, 
with unrealized gains and losses excluded from earnings and reported in a 
separate component of equity.  At September 30, 1998, $17.5 million of the 
investment securities were classified as available for sale and $1.2 million 
were classified as held to maturity.

The following table sets forth the composition of the investment securities 
portfolio at the dates indicated.

                                                September 30,
                              ________________________________________________
                                   1998             1997             1996     
                              ______________   ______________   ______________
                                      Market           Market           Market
    (Dollars in Thousands)     Cost    Value    Cost    Value    Cost    Value
                              ______  ______   ______  ______   ______  ______
Investment securities:
Available for sale:
 U.S. Government securities..$17,106 $17,415  $13,184 $13,307  $14,898 $14,887
 Equity securities...........    396     335       --      --       --      --
                              ______  ______   ______  ______   ______  ______
  Total available for sale... 17,502  17,750   13,184  13,307   14,898  14,887
                              ______  ______   ______  ______   ______  ______
Held to maturity:
 Federal Home Loan Bank stock  1,185   1,185    1,116   1,116    1,053   1,053
                              ______  ______   ______  ______   ______  ______
  Total held to maturity.....  1,185   1,185    1,116   1,116    1,053   1,053
                              ______  ______   ______  ______   ______  ______
  Total investment securities$18,687 $18,935  $14,300 $14,423  $15,951 $15,940
                              ======  ======   ======  ======   ======  ======

                                        17
<PAGE>
The following table sets forth the amount of investment securities which 
mature during each of the periods indicated.

                               Amounts at September 30, 1998 Which Mature In 
                              _______________________________________________
                              1 Year     1 to 5   5 to 10   Over 10          
    (Dollars in Thousands)    or Less     Years    Years     Years     Total 
                              _______   _______   _______   _______   _______
Investment securities
Available for sale:
 U.S. Government securities...$   500   $13,110   $ 2,996   $   500   $17,106
 Equity securities............    396        --        --        --       396
                               ______    ______    ______    ______    ______
  Total available for sale....    896    13,110     2,996       500    17,502
                               ______    ______    ______    ______    ______
Held to maturity:
 Federal Home Loan Bank stock.  1,185        --        --        --     1,185
                               ______    ______    ______    ______    ______
  Total held to maturity......  1,185        --        --        --     1,185
                               ______    ______    ______    ______    ______
  Total investment securities $ 2,081   $13,110   $ 2,996   $   500   $18,687
                               ======    ======    ======    ======    ======


Sources of Funds

General.  Deposits are the primary source of the Association's funds for 
lending and other investment purposes.  In addition to deposits, the 
Association derives funds from loan principal repayments, prepayments and 
advances from the FHLB of Dallas.  Loan repayments are a relatively stable 
source of funds, while deposit inflows and outflows are significantly 
influenced by general interest rates and money market conditions.  Borrowings 
may be used on a short-term basis to compensate for reductions in the 
availability of funds from other sources.  They may also be used on a longer 
term basis for general business purposes.

Deposits.  The Association's deposit products include a broad selection of 
deposit instruments, including NOW accounts, money market accounts, regular 
savings accounts and term certificate accounts.  Deposit account terms vary, 
with the principal differences being the minimum balance required, the time 
periods the funds must remain on deposit and the interest rate.

The Association considers its primary market area to be southwest Arkansas and 
northeast Texas.  The Association utilizes traditional marketing methods to 
attract new customers and savings deposits.  The Association does not 
advertise for deposits outside of its primary market area or utilize the 
services of deposit brokers, and management believes that an insignificant 
number of deposit accounts were held by non-residents of Arkansas and Texas at 
September 30, 1998.

The Association has been competitive in the types of accounts and in interest 
rates it has offered on its deposit products but does not necessarily seek to 
match the highest rates paid by competing institutions.  Although market 
demand generally dictates which deposit maturities and rates will be accepted 
by the public, the Association intends to continue to promote longer term 
deposits to the extent possible and consistent with its asset and liability 
management goals.

                                        18
<PAGE>
The following table sets forth, by type of deposit, the distribution of the 
amount of deposits and the percentage of total deposits as of the dates 
indicated.

                                               September 30,                 
                             ________________________________________________
                                  1998             1997             1996     
                             ______________   ______________   ______________
    (Dollars in Thousands)    Amount    %      Amount    %      Amount    %  
                             ________ _____   ________ _____   ________ _____
Certificates of deposit:
    2.01% to  4.00%..........$    200    .1%  $    295    .2%  $    632   0.5%
    4.01% to  6.00%.......... 118,730  78.2    109,606  76.6     98,572  74.1
    6.01% to  8.00%..........  11,996   7.9     13,923   9.7     13,577  10.2
    8.01% and over...........       5   0.0          4   0.0          4   0.0
                              _______ _____    _______ _____    _______ _____
 Total certificate accounts.. 130,931  86.2    123,828  86.5    112,785  84.8
                              _______ _____    _______ _____    _______ _____
Passbook and statement
 savings accounts............   6,272   4.1      5,257   3.7      5,917   4.4
Money market accounts........   7,981   5.3      7,500   5.2      8,045   6.0
NOW accounts.................   5,371   3.5      5,262   3.7      5,120   3.9
Noninterest bearing deposits.   1,400    .9      1,360    .9      1,204    .9
                              _______ _____    _______ _____    _______ _____
 Total deposits..............$151,955 100.0%  $143,207 100.0%  $133,071 100.0%
                              ======= =====    ======= =====    ======= =====



The following table presents, by type of deposit, the average balance and the 
average rate paid for the periods indicated.

                                         Year Ended September 30,            
                             ________________________________________________
                                  1998             1997             1996     
                             ______________   ______________   ______________
                                 Average          Average          Average   
    (Dollars in Thousands)    Balance  Rate    Balance  Rate    Balance  Rate
                             ________ _____   ________ _____   ________ _____

Certificates of deposit..... $126,634  5.48%  $117,718  5.42%  $107,866  5.49%
Passbook and statement
 savings accounts...........    5,713  3.30      5,417  3.26      5,280  3.18
Money market and
 NOW accounts...............   14,664  2.81     14,044  2.72     13,937  2.57
Noninterest bearing accounts    1,359    --      1,200    --      1,026    --
                              _______  ____    _______  ____    _______  ____
  Total deposits............ $148,370  5.08%  $138,379  5.01%  $128,109  5.05%
                              =======  ====    =======  ====    =======  ====

                                        19
<PAGE>
The following table sets forth the net deposit flows during the periods 
indicated.

                                                Year Ended September 30,   
                                            _______________________________
           (Dollars in Thousands)              1998       1997       1996  
                                            _________  _________  _________

Increase(decrease) before interest credited. $ 3,610    $ 5,504    $ 3,844 
Interest credited...........................   5,138      4,632      4,274 
                                              ______     ______     ______ 
 Net increase(decrease) in deposits......... $ 8,748    $10,136    $ 8,118 
                                              ======     ======     ====== 



The following table presents, by various interest rate categories, the amount 
of certificates of deposit at September 30, 1998 and the amounts which mature 
during the periods indicated.

                                             Amounts at September 30, 1998   
                            September 30,           Maturing Within          
                            _____________  __________________________________
                                                                       After 
   (Dollars in Thousands)        1998       1 Year  2 Years  3 Years  3 Years
                            _____________  _______  _______  _______  _______
Certificates of deposit:
    2.01% to 4.00%..........   $    200   $    200 $     -- $     -- $     --
    4.01% to 6.00%..........    118,730     95,650   12,077    4,011    6,992
    6.01% to 8.00%..........     11,996        927    9,163    1,906       --
    8.01% and over..........          5         --       --       --        5
                                _______    _______  _______  _______  _______
 Total certificate accounts.   $130,931   $ 96,777 $ 21,240 $  5,917 $  6,997
                                =======    =======  =======  =======  =======



The following table sets forth maturities of certificates of deposit of 
$100,000 or more at September 30, 1998 by time remaining to maturity.

                       (Dollars in Thousands)        Amount
                                                    _______

                Three months or less............... $ 3,427
                Three months through six months....   7,845
                Six months through 12 months.......   9,107
                Over 12 months.....................   5,488
                                                     ______
                 Total............................. $25,867
                                                     ======

                                        20
<PAGE>
Borrowed Funds.  The Association may obtain advances from the FHLB of Dallas 
upon the security of the common stock it owns in that bank and certain of its 
residential mortgage loans and securities held to maturity, provided certain 
standards related to creditworthiness have been met.  Such advances are made 
pursuant to several credit programs, each of which has its own interest rate 
and range of maturities.  Such advances are generally available to meet 
seasonal and other withdrawals of deposit accounts and to permit increased 
lending.  Recently, the Association has utilized such advances as a 
supplemental source of funds for the Association's investment and lending 
activities.

The following table presents certain information regarding borrowed funds for 
the periods indicated.

                                                Year Ended September 30,    
                                            ________________________________
   (Dollars in Thousands)                      1998       1997       1996   
                                            __________ __________ __________
FHLB advances:
  Average balance outstanding..............   $ 6,423    $   706    $    -- 
  Maximum amount outstanding at any
    month-end during the period............     7,200      4,967         -- 
  Balance outstanding at end of period.....     6,600      4,967         -- 
  Weighted average interest rate
    during the period......................      5.52%      5.53%        -- 
  Weighted average interest rate
    at the end of the period...............      4.59%      5.54%        -- 

Repurchase agreements:
  Average balance outstanding..............   $    --    $    82    $    78 
  Maximum amount outstanding at any
    month-end during the period............        --         --      2,340 
  Balance outstanding at end of period.....        --         --      2,340 
  Weighted average interest rate
    during the period......................        --       5.58%      5.58%
  Weighted average interest rate
    at the end of the period...............        --         --       5.58%

Other borrowed money:
  Average balance outstanding..............   $    13    $    39  $      65 
  Maximum amount outstanding at any
    month-end during the period............        22         43        518 
  Balance outstanding at end of period.....        --         22        518 
  Weighted average interest rate
    during the period......................      6.50%      6.61%      6.78%
  Weighted average interest rate
    at the end of the period...............        --       6.50%      8.10%

Total borrowings:
  Average balance outstanding..............   $ 6,436    $   827    $   143 
  Maximum amount outstanding at any
    month-end during the period............     7,222      4,989      2,858 
  Balance outstanding at end of period.....     6,600      4,989      2,858 
  Weighted average interest rate
    during the period......................      5.63%      5.72%      5.87%
  Weighted average interest rate
    at the end of the period...............      4.59%      5.61%      5.49%

                                        21
<PAGE>
Employees

The Company and the Association had 38 full-time employees and two part-time 
employees at September 30, 1998.  None of these employees is represented by a 
collective bargaining agent, and the Company believes that it enjoys good 
relations with its personnel.

Subsidiaries

As of September 30, 1998, the Company had no subsidiaries other than First 
Federal, and First Federal had no subsidiaries.

Competition

The Association faces strong competition both in attracting deposits and 
making real estate loans.  Its most direct competition for deposits has 
historically come from other savings associations, credit unions and 
commercial banks, including many large financial institutions which have 
greater financial and marketing resources available to them.  In addition, 
during times of high interest rates, the Association has faced additional 
significant competition for investors' funds from short-term money market 
securities, mutual funds and other corporate and government securities.  The 
ability of the Association to attract and retain savings deposits depends on 
its ability to generally provide a rate of return, liquidity and risk 
comparable to that offered by competing investment opportunities.

The Association experiences strong competition for real estate loans 
principally from commercial banks and mortgage companies.  The Association 
competes for loans principally through the interest rates and loan fees it 
charges and the efficiency and quality of services it provides borrowers.  
Competition may increase as a result of the continuing reduction of 
restrictions on the interstate operations of financial institutions.



                                   REGULATION

The Company

General.  The Company, as a registered savings and loan holding company within 
the meaning of the Home Owners' Loan Act ("HOLA"), is subject to OTS 
regulations, examinations, supervision and reporting requirements.  As a 
subsidiary of a savings and loan holding company, First Federal is subject to 
certain restrictions in its dealings with the Company and affiliates thereof.

                                        22
<PAGE>
Activities Restrictions.  There are generally no restrictions on the 
activities of a savings and loan holding company which holds only one 
subsidiary savings institution.  However, if the Director of the OTS 
determines that there is reasonable cause to believe that the continuation by 
a savings and loan holding company of an activity constitutes a serious risk 
to the financial safety, soundness or stability of its subsidiary savings 
institution, the Director may impose such restrictions as deemed necessary to 
address such risk, including limiting (i) payment of dividends by the savings 
institution; (ii) transactions between the savings institution and its 
affiliates; and (iii) any activities of the savings institution that might 
create a serious risk that the liabilities of the holding company and its 
affiliates may be imposed on the savings institution.  Notwithstanding the 
above rules as to permissible business activities of unitary savings and loan 
holding companies, if the savings institution subsidiary of such a holding 
company fails to meet the QTL test, as discussed under "The Association - 
Qualified Thrift Lender Test", then such unitary holding company becomes 
subject to the activities restrictions applicable to multiple savings and loan 
holding companies and, unless the savings institution requalifies as a QTL 
within one year thereafter, must register as, and become subject to the 
restrictions applicable to, a bank holding company.

If the Company were to acquire control of another savings institution, other 
than through merger or other business combination with First Federal, the 
Company would thereupon become a multiple savings and loan holding company.  
Except where such acquisition is pursuant to the authority to approve 
emergency thrift acquisitions and where each subsidiary savings institution 
meets the QTL test, as set forth below, the activities of the Company and any 
of its subsidiaries (other than First Federal or other subsidiary savings 
institutions) would thereafter be subject to further restrictions.  Among 
other things, no multiple savings and loan holding company or subsidiary 
thereof which is not a savings institution may commence or continue for a 
limited period of time after becoming a multiple savings and loan holding 
company or subsidiary thereof any business activity, upon prior notice to, and 
no objection by the OTS, other than: (i) furnishing or performing management 
services for a subsidiary savings institution; (ii) conducting an insurance 
agency or escrow business; (iii) holding, managing, or liquidating assets 
owned by or acquired from a subsidiary savings institution; (iv) holding or 
managing properties used or occupied by a subsidiary savings institution; (v) 
acting as trustee under deeds of trust; (vi) those activities authorized by 
regulation as of March 5, 1987, to be engaged in by multiple savings and loan 
holding companies; or (vii) unless the Director of the OTS by regulation 
prohibits or limits such activities for savings and loan holding companies, 
those activities authorized by the FRB as permissible for bank holding 
companies.  Those activities described in (vii) above also must be approved by 
the Director of the OTS prior to being engaged in by a multiple savings and 
loan holding company.

Limitations on Transactions with Affiliates.  Transactions between savings 
institutions and any affiliate are governed by Sections 23A and 23B of the 
Federal Reserve Act.  An affiliate of a savings institution is any company or 
entity which controls, is controlled by or is under common control with the 
savings institution.  In a holding company context, the parent holding company 
of a savings institution (such as the Company) and any companies which are 
controlled by such parent holding company are affiliates of the savings 
institution.  Generally, Sections 23A and 23B (i) limit the extent to which 
the savings institution or its subsidiaries may engage in "covered 
transactions" with any one affiliate to an amount equal to 10% of such 
institution's capital stock and surplus, and contain an aggregate limit on all 
such transactions with all affiliates to an amount equal to 20% of such 
capital stock and surplus and (ii) require that all such transactions be on 
terms substantially the same, or at least as favorable, to the institution or 
subsidiary as those provided to a non-affiliate.  The term "covered 
transaction" includes the making of loans, purchase of assets, issuance of a 
guarantee and other similar transactions.  In addition to the restrictions 
imposed by Sections 23A and 23B, no savings institution may (i) loan or 
otherwise extend credit to an affiliate, except for any affiliate which 
engages only in activities which are permissible for bank holding companies, 
or (ii) purchase or invest in any stocks, bonds, debentures, notes or similar 
obligations of any affiliate, except for affiliates which are subsidiaries of 
the savings institution.

                                        23
<PAGE>
In addition, Sections 22(h) and (g) of the Federal Reserve Act place 
restrictions on loans to executive officers, directors and principal 
stockholders.  Under Section 22(h), loans to a director, an executive officer 
and to a greater than 10% stockholder of a savings institution, and certain 
affiliated interests of either, may not exceed, together with all other 
outstanding loans to such person and affiliated interests, the savings 
institution's loans to one borrower limit (generally equal to 15% of the 
institution's unimpaired capital and surplus).  Section 22(h) also requires 
that loans to directors, executive officers and principal stockholders be made 
on terms substantially the same as offered in comparable transactions to other 
persons and also requires prior board approval for certain loans.  In 
addition, the aggregate amount of extensions of credit by a savings 
institution to all insiders cannot exceed the institution's unimpaired capital 
and surplus.  Furthermore, Section 22(g) places additional restrictions on 
loans to executive officers.  At September 30, 1998, First Federal was in 
compliance with the above restrictions.

Restrictions on Acquisitions.  Except under limited circumstances, savings and 
loan holding companies are prohibited from acquiring, without prior approval 
of the Director of the OTS, (i) control of any other savings institution or 
savings and loan holding company or substantially all the assets thereof or 
(ii) more than 5% of the voting shares of a savings institution or holding 
company thereof which is not a subsidiary.  Except with the prior approval of 
the Director of the OTS, no director or officer of a savings and loan holding 
company or person owning or controlling by proxy or otherwise more than 25% of 
such company's stock, may acquire control of any savings institution, other 
than a subsidiary savings institution, or of any other savings and loan 
holding company.

The Director of the OTS may only approve acquisitions resulting in the 
formation of a multiple savings and loan holding company which controls 
savings institutions in more than one state if (i) the multiple savings and 
loan holding company involved controls a savings institution which operated a 
home or branch office located in the state of the institution to be acquired 
as of March 5, 1987; (ii) the acquiror is authorized to acquire control of the 
savings institution pursuant to the emergency acquisition provisions of the 
Federal Deposit Insurance Act ("FDIA"); or (iii) the statutes of the state in 
which the institution to be acquired is located specifically permit 
institutions to be acquired by the state-chartered institutions or savings and 
loan holding companies located in the state where the acquiring entity is 
located (or by a holding company that controls such state-chartered savings 
institutions).

FIRREA amended provisions of the Bank Holding Company Act of 1956 to 
specifically authorize the FRB to approve an application by a bank holding 
company to acquire control of a savings institution.  FIRREA also authorized a 
bank holding company that controls a savings institution to merge or 
consolidate the assets and liabilities of the savings institution with, or 
transfer assets and liabilities to, any subsidiary bank which is a member of 
the Bank Insurance Fund ("BIF") with the approval of the appropriate federal 
banking agency and the FRB.  As a result of these provisions, there have been 
a number of acquisitions of savings institutions by bank holding companies in 
recent years.

                                        24
<PAGE>
The Association

General.  The OTS has extensive authority over the operations of federally 
chartered savings institutions.  As part of this authority, savings 
institutions are required to file periodic reports with the OTS and are 
subject to periodic examinations by the OTS and the FDIC.  The investment and 
lending authority of savings institutions are prescribed by federal laws and 
regulations, and such institutions are prohibited from engaging in any 
activities not permitted by such laws and regulations.  Those laws and 
regulations generally are applicable to all federally chartered savings 
institutions and may also apply to state-chartered savings institutions.  Such 
regulation and supervision is primarily intended for the protection of 
depositors.

The OTS' enforcement authority over all savings institutions and their holding 
companies was substantially enhanced by FIRREA.  This enforcement authority 
includes, among other things, the ability to assess civil money penalties, to 
issue cease and desist or removal orders and to initiate injunctive actions.  
In general, these enforcement actions may be initiated for violations of laws 
and regulations and unsafe or unsound practices.  Other actions or inactions 
may provide the basis for enforcement action, including misleading or untimely 
reports filed with the OTS.  FIRREA significantly increased the amount of and 
grounds for civil money penalties.

On December 19, 1991, the Federal Deposit Insurance Corporation Improvement 
Act of 1991 ("FDICIA") was enacted into law.  The FDICIA provides for, among 
other things, the recapitalization of the BIF, the authorization of the FDIC 
to make emergency special assessments under certain circumstances against BIF 
members and members of the Savings Association Insurance Fund ("SAIF"), the 
establishment of risk-based deposit insurance premiums, and improved 
examinations and reporting requirements.  The FDICIA also provides for 
enhanced federal supervision of depository institutions based on, among other 
things, an institution's capital level.

Insurance of Accounts.  The deposits of First Federal are insured to the 
maximum extent permitted by the SAIF, which is administered by the FDIC, and  
are backed by the full faith and credit of the U.S. Government.  As insurer, 
the FDIC is authorized to conduct examinations of, and to require reporting 
by, FDIC-insured institutions.  It also may prohibit any FDIC-insured 
institution from engaging in any activity the FDIC determines by regulation or 
order to pose a serious threat to the FDIC.  The FDIC also has the authority 
to initiate enforcement actions against savings institutions, after giving the 
OTS an opportunity to take such action.

                                        25
<PAGE>
On September 30, 1996, the Omnibus Appropriations Act was signed into law.  
The legislation authorized a one-time charge of SAIF insured institutions at a 
rate of 65.7 basis points per $100.00 of March 31, 1995 deposits.  As a 
result, First Federal's assessment amounted to $834,839.  Additional 
provisions of the Act include new BIF and SAIF premiums and the merger of BIF 
and SAIF.  The new BIF and SAIF premiums will include a premium for repayment 
of the Financing Corporation ("FICO") bonds plus any regular insurance 
assessment.  Until full pro-rata FICO sharing is in effect, the FICO premiums 
for BIF and SAIF will be 1.3 and 6.4 basis points, respectively, beginning 
January 1, 1997.  Full pro-rata FICO sharing is to begin no later than January 
1, 2000.  BIF and SAIF are to be merged on January 1, 1999, provided the bank 
and savings association charters are merged by that date.

Under the current risk classification system, institutions are assigned to one 
of three capital groups which are based solely on the level of an 
institution's capital - "well capitalized", "adequately capitalized" and 
"undercapitalized" - which are defined in the same manner as the regulations 
establishing the prompt corrective action system under Section 38 of the FDIA, 
as discussed below.  These three groups are then divided into three subgroups 
which reflect varying levels of supervisory concern, from those which are 
considered to be healthy to those which are considered to be of substantial 
supervisory concern.  The matrix so created results in nine assessment risk 
classifications, with rates ranging from zero basis points for well 
capitalized, healthy institutions to 27 basis points for under capitalized 
institutions with substantial supervisory concerns.

The FDIC may terminate the deposit insurance of any insured depository 
institution, including First Federal, if it determines after a hearing that 
the institution has engaged or is engaging in unsafe or unsound practices, is 
in an unsafe or unsound condition to continue operations, or has violated any 
applicable law, regulation, order or any condition imposed by an agreement 
with the FDIC.  It also may suspend deposit insurance temporarily during the 
hearing process for the permanent termination of insurance, if the institution 
has no tangible capital.  If insurance of accounts is terminated, the accounts 
at the institution at the time of the termination, less subsequent 
withdrawals, continue to be insured for a period of six months to two years, 
as determined by the FDIC.  Management is aware of no existing circumstances 
which would result in termination of the Association's deposit insurance.

Regulatory Capital Requirements.  Federally insured savings institutions are 
required to maintain certain levels of regulatory capital.  OTS-regulated 
savings associations must comply with two overlapping sets of regulatory 
capital standards (1) capital adequacy and minimum standards pursuant to 
FIRREA, and (2) various capital measures pursuant to FDICIA "Prompt Corrective 
Action".

Pursuant to FIRREA, savings institutions are required to satisfy three 
different capital requirements.  Under these standards, savings institutions 
must maintain "tangible" capital equal to at least 1.5% of adjusted total 
assets, "core" capital equal to at least 3.0% of adjusted total assets and 
"total" capital (a combination of core and "supplementary" capital) equal to 
at least 8.0% of "risk-weighted" assets.  For purposes of the regulation, core 
capital generally consists of common stockholders' equity (including retained 
earnings), noncumulative perpetual preferred stock and related surplus, 
minority interests in the equity accounts of fully consolidated subsidiaries, 
certain nonwithdrawable accounts and pledged deposits and "qualifying 
supervisory goodwill."  Tangible capital is given the same definition as core 
capital but does not include qualifying supervisory goodwill and is reduced by 
the amount of all the savings institution's intangible assets, with only a 
limited exception for purchased mortgage servicing rights.  Both core and 
tangible capital are further reduced by an amount equal to a savings 
institution's debt and equity investments in subsidiaries engaged in 
activities not permissible to national banks (other than subsidiaries engaged 
in activities undertaken as agent for customers or in mortgage banking 
activities and subsidiary depository institutions or their holding companies).  
At September 30, 1998, the Association had no goodwill or other intangible 
assets and had no subsidiaries engaged in impermissible activities.

                                        26
<PAGE>
In determining compliance with the risk-based capital requirement, a savings 
institution is allowed to include both core capital and supplementary capital 
in its total capital, provided that the amount of supplementary capital 
included does not exceed the savings institution's core capital.  
Supplementary capital generally consists of hybrid capital instruments; 
perpetual preferred stock which is not eligible to be included as core 
capital; subordinated debt and intermediate-term preferred stock; and general 
allowances for loan losses up to a maximum of 1.25% of risk-weighted assets.  
In determining the required amount of risk-based capital, total assets, 
including certain off-balance sheet items, are multiplied by a risk weight 
based on the risks inherent in the type of assets.  The risk weights assigned 
by the OTS for principal categories of assets are (i) 0% for cash and 
securities issued by the U.S. Government or unconditionally backed by the full 
faith and credit of the U.S. Government; (ii) 20% for securities (other than 
equity securities) issued by U.S. Government-sponsored agencies and mortgage-
backed securities issued by, or fully guaranteed as to principal and interest 
by, the FNMA or the FHLMC, except for those classes with residual 
characteristics or stripped mortgage-related securities; (iii) 50% for 
prudently underwritten permanent one-to-four family first lien mortgage loans 
not more than 90 days delinquent and having a loan-to-value ratio of not more 
than 80% at origination unless insured to such ratio by an insurer approved by 
the FNMA or the FHLMC, qualifying residential bridge loans made directly for 
the construction of one-to-four family residences and qualifying multi-family 
residential loans; and (iv) 100% for all other loans and investments, 
including consumer loans, commercial loans, and one-to-four family residential 
real estate loans more than 90 days delinquent, and for repossessed assets.

At September 30, 1998, pursuant to FIRREA, First Federal exceeded all of its 
regulatory capital requirements with a tangible capital ratio of 14.3%, a core 
capital ratio of 14.3% and a risk-based capital ratio of 24.1%.

Pursuant to FDICIA "Prompt Corrective Action", each federal banking agency is 
required to implement a system of prompt corrective action for institutions 
which it regulates.  The federal banking agencies, including the OTS, have 
adopted substantially similar regulations, which became effective December 19, 
1992.  Under the regulations, an institution shall be deemed to be (i) "well 
capitalized" if it has total risk-based capital of 10.0% or more, has a Tier I 
risk-based capital ratio of 6.0% or more, has a Tier I leverage capital ratio 
of 5.0% or more and is not subject to any order or final capital directive to 
meet and maintain a specific capital level for any capital measure, (ii) 
"adequately capitalized" if it has a total risk-based capital ratio of 8.0% or 
more, a Tier I risk-based capital ratio of 4.0% or more and a Tier I leverage 
capital ratio of 4.0% or more (3.0% under certain circumstances) and does not 
meet the definition of "well capitalized", (iii) "undercapitalized" if it has 
a total risk-based capital ratio that is less than 8.0%, a Tier I risk-based 
capital ratio that is less than 4.0% or a Tier I leverage capital ratio that 
is less than 4.0% (3.0% under certain circumstances), (iv) "significantly 
undercapitalized" if it has a total risk-based capital ratio that is less than 
6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a Tier I 
leverage capital ratio that is less than 3.0%, and (v) "critically 
undercapitalized" if it has a ratio of tangible equity to total assets that is 
equal to or less than 2.0%.  The FDIA and the regulations promulgated 
thereunder also specify circumstances under which a federal banking agency may 
reclassify a well capitalized institution as adequately capitalized and may 
require an adequately capitalized institution or an undercapitalized 
institution to comply with supervisory actions as if it were in the next lower 
category (except that the FDIC may not reclassify a significantly 
undercapitalized institution as critically undercapitalized).

                                        27
<PAGE>
At September 30, 1998, pursuant to FDICIA, the Association was in the "well 
capitalized" category with a total risk-based ratio of 24.1%, a Tier 1 risk-
based ratio of 23.5% and a Tier 1 leverage ratio of 14.3%.

The following table sets forth First Federal's compliance with each of the 
above-described capital requirements at September 30, 1998 and 1997.

                                                  September 30, 1998          
                                        ______________________________________
                                          Tier 1        Tier 1         Total  
                                         Leverage     Risk-based    Risk-based
         (Dollars in Thousands)           Capital       Capital       Capital 
                                        __________    __________    __________
GAAP capital............................  $27,158       $27,158       $27,158 

Adjustments to capital:
   Non-allowable assets.................       --            --          (319)
   Unrealized gain on securities........     (167)         (167)         (167)
   Allowable allowance for loan losses..       --            --           955 
                                           ______        ______        ______ 
Regulatory capital......................  $26,991       $26,991       $27,627 
                                           ======        ======        ====== 

Total adjusted assets................... $188,847      $114,840      $114,840 
                                          =======       =======       ======= 

Regulatory capital ratio................    14.29%        23.50%        24.06%
                                            =====         =====         =====
Ratios for:
   Adequately capitalized requirement...     4.00%         4.00%         8.00%
   Well capitalized requirement.........     5.00%         6.00%        10.00%


                                                  September 30, 1997          
                                        ______________________________________
                                          Tier 1        Tier 1         Total  
                                         Leverage     Risk-based    Risk-based
         (Dollars in Thousands)           Capital       Capital       Capital 
                                        __________    __________    __________
GAAP capital............................  $26,878       $26,878       $26,878 

Adjustments to capital:
   Non-allowable assets.................       --            --          (320)
   Unrealized gain on securities........      (81)          (81)          (81)
   Allowable allowance for loan losses..       --            --         1,076 
                                           ______        ______        ______ 
Regulatory capital......................  $26,797       $26,797       $27,553 
                                           ======        ======        ====== 

Total adjusted assets................... $178,477      $108,635      $108,635 
                                          =======       =======       ======= 

Regulatory capital ratio................    15.01%        24.67%        25.36%
                                            =====         =====         =====
Ratios for:
   Adequately capitalized requirement...     4.00%         4.00%         8.00%
   Well capitalized requirement.........     5.00%         6.00%        10.00%

                                        28
<PAGE>
Liquidity Requirements.  All savings institutions are required to maintain an 
average daily balance of liquid assets equal to a certain percentage of the 
sum of its average daily balance of net withdrawable deposit accounts and 
borrowings payable in one year or less.  The liquidity requirement may vary 
from time to time (between 4% and 10%) depending upon economic conditions and 
savings flows of all savings institutions.   At the present time, the required 
minimum liquid asset ratio is 4%.  At September 30, 1998, First Federal's 
liquidity ratio was 13.4%.

Capital Distributions.  OTS regulations govern capital distributions by 
savings institutions, which include cash dividends, stock redemptions or 
repurchases, cash-out mergers, interest payments on certain convertible debt 
and other transactions charged to the capital account of a savings institution 
to make capital distributions.  Generally, the regulation creates a safe 
harbor for specified levels of capital distributions from institutions meeting 
at least their minimum capital requirements, so long as such institutions 
notify the OTS and receive no objection to the distribution from the OTS.  
Savings institutions that do not qualify for the safe harbor are required to 
obtain prior OTS approval before making any capital distributions.

Generally, a savings institution that before and after the proposed 
distribution meets or exceeds its fully phased-in capital requirements (Tier 1 
institutions) may make capital distributions during any calendar year equal to 
the higher of (i) 100% of net income for the calendar year-to-date plus 50% of 
its "surplus capital ratio" at the beginning of the calendar year or (ii) 75% 
of net income over the most recent four-quarter period.  The "surplus capital 
ratio" is defined to mean the percentage by which the institution's ratio of 
total capital to assets exceeds the ratio of its fully phased-in capital 
requirement to assets.  "Fully phased-in capital requirement" is defined to 
mean an institution's capital requirement under the statutory and regulatory 
standards to be applicable on December 31, 1994, as modified to reflect any 
applicable individual minimum capital requirement imposed upon the 
institution.  Failure to meet fully phased-in or minimum capital requirements 
will result in further restrictions on capital distributions, including 
possible prohibition without explicit OTS approval.  See "Regulatory Capital 
Requirements."

Tier 2 institutions, which are institutions that before and after the proposed 
distribution meet or exceed their minimum capital requirements, may make 
capital distributions up to a specified percentage of their net income during 
the most recent four quarter period, depending on how close the institution is 
to meeting its fully phased-in capital requirements.  Tier 2 institutions that 
meet the capital requirements in effect on January 1, 1993 (including the 8% 
risk-based requirement and then-applicable exclusions on non-permissible 
subsidiary investments and goodwill) are permitted to make distributions 
totalling up to 75% of their net income over the most recent four quarter 
period.  

                                        29
<PAGE>
In order to make distributions under these safe harbors, Tier 1 and Tier 2 
institutions must submit 30 days written notice to the OTS prior to making the 
distribution.  The OTS may object to the distribution during that 30-day 
period based on safety and soundness concerns.  In addition, a Tier 1 
institution deemed to be in need of more than normal supervision by the OTS 
may be downgraded to a Tier 2 or Tier 3 institution as a result of such a 
determination.

Tier 3 institutions, which are institutions that do not meet current minimum 
capital requirements, or that have capital in excess of either their fully 
phased-in capital requirement or minimum capital requirement but which have 
been notified by the OTS that it will be treated as a Tier 3 institution 
because they are in need of more than normal supervision, cannot make any 
capital distribution without obtaining OTS approval prior to making such 
distributions.

At September 30, 1998, First Federal was a Tier 1 institution for purposes of 
this regulation.

On December 5, 1994, the OTS published a notice of proposed rulemaking to 
amend its capital distribution regulation.  Under the proposal, institutions 
would be permitted to only make capital distributions that would not result in 
their capital being reduced below the level required to remain "adequately 
capitalized."  An institution is adequately capitalized if it has a total 
risked-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio 
of 4.0% or more and a Tier 1 leverage capital ratio of 4.0% or more and does 
not meet the definition of well capitalized.  Because the Association is a 
subsidiary of a holding company, the proposal would require the Association to 
provide notice to the OTS of its intent to make a capital distribution.  The 
Association does not believe that its ability to make capital distributions 
will be adversely affected.

Community Reinvestment.  Under the Community Reinvestment Act of 1977, as 
amended ("CRA"), as implemented by OTS regulations, a savings institution has 
a continuing and affirmative obligation consistent with its safe and sound 
operation to help meet the credit needs of its entire community, including low 
and moderate income neighborhoods.  The CRA does not establish specific 
lending requirements or programs for financial institutions nor does it limit 
an institution's discretion to develop the types of products and services that 
it believes are best suited to its particular community, consistent with the 
CRA.  The CRA requires the OTS, in connection with its examination of a 
savings institution, to assess the institution's record of meeting the credit 
needs of its community and to take such record into account in its evaluation 
of certain applications by such institution.  FIRREA amended the CRA to 
require public disclosure of an institution's CRA rating and require the OTS 
to provide a written evaluation of an institution's CRA performance utilizing 
a rating system which identifies four levels of performance that may describe 
an institution's record of meeting community needs: outstanding, satisfactory, 
needs to improve and substantial noncompliance.  The CRA also requires all 
institutions to make public disclosure of their CRA ratings.

                                        30
<PAGE>
Qualified Thrift Lender Test.  All savings institutions are required to meet a 
QTL test set forth in Section 10(m) of the HOLA and regulations of the OTS 
thereunder to avoid certain restrictions on their operations.  A savings 
institution that does not meet the QTL test set forth in the HOLA and 
implementing regulations must either convert to a bank charter or comply with 
the following restrictions on its operations: (i) the institution may not 
engage in any new activity or make any new investment, directly or indirectly, 
unless such activity or investment is permissible for a national bank; (ii) 
the branching powers of the institution shall be restricted to those of a 
national bank; (iii) the institution shall not be eligible to obtain any 
advances from its FHLB; and (iv) payment of dividends by the institution shall 
be subject to the rules regarding payment of dividends by a national bank.  
Upon the expiration of three years from the date the savings institution 
ceases to be a QTL, it must cease any activity and not retain any investment 
not permissible for a national bank and immediately repay any outstanding FHLB 
advances (subject to safety and soundness considerations).

Currently, the QTL test requires that 65% of an institution's "portfolio 
assets" (as defined) consist of certain housing and consumer related assets on 
a monthly average basis in nine out of every 12 months.  Assets that qualify 
without limit for inclusion as part of the 65% requirement are loans made to 
purchase, refinance, construct, improve or repair domestic residential housing 
and manufactured housing; home equity loans; mortgage-backed securities (where 
the mortgages are secured by domestic residential housing or manufactured 
housing); stock issued by the FHLB of Dallas; and direct or indirect 
obligations of the FDIC.  In addition, the following assets, among others, may 
be included in meeting the test subject to an overall limit of 20% of the 
savings institution's portfolio assets: 50% of residential mortgage loans 
originated and sold within 90 days of origination; 100% of consumer and 
educational loans (limited to 10% of total portfolio assets); and stock issued 
by the FHLMC or the FNMA.  Portfolio assets consist of total assets minus the 
sum of (i) goodwill and other intangible assets, (ii) property used by the 
savings institution to conduct its business, and (iii) liquid assets up to 20% 
of the institution's total assets.  At September 30, 1998, the qualified 
thrift investments of First Federal were approximately 83% of its portfolio 
assets.

Branching by Federal Savings Institutions.  OTS policy permits interstate 
branching to the full extent permitted by statute (which is essentially 
unlimited).  Generally, federal law prohibits federal savings institutions 
from establishing, retaining or operating a branch outside the state in which 
the federal institution has its home office unless the institution meets the 
IRS domestic building and loan test (generally, 60% of a thrift's assets must 
be housing-related) ("IRS Test").  The IRS Test requirement does not apply if, 
among other things, the law of the state where the branch would be located 
would permit the branch to be established if the federal savings institution 
were chartered by the state in which its home office is located.  Furthermore, 
the OTS will evaluate a branching applicant's regulatory capital and record of 
compliance with the Community Reinvestment Act of 1977.  An unsatisfactory CRA 
record may be the basis for denial of a branching application.

Accounting Requirements.  FIRREA requires the OTS to establish accounting 
standards to be applicable to all savings institutions for purposes of 
complying with regulations, except to the extent otherwise specified in the 
capital standards.  Such standards must incorporate GAAP to the same degree as 
is prescribed by the federal banking agencies for banks or may be more 
stringent than such requirements.

                                        31
<PAGE>
The accounting principles for depository institutions are currently undergoing 
review to determine whether the historical cost model or market-based measure 
of valuation is the appropriate measure for reporting the assets of such 
institutions in their financial statements.  Such proposal is controversial 
because any change in applicable accounting principles which requires 
depository institutions to carry mortgage-backed securities and mortgage loans 
at fair market value could result in substantial losses to such institutions 
and increased volatility in their liquidity and operations.  Currently, it 
cannot be predicted whether there may be any changes in the accounting 
principles for depository institutions in this regard beyond those imposed by 
SFAS No. 115 or when any such changes might become effective.

Federal Home Loan Bank System.  First Federal is a member of the FHLB of 
Dallas, which is one of 12 regional FHLBs that administers the home financing 
credit function of savings institutions.  Each FHLB serves as a reserve or 
central bank for its members within its assigned region.  It is funded 
primarily from proceeds derived from the sale of consolidated obligations of 
the FHLB System.  It makes loans to members (i.e., advances) in accordance 
with policies and procedures established by the Board of Directors of the 
FHLB.  At September 30, 1998, the Association had $6.6 million in advances 
from the FHLB of Dallas.

As a member, First Federal is required to purchase and maintain stock in the 
FHLB of Dallas in an amount equal to at least 1% of its aggregate unpaid 
residential mortgage loans, home purchase contracts or similar obligations at 
the beginning of each year.  At September 30, 1998, First Federal had $1.2 
million in FHLB stock, which was in compliance with this requirement.

As a result of FIRREA, the FHLBs are required to provide funds for the 
resolution of troubled savings institutions and to contribute to affordable 
housing programs through direct loans or interest subsidies on advances 
targeted for community investment and low and moderate income housing 
projects.

Federal Reserve System.  The FRB requires all depository institutions to 
maintain reserves against their transaction accounts (primarily NOW and Super 
NOW checking accounts) and non-personal time deposits.  As of September 30, 
1998, no reserves were required to be maintained on the first $4.7 million of 
transaction accounts, reserves of 3% were required to be maintained against 
the next $43.1 million of net transaction accounts (with such dollar amounts 
subject to adjustment by the FRB), and a reserve of 10% against all remaining 
net transaction accounts.  Because required reserves must be maintained in the 
form of vault cash or a noninterest-bearing account at a Federal Reserve Bank, 
the effect of this reserve requirement is to reduce an institution's earning 
assets.



                                    TAXATION

Federal Taxation

General.  The Company and First Federal are subject to the generally 
applicable corporate tax provisions of the Code, and First Federal is subject 
to certain additional provisions of the Code which apply to thrift and other 
types of financial institutions.  The following discussion of federal taxation 
is intended only to summarize certain pertinent federal income tax matters and 
is not a comprehensive discussion of the tax rules applicable to the Company 
and First Federal.

                                        32
<PAGE>
Tax Year.  The Company and the Association file consolidated federal income 
tax returns on the basis of a fiscal year ending on September 30.  

Bad Debt Reserves.  Savings institutions, such as First Federal, which meet 
certain definitional tests primarily relating to their assets and the nature 
of their businesses, are permitted to establish a reserve for bad debts and to 
make annual additions to the reserve.  These additions may, within specified 
formula limits, be deducted in arriving at the institution's taxable income.  
For purposes of computing the deductible addition to its bad debt reserve, the 
institution's loans are separated into "qualifying real property loans" (i.e., 
generally those loans secured by certain interests in real property) and all 
other loans ("non-qualifying loans").  The deduction with respect to non-
qualifying loans must be computed under the experience method as described 
below.  The following formulas may be used to compute the bad debt deduction 
with respect to qualifying real property loans:  (i) actual loss experience, 
or (ii) a percentage of taxable income.  Reasonable additions to the reserve 
for losses on non-qualifying loans must be based upon actual loss experience 
and would reduce the current year's addition to the reserve for losses on 
qualifying real property loans, unless that addition is also determined under 
the experience method.  The sum of the additions to each reserve for each year 
is the institution's annual bad debt deduction.

Under the experience method, the deductible annual addition to the 
institution's bad debt reserves is the amount necessary to increase the 
balance of the reserve at the close of the taxable year to the greater of (a) 
the amount which bears the same ratio to loans outstanding at the close of the 
taxable year as the total net bad debts sustained during the current and five 
preceding taxable years bear to the sum of the loans outstanding at the close 
of the six years, or (b) the lower of (i) the balance of the reserve account 
at the close of the Association's "base year," which was its tax year ended 
September 30, 1988, or (ii) if the amount of loans outstanding at the close of 
the taxable year is less than the amount of loans outstanding at the close of 
the base year, the amount which bears the same ratio to loans outstanding at 
the close of the taxable year as the balance of the reserve at the close of 
the base year bears to the amount of loans outstanding at the close of the 
base year.

                                        33
<PAGE>
Under the percentage of taxable income method, the bad debt deduction equals 
8% of taxable income determined without regard to that deduction and with 
certain adjustments.  The availability of the percentage of taxable income 
method permits a qualifying savings institution to be taxed at a lower 
effective federal income tax rate than that applicable to corporations in 
general.  This resulted generally in an effective federal income tax rate 
payable by a qualifying savings institution fully able to use the maximum 
deduction permitted under the percentage of taxable income method, in the 
absence of other factors affecting taxable income, of 31.3% exclusive of any 
minimum tax or environmental tax (as compared to 34% for corporations 
generally).  For tax years beginning on or after January 1, 1993, the maximum 
corporate tax rate was increased to 35%, which increased the maximum effective 
federal income tax rate payable by a qualifying savings institution fully able 
to use the maximum deduction to 32.2%.  Any savings institution at least 60% 
of whose assets are qualifying assets, as described in the Code, will 
generally be eligible for the full deduction of 8% of taxable income.  As of 
September 30, 1998, approximately 83% of the assets of First Federal were 
"qualifying assets" as defined in the Code.

Under the percentage of taxable income method, the bad debt deduction for an 
addition to the reserve for qualifying real property loans cannot exceed the 
amount necessary to increase the balance in this reserve to an amount equal to 
6% of such loans outstanding at the end of the taxable year.  The bad debt 
deduction is also limited to the amount which, when added to the addition to 
the reserve for losses on non-qualifying loans, equals the amount by which 12% 
of deposits at the close of the year exceeds the sum of surplus, undivided 
profits and reserves at the beginning of the year.  In addition, the deduction 
for qualifying real property loans is reduced by an amount equal to all or 
part of the deduction for non-qualifying loans.

In August 1996, the Small Business Job Protection Act was signed into law.  
This Act repealed the percentage method of computing the bad debt deduction 
for tax years beginning after December 31, 1995.  If certain conditions apply, 
the Company would have to include in income previous bad debt deductions.  For 
federal tax purposes the conditions do not apply, and so long as the 
Association continues to qualify as a thrift or a bank no repayment of the tax 
on prior bad debt deductions will be required.  Should the Association fail to 
qualify as a thrift or bank the tax would have to be repaid ratably over a six 
year period.  The Association is currently in no jeopardy of failing to 
qualify as a thrift or bank.

First Federal used the experience method for the periods ended September 30, 
1998 and 1997 and used the percentage method for the period ended September 
30, 1996.

Distributions.  If First Federal were to distribute cash or property to its 
sole stockholder, and the distribution was treated as being from its 
accumulated bad debt reserves, the distribution would cause First Federal to 
have additional taxable income.  A distribution is deemed to have been made 
from accumulated bad debt reserves to the extent that (a) the reserves exceed 
the amount that would have been accumulated on the basis of actual loss 
experience, and (b) the distribution is a "non-qualified distribution."  A 
distribution with respect to stock is a non-qualified distribution to the 
extent that, for federal income tax purposes, (i) it is in redemption of 
shares, (ii) it is pursuant to a liquidation of the institution, or (iii) in 
the case of a current distribution, together with all other such distributions 
during the taxable year, it exceeds the institution's current and post-1951 
accumulated earnings and profits.  The amount of additional taxable income 
created by a non-qualified distribution is an amount that when reduced by the 
tax attributable to it is equal to the amount of the distribution.

                                        34
<PAGE>
Minimum Tax.  The Code imposes an alternative minimum tax at a rate of 20%.  
The alternative minimum tax generally applies to a base of regular taxable 
income plus certain tax preferences ("alternative minimum taxable income" or 
"AMTI") and is payable to the extent such AMTI is in excess of an exemption 
amount.  The Code provides that an item of tax preference is the excess of the 
bad debt deduction allowable for a taxable year pursuant to the percentage of 
taxable income method over the amount allowable under the experience method.  
Other items of tax preference that constitute AMTI include (a) tax-exempt 
interest on newly issued (generally, issued on or after August 8, 1986) 
private activity bonds other than certain qualified bonds and (b) 75% of the 
excess (if any) of (i) adjusted current earnings as defined in the Code, over 
(ii) AMTI (determined without regard to this preference and prior to reduction 
by net operating losses).

Net Operating Loss Carryovers.  Prior to the 1997 Tax Law, a corporation could 
carry back net operating losses ("NOLs") to the preceding three taxable years 
and forward to the succeeding 15 taxable years, applicable to losses incurred 
in taxable years beginning after 1986.  The 1997 Tax Law reduced the carryback 
period from three years to two years and increased the carryforward period 
from 15 years to 20 years, effective for NOLs for taxable years beginning 
after July 1997.  At September 30, 1998, the Company and First Federal had no 
NOL carryforwards for federal income tax purposes.

Capital Gains and Corporate Dividends-Received Deduction.  Corporate net 
capital gains are taxed at a maximum rate of 34%.  The corporate dividends-
received deduction is 80% in the case of dividends received from corporations 
with which a corporate recipient does not file a consolidated tax return, and 
corporations which own less than 20% of the stock of a corporation 
distributing a dividend may deduct only 70% of dividends received or accrued 
on their behalf.  However, a corporation may deduct 100% of dividends from a 
member of the same affiliated group of corporations.

Other Matters.  Federal legislation is introduced from time to time that would 
limit the ability of individuals to deduct interest paid on mortgage loans.  
Individuals are currently not permitted to deduct interest on consumer loans.  
Significant increases in tax rates or further restrictions on the 
deductibility of mortgage interest could adversely affect First Federal.

First Federal's federal income tax returns for the tax years ended September 
30, 1995 forward are open under the statute of limitations and are subject to 
review by the IRS.


State Taxation

The Association is subject to Arkansas corporation income tax which includes a 
graduated rate schedule with the highest rate of 6.5% of earnings in excess of 
$100,000.

The state of Arkansas repealed the percentage method of computing the bad debt 
deduction for years beginning after January 1, 1997.  As a result, the Company 
will have to repay tax on approximately $1.5 million of bad debt deductions 
ratably over a six year period for state tax purposes.  The Company has made 
provision in the amount of $89,000 for this tax in prior financial statements 
and repayment will have no effect on income.

The Association is subject to Arkansas franchise tax in an amount equal to 
 .27% of Arkansas apportioned capital stock.  The Arkansas apportioned capital 
stock is the Association's capital stock (par value) multiplied by the ratio 
of Arkansas assets to total assets.

The Company is incorporated under Texas law and is subject to Texas franchise 
tax in an amount equal to the greater of 4.5% of Texas apportioned earned
surplus, or .25% of Texas apportioned capital and surplus.  The Texas
apportioned earned surplus and capital is calculated using the ratio of 
Texas gross receipts to total gross receipts.

                                        35
<PAGE>
Item 2.  Properties.

The Association conducts its business from its executive office in Texarkana, 
Arkansas, and four full-service offices, all of which are located in Southwest 
Arkansas.  The following table sets forth the net book value (including 
leasehold improvements and equipment) and certain other information with 
respect to the offices and other properties at September 30, 1998.

                               Leased/       Net Book Value      Amount of
                                Owned         of Property        Deposits
_________________________   ______________   ______________   ______________
                                                  (Dollars In Thousands)

Third & Olive Streets           Owned            $1,224         $101,442
Texarkana, Arkansas

611 East Wood Street            Owned                77           11,463
Ashdown, Arkansas

6th & S. Main                   Owned               124           16,082
Hope, Arkansas

1011 W. Collin Raye Drive       Owned               651           20,025
DeQueen, Arkansas

111 W. Shepherd                Leased(1)             --            2,943
Nashville, Arkansas

Richmond Road                   Owned(2)            311               --
Texarkana, Texas


____________________

(1)  Property is leased on a month to month basis.

(2)  Future building site.  Construction of a full-service branch office 
     is scheduled to begin in March 1999 with an estimated completion date 
     of October 1999 and an approximate cost of $850,000.


Item 3.  Legal Proceedings.

The Company is not involved in any pending legal proceedings other than 
nonmaterial legal proceedings occurring in the ordinary course of business.


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

None submitted during the fourth quarter of the fiscal year.

                                        36
<PAGE>
PART II.


Item 5. Market for Company's Common Equity and Related Stockholder Matters.

Shares of Texarkana First Financial Corporation's common stock are traded 
under the name Texarkana, symbol "FTF", on the American Stock Exchange.  At 
September 30, 1998, the Company had approximately 412 stockholders of record.

Cash dividends declared and any additional information required herein, to the 
extent applicable, is incorporated by reference from pages 3 and 4 of the 
Company's 1998 Annual Report to Stockholders ("Annual Report").


Item 6. Selected Financial Data.

The information required herein is incorporated by reference from pages 3 and 
4 of the 1998 Annual Report.


Item 7. Management's Discussion and Analysis of Financial Condition and 
        Results of Operations.

The information required herein is incorporated by reference from pages 5 to 
17 of the 1998 Annual Report.


Item 8. Financial Statements and Supplementary Data.

The information required herein is incorporated by reference from pages 18 to 
42 of the 1998 Annual Report.


Item 9. Changes in and Disagreements With Accountants on Accounting and 
        Financial Disclosure.

None.

                                        37
<PAGE>
PART III.


Item 10. Directors and Executive Officers of the Company.

The information required herein is incorporated by reference from pages 2 and 
3 of the definitive proxy statement of the Company for the Annual Meeting of 
Stockholders to be held on January 26, 1999, which was filed on December 21, 
1998 ("Definitive Proxy Statement").


Item 11. Executive Compensation.

The information required herein is incorporated by reference from pages 7 to 9 
of the Definitive Proxy Statement.


Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information required herein is incorporated by reference from pages 5 and 
6 of the Definitive Proxy Statement.


Item 13. Certain Relationships and Related Transactions.

The information required herein is incorporated by reference from page 9 of 
the Definitive Proxy Statement, and page 38 of the Annual Report, Note 18 in 
the Notes to the Consolidated Financial Statements.

                                        38
<PAGE>
PART IV.


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)  Documents Filed as Part of this Report

(1)  The following financial statements are incorporated by reference from 
Item 8 hereof (see Exhibit 13.0):

     Report of Independent Auditors
     Consolidated Statements of Financial Condition as of September 30, 1998 
        and 1997.
     Consolidated Statements of Income for the Fiscal Periods Ended September 
        30, 1998, 1997 and 1996
     Consolidated Statements of Changes in Shareholders' Equity for the Fiscal 
        Periods Ended September 30, 1998, 1997 and 1996.
     Consolidated Statements of Cash Flows for the Fiscal Periods ended 
        September 30, 1998, 1997 and 1996.
     Notes to Consolidated Financial Statements.


(2)  All schedules for which provision is made in the applicable accounting 
regulation of the Securities and Exchange Commission ("SEC") are omitted 
because of the absence of conditions under which they are required or because 
the required information is included in the consolidated financial statements 
and related notes thereto.


(3)  The following exhibits are filed as part of this Form 10-K, and this list 
includes the Exhibit index.

                                Exhibit Index                            Page

 2.1  Plan of Conversion                                                  *  
 3.1  Articles of Incorporation of Texarkana First Financial Corporation  *  
 3.2  Bylaws of Texarkana First Financial Corporation                     *  
 4.1  Stock Certificate of Texarkana First Financial Corporation          ** 
10.1  Employment Agreement among First Federal Savings and Loan 
        Association of Texarkana, Texarkana First Financial Corporation 
        and James W. McKinney                                             *  
10.2  Employment Agreement among First Federal Savings and Loan 
        Association of Texarkana, Texarkana First Financial Corporation 
        and John E. Harrison                                              *  
10.3  1996 Key Employee Stock Compensation Program                        *  
10.4  1996 Management Recognition Plan for Officers                       *  
10.5  1996 Management Recognition Plan for Directors                      *  
10.6  1996 Directors' Stock Option Plan                                   *  
11.0  Earnings Per Share Computation                                      E-1
13.0  1998 Annual Report to Stockholders                                  ***

____________________

                                        39
<PAGE>

*   Incorporated herein by reference from the Corporation's Registration 
    Statement on Form S-1 (Registration No. 33-900834) filed by the Company 
    with the SEC on March 31, 1995, as subsequently amended.

**  Incorporated herein by reference from the Company's Form 10-K for the 
    year ended September 30, 1995.

*** Previously filed by EDGAR on December 21, 1998




(b)  Reports on Form 8-K.

None filed during the fourth quarter of the fiscal year.

(c)  See (a)(3) above for all exhibits and the Exhibit Index.

(d)  There are no other financial statements and financial statement schedules 
which were excluded from the 1998 Annual Report to Stockholders which are 
required to be included herein.

                                        40
<PAGE>
                                  SIGNATURES                                

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange 
Act of 1934, the Registrant has duly caused this report to be signed on its 
behalf by the undersigned, thereunto duly authorized.

                                       TEXARKANA FIRST FINANCIAL CORPORATION

                                            /s/ James W. McKinney           
                                           _________________________________
                                       By:  James W. McKinney
                                              Chairman of the Board
                                               and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the dates indicated.

/s/ James W. McKinney 
__________________________________                          December 21, 1998
  James W. McKinney
    Chairman of the Board
    and Chief Executive Officer

/s/ John E. Harrison 
__________________________________                          December 21, 1998
  John E. Harrison
    President, Chief Operation Officer,
    and Director

/s/ John M. Andres 
__________________________________                          December 21, 1998
  John M. Andres
    Director

/s/ Arthur L. McElmurry 
__________________________________                          December 21, 1998
  Arthur L. McElmurry
    Director

/s/ Donald N. Morriss 
__________________________________                          December 21, 1998
  Donald N. Morriss
    Director

/s/ Josh R. Morriss, Jr. 
__________________________________                          December 21, 1998
  Josh R. Morriss, Jr.
    Director

/s/ James L. Sangalli 
__________________________________                          December 21, 1998
  James L. Sangalli
    Chief Financial Officer

                                        41
<PAGE>
Form 10-K
Exhibit 11
EARNINGS PER SHARE COMPUTATION






                                                Years Ended September 30,
                                           __________________________________
                                              1998        1997        1996   
                                           __________  __________  __________

Net Income.................................$3,305,759  $2,883,956  $2,401,180
                                            =========   =========   =========



Weighted average shares:
  Common shares outstanding................ 1,627,087   1,686,598   1,832,272
  Common stock equivalents due to
    assumed exercise of stock options......    81,600      33,472       1,514
                                            _________   _________   _________
      Common shares assuming dilution...... 1,708,687   1,720,070   1,833,786
                                            =========   =========   =========



Net income per common share:
  Basic....................................     $2.03       $1.71       $1.31
  Assuming dilution........................      1.94        1.68        1.31



____________________


                                       E-1
<PAGE>