U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                  For the fiscal year ended December 31, 1995
                             Commission file number
                                   2-94245-LA

                               BILTMORE BANK CORP.
             (Exact name of registrant as specified in its charter)

            ARIZONA                                        86-0490147 012112
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

2425 East Camelback, Suite 100, Phoenix, Arizona                     85016
    (Address of principal executive offices)                       (Zip Code)

        Registrant's telephone number, including area code (602) 381-6800

         Securities registered under Section 12(b) of the Exchange Act:
                                              Name of each exchange on
                 Title of each class             which registered

                         None                           None

Securities  registered  pursuant to Section  12(g) of the Exchange Act:

                                      None

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

16,522,530  shares of common stock are outstanding at March 22, 1996.  Currently
there is no established public trading market for the Company's common shares.
<PAGE>
                                     PART I

ITEM 1.           BUSINESS

Business of the Biltmore Bank Corp. and Biltmore Investors Bank

         Biltmore Bank Corp. ("The Company") was incorporated  under the laws of
the State of Arizona on March 19,  1984 to operate as the  holding  company  for
Biltmore  National Bank,  predecessor to Biltmore  Investors Bank ("Bank").  The
Bank, organized as a nationally chartered bank, opened August 22, 1985. The Bank
engages in the  commercial  banking  business.  The Bank  accepts  checking  and
savings deposits, makes a full range of commercial,  installment and real estate
loans, and provides other customary banking services,  including consumer loans,
brokerage  and  trust  services.  The  Bank  has two  banking  offices,  and one
administrative  office. The main office is at 2425 E. Camelback Road in Phoenix,
Arizona.  The  second  branch is at 8700 E.  Pinnacle  Peak Road in  Scottsdale,
Arizona.  Both offices provide  banking,  trust and investment  services for its
primary  service area.  The Company has no definite plans to engage in any other
business  at this time.  Federal  law  prohibits  bank  holding  companies  from
engaging in activities other than banking or bank-related services.

Marketing and Business Plans

         The Bank's business plan emphasizes  personalized service combined with
a  full  range  of  banking   services   for   executives,   professionals   and
entrepreneurs.  The Bank markets its services to professional  firms,  including
law  firms,  accounting  firms,  physicians  and  dentists,   manufacturing  and
distribution businesses, service firms, and individuals living or working in the
Bank's primary  service area.  The Board of Directors and Advisory  Directors of
the Bank assist in business  development  efforts through referrals  obtained by
the  Directors'  personal  contacts  and  participation  in  activities  in  the
community in which the Bank is located.  The Board of Directors of the Bank also
attempts,  on a constant  basis,  to develop  methods that will better serve the
financial  needs  of  the  Bank's  primary  service  area.  The  Bank  seeks  to
differentiate  itself  from other  large  commercial  banks and savings and loan
associations by a marketing plan that emphasizes personalized,  friendly service
from  professional  staff  members,  access  to  Bank  management,  prompt  loan
decisions, and customized products.

         The Bank's real estate lending  philosophy and direction now emphasizes
owner-occupied  permanent  real  estate  lending  and  residential  real  estate
construction loans, with permanent take-out  commitments from either the Bank or
other financial institutions.

         In conjunction with the Bank's business plan to provide a full range of
banking services,  the Bank introduced a securities brokerage office in 1990 and
trust services in 1991. The securities brokerage office, which is located at the
Bank,  is  operated  under an  agreement  between  the Bank and LINK  Investment
Services, a national non-affiliated securities brokerage firm. The trust office,
which is also  located  at the Bank,  offers a full range of  employee  benefit,
personal trust, custody, and asset management services.

         On February 1, 1994 Biltmore  Investors Bank consummated a purchase and
assumption agreement with Sears, Roebuck and Co. to acquire substantially all of
the assets and  liabilities  of American  National  Bank,  which operated at the
Pinnacle Peak site.

         The  acquisition  of ANB  assets  allowed  Biltmore  Investors  Bank to
establish  an  operation  in  a  strategically  desirable  market  area  without
incurring  significant  start-up  costs and to provide a high quality of banking
service  to the North  Scottsdale  area.  This  acquisition  allows  the Bank to
provide additional services to the former clients of American National Bank such
as trust,  financial  planning  and a higher  lending  limit.  These  additional
services more effectively meet the needs of the market area.

Competition

         The banking  business in Arizona  generally,  and in the Bank's primary
service area in particular, is highly competitive with respect to both loans and
deposits and is dominated by a relatively small number of major banks which have
many offices throughout the State of Arizona. As of December 31, 1995, according
to the Arizona State Banking Department,  there were twenty (20) state chartered
banks and nine (9) national banks for a total of twenty- nine (29) banks.

         The Bank competes for deposits and loans  principally with these banks,
as well as with other financial intermediaries including credit unions, mortgage
companies,  insurance  companies,  stock  brokerage  firms,  and  other  lending
institutions.  These larger institutions are able to undertake large advertising
campaigns and to allocate their investment  assets in areas of highest yield and
demand.  In  competing  for  deposits,  the  Bank  also is  subject  to  certain
limitations not applicable to non-bank financial institutions.

         In order to compete with the other  financial  institutions  within the
Bank's  primary  service  area,  the Bank  relies on  personal  contacts  by its
officers,   Directors,   members  of  the  Advisory  Board,  employees  and  the
shareholders of the Company.  The Bank's  promotional  activities  emphasize the
advantages of dealing with a  locally-managed  institution  that is sensitive to
the  special  needs of the  community.  The Bank  provides a courier  service to
clients in order to compete with other institutions who have multiple locations.
                                       
Employees

         As of December 31, 1995,  the Bank employed  forty-five  (45) full-time
employees  and three  (3) part time  employees.  Of  these,  fourteen  (14) were
management personnel.

Profitability

         The Company and the Bank have been  operating  since 1985.  Because the
Company's  principal  activity for the foreseeable  future will be to act as the
holding  company  of  the  Bank,  its   profitability   depends  on  the  Bank's
profitability.  For the year ended  December  31,  1995,  the  Company  recorded
consolidated  net income of $715,281  compared with a consolidated net income of
$1,357,375 in 1994.

SUPERVISION AND REGULATION

The Company

         The Common  Stock is subject to the  registration  requirements  of the
Securities  Act of 1933,  as  amended.  The  Company is subject to the  periodic
reporting requirements of the Securities Exchange Act of 1934, as amended, which
includes,  but is not  limited  to, the filing of  annual,  quarterly  and other
reports with the Securities and Exchange Commission.

         The Company is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "Holding  Company Act"),  and is subject to
supervision by the Federal Reserve Board. As a bank holding company, the Company
is  required to file with the Federal  Reserve  Board an annual  report and such
other additional  information as the Federal Reserve Board requires  pursuant to
the Holding  Company Act. The Federal  Reserve Board also makes  examinations of
the Company and its subsidiary.

         The Holding  Company Act requires prior approval of the Federal Reserve
Board for,  among other things,  the  acquisition  by a bank holding  company of
direct or indirect  ownership  or control of more than five  percent (5%) of the
voting shares,  or substantially  all the assets of any bank, or for a merger or
consolidation by a bank holding company with any other bank holding company. The
Holding  Company Act also prohibits the acquisition by a bank holding company or
any of its subsidiaries of joint shares or  substantially  all the assets of any
bank located in a state other than the state in which the operations of the bank
holding company's  banking  subsidiaries are principally  conducted,  unless the
statutes  of the state in which the bank to be  acquired  is  located  expressly
authorize such an acquisition. Beginning October 1, 1986, out-of-state banks and
bank holding companies were allowed to acquire banks, bank holding companies, or
both, in Arizona.

         With certain limited  exceptions,  a bank holding company is prohibited
from acquiring direct or indirect ownership or control of more than five percent
(5%) of the voting  shares of any  company  which is not a bank or bank  holding
company and from  engaging  directly or  indirectly  in any activity  other than
banking, managing or controlling banks or performing services for its authorized
subsidiaries.  A bank holding company,  however,  may engage in activities which
the Federal  Reserve Board has determined to be closely  related to banking.  In
making that  determination,  the Federal  Reserve  Board is required to consider
whether  the  performance  of these  activities  can  reasonably  be expected to
produce  benefits  to  the  public,  such  as  greater  convenience,   increased
competition,  or gains in efficiency,  that outweigh  possible  adverse effects,
such as undue  concentration  of  resources,  decreased  or unfair  competition,
conflicts of interest,  or unsound banking practices.  The Federal Reserve Board
is also  empowered to  differentiate  between  activities  commenced de novo and
activities  commenced  by the  acquisition,  in  whole  or in  part,  of a going
concern.  The Federal Reserve Board has determined  that mortgage  banking is an
activity  which,  in  general,  can be engaged in by a  subsidiary  of a banking
holding  company.  However,  should the Company decide to establish or acquire a
mortgage banking  subsidiary,  it would be required to obtain the prior approval
of the Federal Reserve Board.

         Additional statutory provisions prohibit a bank holding company and any
subsidiary banks from engaging in certain tie-in arrangements in connection with
the extension of credit. Thus, a subsidiary bank may not extend credit, lease or
sell property, furnish any services, or fix or vary the consideration for any of
the  foregoing on the  condition  that:  (i) the customer must obtain or provide
some additional  credit,  property or service from or to, such bank other than a
loan,  discount,  deposit or trust service;  or (ii) the customer may not obtain
some other  credit,  property or service  from  competitors,  except  reasonable
requirements to assure soundness of credit extended.

         The  federal  banking  agencies  have  also  adopted  leverage  capital
guidelines which banking  organizations  must meet. Under these guidelines,  the
most highly rated banking  organizations  must meet a leverage ratio of at least
3%  Tier  1  capital  to  adjusted  total  assets,  while  lower  rated  banking
organizations must maintain a ratio of at least 4% to 5%. In all cases,  banking
institutions are expected to hold capital commensurate with the level and nature
of risks.  The Company's  leverage  ratios for the years ended December 31, 1995
and 1994 were 8.88% and 7.12%, respectively.


The Bank

         The Bank is a national banking association whose depositors are insured
by the Federal  Deposit  Insurance  Corporation  (the  "FDIC") up to the maximum
legal limits of the FDIC  ($100,000) and is subject to regulation,  supervision,
and regular examination by the Comptroller of the Currency. The Bank is a member
of the  Federal  Reserve  System and is subject  to  certain  provisions  of the
Federal  Reserve  Act and to  regulations  promulgated  from time to time by the
Federal  Reserve  Board.  The Bank also is subject to  applicable  provisions of
Arizona  state  law,  insofar  as those laws do not  conflict  with,  or are not
preempted by, federal law. The regulations of these various agencies govern most
aspects of the Bank's  business,  including  reserve  against  deposits,  loans,
investments,  mergers and acquisitions,  borrowings,  dividends and locations of
branch offices.

         The Bank is required to maintain  adequate capital ratios.  The Federal
Reserve  Board has adopted a  risk-based  capital  measurement  to assist in the
determination of capital adequacy.  The guidelines divide holding companies into
two categories:  (1) above 150 million dollars in consolidated  assets, in which
case the guidelines are applied on a consolidated  basis for all banks under the
holding  company,  and (2)  holding  companies  below  150  million  dollars  in
consolidated  assets  level,  in which  case the  guidelines  are  applied  on a
bank-by-bank  basis.  The Bank falls in the second  category as of December  31,
1995.

         The Federal Reserve Board has adopted capital regulations which require
the Bank to maintain two separate  minimum  capital  ratios:  the Tier 1 Capital
Ratio and the Total  Risk-Weighted  Capital Ratio. The Bank's capital ratios are
shown,  along with the minimum required ratios as of December 31, 1995, and 1994
respectively, in the following table:


<PAGE>

                                                   Total Risk-
                                        Tier 1      Weighted
                                        Capital     Capital
                                        -------     -------

Capital Ratio at December 31, 1995       13.57%     16.16%
Capital Ratio at December 31, 1994       12.96%     14.23%
Regulatory Capital Requirement            4.00%      8.00%


    The Depository  Institutions  Deregulation  and Monetary Control Act of 1980
specifies that any reserve requirement to maintain non-interest bearing reserves
with the  Federal  Reserve  Bank will be  uniformly  applied  to all  depository
institutions that maintain  transaction  accounts (demand deposit accounts,  NOW
accounts and savings  accounts  subject to automatic  transfers) or non-personal
time deposits.

    In August 1989, the Financial  Institution Reform,  Recovery and Enforcement
Act  ("FIRREA")  was  enacted  into  law.  FIRREA  provides,  in  part,  for the
recapitalization  of the  savings  association  and bank  insurance  funds,  the
restructuring  of  the  federal  agencies  that  insure  and  supervise  savings
institutions,  and the implementation of a number of changes to federal statutes
governing  not  only  savings  institutions,  but  also  banking  organizations.
Provisions  of FIRREA  which  affect the Company and the Bank  include,  without
limitation,  the enhancement of the FDIC's  enforcement  powers,  an increase in
banks' deposit  insurance  premiums and the basing of a bank's deposit insurance
premium on the type of investments held by the Bank.

    The  Federal  Deposit  Insurance  Corporation  Improvement  Act of 1991 (the
"Act")  modified  FIRREA in  several  material  respects  and set forth  certain
changes  in the legal  environment  for  insured  banks.  The Act,  among  other
provisions,  reduced insurance coverage for certain kinds of deposits, increased
consumer-oriented  requirements,  and  revised the  process of  supervision  and
examination of depository institutions.

        Specifically (but not exclusively) the Act provided for recapitalization
of the Bank Insurance Fund,  created  additional  controls on brokered deposits,
tightened  controls on extensions of credits to directors and executive officers
and  accelerated  regulatory  action for  underperforming  or under  capitalized
institutions.

    Legislative   and   regulatory   proposals   which  could  affect  the  Bank
specifically  and the banking  business in general may be introduced  before the
United  States  Congress and other  governmental  bodies.  These  proposals  may
further  alter  the  structure,   regulation  and  competitive  relationship  of
financial institutions if they become law, and may subject the Bank to increased
regulation,  disclosure and reporting requirements. In addition, various banking
regulatory  agencies  frequently  propose rules and regulations to implement and
enforce already existing legislation.  It cannot be predicted whether or in what
form any such  legislation or regulations will be enacted or the extent to which
the business of the Bank would be affected thereby.

    Banking is a business  which depends on interest  rate margins.  In general,
the difference between the interest paid by a bank on its deposits and its other
borrowings,  and the  interest  received  by a bank  on  loans  extended  to its
customers and on securities held in its investment portfolio, comprise the major
portion of a Bank's  earnings.  Thus,  the  earnings  and growth of the Bank are
subject to the influences of economic  conditions  generally,  both domestic and
foreign,  and also to the monetary and fiscal  policies of the United States and
its agencies, particularly the Federal Reserve Board, which regulates the supply
of money through  various means  including open market dealings in United States
government  securities.  The nature and timing of future changes in the policies
and their impact on the Bank cannot be predicted.


INDUSTRY SEGMENTS AND FOREIGN OPERATIONS

    Industry  segment  information  and foreign  operations  disclosures are not
applicable to the Company since the Company's  only activity is ownership of the
Bank which has no foreign operations.

SELECTED BANKING INFORMATION

    Set forth below is information  relating to the Bank's financial position as
of December  31, 1995 and 1994,  and relating to the Bank's  operations  for the
years ended December 31, 1995, 1994 and 1993.

I.  Distribution of Assets, Liabilities and Shareholders' Equity; Interest
Rates and Interest Differential

    A.  Schedule of Assets, Liabilities and Shareholders' Equity and
Interest             Income

    The  following  schedule  shows the average  balances of the Bank's  assets,
liabilities and shareholders' equity accounts and the percentage distribution of
the items using the average month-end balances for the periods indicated.
<TABLE>
<CAPTION>
                                                     December 31,
                                 ---------------------------------------------------
                                            1995                       1994
                                 -----------------------     -----------------------
<S>                              <C>               <C>       <C>               <C>
AVERAGE ASSETS
Taxable investment   
 securities                      $  36,372,000     26.92%    $  37,905,000     28.43%
Other investments                      391,000       .29           319,000       .24
Federal funds sold                       6,000        --         3,565,000      2.67
Loans (net of allowance)            88,166,000     65.27        81,116,000     60.84
Other assets                        10,154,000      7.52        10,424,000      7.82
                                 -------------    ------     -------------    ------
Total Average Assets             $ 135,089,000    100.00%    $ 133,329,000    100.00%
                                 =============    ======     =============    ======


                                                     December 31,
                                 ---------------------------------------------------
                                            1995                       1994
                                 -----------------------     -----------------------
AVERAGE LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits
  Non-interest bearing demand    $  22,575,000     16.71%    $  22,055,000     16.54%
  Interest-bearing demand           28,913,000     21.40        37,008,000     27.76
  Other time certificates           44,005,000     32.57        40,981,000     30.74
  Savings deposits                  21,164,000     15.67        20,587,000     15.44
                                 -------------    ------     -------------    ------
Total Average Deposits             116,657,000     86.35       120,631,000     90.48

Repurchase agreements                3,960,000      2.93           205,000       .15
Other liabilities                    1,536,000      1.14         1,041,000       .78
                                 -------------    ------     -------------    ------
Total Average Liabilities          122,153,000     90.42       121,877,000     91.41

Shareholders' Equity
  Common stock                       1,782,000      1.32         1,782,000      1.34
  Capital surplus                   13,093,000      9.69        13,093,000      9.82
  Retained earnings (deficit)
    and unrealized (loss) gain
    on securities                   (1,939,000)    (1.43)       (3,423,000)    (2.57)
                                 -------------    ------     -------------    ------
Average Shareholders' Equity        12,936,000      9.58        11,452,000      8.59

Total Average Liabilities
  & Average Shareholders'
  Equity                         $ 135,089,000    100.00%    $ 133,329,000    100.00%
                                 =============    ======     =============    ======
</TABLE>
<PAGE>
     B.   Interest Income

        The following table shows the average  balances,  the average  month-end
yields and the dollar amounts of interest  earned or paid for each of the Bank's
major categories of interest-earning assets and interest-bearing liabilities for
the period indicated.


                                      Year ended December 31, 1995
                                  ----------------------------------
                                                                Average
                                    Average        Interest      Rate
                                   Balance(1)    Earned/Paid  Earned/Paid
                                  ------------   ------------ -----------

Loans (net of allowance)          $ 88,166,000   $  7,888,928   8.95%
Taxable investment securities       36,372,000      2,042,226   5.61
Other investments                      391,000         22,143   5.66
Federal funds sold                       6,000        216,886
                                  ------------   ------------   ----
        Total Average Interest-
          Earning Assets          $124,935,000   $ 10,170,183   8.14%
                                  ============   ============   ====
Deposits, interest-bearing:
  Interest-bearing demand         $ 28,913,000   $    911,151   3.15
  Other time certificates           44,005,000      2,539,071   5.77
  Savings deposits                  21,164,000        867,790   4.10
  Repurchase agreements              3,960,000         81,018   2.05
                                  ------------   ------------   ----
        Total Average Interest-
          Bearing Liabilities     $ 98,042,000   $  4,399,030   4.49%
                                  ============   ============   ====


                                            Net                  Net
                                          Interest             Interest
                                          Earnings             Earnings
                                          --------             --------
Net yield on interest-earning
  assets                                 $5,771,153             4.62%


------------------------------
(1) Includes non-accrual loans.
<PAGE>
     The  following  table shows the  average  balances,  the average  month-end
yields and the dollar amounts of interest  earned or paid for each of the Bank's
major categories of interest-earning assets and interest-bearing liabilities for
the period indicated.

                                      Year ended December 31, 1994
                                  ----------------------------------
                                                                Average
                                     Average       Interest      Rate
                                    Balance(1)    Earned/Paid  Earned/Paid
                                  ------------   ------------  -----------

Loans (net of allowance)          $ 81,116,000   $  6,229,328     7.68%
Taxable investment securities       37,905,000      2,093,653     5.52 
Other investments                      319,000         19,161     6.01 
Federal funds sold                   3,565,000        141,807     3.98 
                                  ------------   ------------     ---- 
        Total Average Interest-                                        
          Earning Assets          $122,905,000   $  8,483,94      6.90%
                                  ============   ============     ==== 
Deposits, interest-bearing:                                             
  Interest-bearing demand         $ 37,008,000   $    822,909     2.22 
  Other time certificates           40,981,000      1,993,637     4.86 
  Savings deposits                  20,587,000        548,490     2.66 
  Repurchase agreements                205,000          4,832     2.36 
                                  ------------   ------------     ---- 
        Total Average Interest-                                    
          Bearing Liabilities     $ 98,781,000   $  3,369,868     3.41%
                                  ============   ============     ====


                                           Net                    Net
                                         Interest               Interest
                                         Earnings               Earnings
                                         --------               --------
Net yield on interest-earning
  assets                                $5,114,081                4.16%

-------------------------------
(1) Includes non-accrual loans.
<PAGE>
        C.      Net Interest Volume and Rate Variances

        The following  tables set forth the dollar amounts of the changes in net
interest  income  (before  provision for credit  losses) and the extent to which
such  changes  were  attributable  to changes  in  volume,  changes in rates and
changes  in   rate/volume   for  each  of  the  Bank's   major   categories   of
interest-earning  assets  and  interest-bearing  liabilities  for the year ended
December 31, 1995 as compared with the year ended December 31, 1994, and for the
year ended  December 31, 1994 as compared with the year ended December 31, 1993.
Changes  allocable to volume and rate have been  allocated in  proportion to the
relationship of the absolute dollar amounts of the change in each category.


                                Year ended December 31, 1995
                          ---------------------------------------
                                      (000's omitted)
                           Change     Change    Change     Total
                          in Volume  in Rate  Rate/Volume  Change
                          -------    -------   -------    -------
Interest Income:
Loans (Less Allowance)    $   164    $ 1,457   $    38    $ 1,659
Taxable Invest Sec            (83)        34        (2)       (51)
Other Investments            (168)     1,631    (1,385)        78
                          -------    -------   -------    -------
Total Interest Income     ($   87)   $ 3,122   ($1,349)   $ 1,686
                          -------    -------   -------    -------

Interest Expense:
Interest Bearing Demand   ($  236)   $   780   ($  140)   $   404
Other Time Certificates        37        500         9        546
Savings Deposits               (7)        11        (1)         3
Repurchase Agreements          46          3        27         76
                          -------    -------   -------    -------
Total Interest Expense       (160)     1,294      (105)     1,029
                          -------    -------   -------    -------
Change in Net Interest
 Income                   $    73    $ 1,828   ($1,244)   $   657
                          =======    =======   =======    =======
<PAGE>
                              Year ended December 31, 1994
                          ---------------------------------------
                                      (000's omitted)
                          Change     Change     Change     Total
                         in Volume   in Rate  Rate/Volume  Change
                          -------    -------    -------    -------
Interest Income:
Loans (Less Allowance)    $ 1,047    $   723    $   177    $ 1,947
Taxable Invest Sec            491       (202)       (53)       236
Other Investments              (4)        44         (3)        37
                          -------    -------    -------    -------
Total Interest Income     $ 1,534    $   565    $   121    $ 2,220
                          -------    -------    -------    -------

Interest Expense:
Interest Bearing Demand   $   336    $    26    $    20    $   382
Other Time Certificates        13       (359)        (2)      (348)
Savings Deposits               47          3         --         50
Repurchase Agreements           3         (1)        (1)         1
                          -------    -------    -------    -------
Total Interest Expense        399       (331)        17         85
                          -------    -------    -------    -------
Change in Net Interest
 Income                   $ 1,135    $   896    $   104    $ 2,135
                          =======    =======    =======    =======
<PAGE>
        D.     Investment Securities

        All of the Bank's  investment  securities  consist of  securities of the
U.S.  Treasury  and  other  governmental  agencies,   Certificates  of  Deposit,
Corporate  Bonds,  and  Federal  Reserve  Bank  stock.  The  following  schedule
summarizes  the  book  value  and  the  distribution  of the  Bank's  investment
securities  held as of the dates  indicated  below.  Investment  securities  are
carried at market as of December 31, 1995 and 1994.

                                   December 31,
                             -------------------------
                                1995          1994
                             -----------   -----------
U.S. Treasury Notes          $20,054,063   $19,199,000
U.S. Agencies                 15,762,224    16,297,000
Federal Reserve Bank Stock       390,850       354,000
Certificates of Deposit           98,866       100,000
Corporate Bonds                  502,350       493,000
                             -----------   -----------
        Total                $36,808,353   $36,443,000
                             ===========   ===========

        E.      Maturity of Investment Securities

        The following  tables  summarize  the maturity of the Bank's  investment
securities  distribution  and  their  weighted-average  yields  for the  periods
listed.
<TABLE>
<CAPTION>
                                            December 31, 1995
                                          Investment Maturity Distribution
               Amortized                  Amortized                   Amortized
                  Cost                       Cost                        Cost
               Less than      Market        One to        Market         Over          Market
                1 Year        Value       Five Years       Value      Five Years       Value
              -----------   -----------   -----------   -----------   -----------   -----------
<S>           <C>           <C>           <C>           <C>           <C>             <C>
U.S.       
 Treasury     $ 2,014,602   $ 2,017,814   $17,843,646   $18,036,249   $        --     $      --
U.S. 
 Agencies       2,985,311     2,990,000    11,045,357    11,105,274     1,683,055     1,666,950
Federal
 Reserve
 Bank Stock            --            --            --            --       390,850       390,850
Certificate
   of
 Deposit          100,000        98,866            --            --            --            --
Corporate
 Bonds            500,000       502,350            --            --            --            --
              -----------   -----------   -----------   -----------   -----------   -----------
  Total       $ 5,599,913   $ 5,609,030   $28,889,003   $29,141,523   $ 2,073,905   $ 2,057,800
              ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>

                                      December 31, 1995
                                      Investment Yields
                          ---------------------------------------
                         Less than          One to         Over
                          1 Year         Five Years     Five Years
                          -----             -----          -----

U.S. Treasuries           4.90%              5.79%            --
U.S. Agencies             5.30%              6.18%          4.80%
Federal Reserve
  Bank Stock                --                 --           6.00%
Certificates of
  Deposit                 2.75%                --             --
Corporate Bonds           6.95%                --             --
                          -----             -----          -----
    Total                 5.26%             5.94%           5.03%
                          =====             =====          =====
<PAGE>
<TABLE>
<CAPTION>
                                           December 31, 1994
                                    Investment Maturity Distributio
              ---------------------------------------------------------------------------------
             Amortized Cost             Amortized Cost              Amortized Cost
               Less than      Market        One to        Market          Over        Market
                1 Year        Value       Five Years      Value       Five Years       Value
              -----------   -----------   -----------   -----------   -----------   -----------
<S>           <C>           <C>           <C>           <C>           <C>             <C>
U.S. 
 Treasury     $ 5,025,000   $ 4,980,000   $15,047,000   $14,219,000   $        --     $      --
U.S. 
 Agencies              --            --    14,985,000    14,384,000     2,016,000     1,913,000
Federal
 Reserve
 Bank Stock            --            --            --            --       354,000       354,000
Certificate
   of
 Deposit          100,000       100,000            --            --            --            --
Corporate
 Bonds                 --            --       500,000       493,000            --            --
              -----------   -----------   -----------   -----------   -----------   -----------
  Total       $ 5,125,000   $ 5,080,000   $30,532,000   $29,096,000   $ 2,370,000   $ 2,267,000
              ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
                                           December 31, 1994
                                           Investment Yields
                                 Less than         One to         Over
                                  1 Year         Five Years     Five Years
                                  -----            -----           -----

U.S. Treasuries                   5.43%            5.97%             --
U.S. Agencies                       --             5.76%           4.63%
Federal Reserve
  Bank Stock                        --               --            6.00%
Certificates of
  Deposit                         2.75%              --              --
Corporate Bonds                     --             6.95%             --
                                  -----            -----           -----
    Total                         5.38%            5.88%           4.84%
                                  =====            =====           =====
<PAGE>
        F.      Distribution of Loans

        The following table shows the  distribution of the Bank's total loans as
of the dates indicated below. All loans arise from domestic operations.

                         December 31, 1995       December 31, 1994
                       --------------------    --------------------
                         Amount Percentage       Amount Percentage
                       --------------------    --------------------

Commercial and
  Industrial           $45,379,732    49.46%   $42,243,000    47.20%
Real Estate
  Construction           2,158,172     2.35      1,135,000     1.27
Consumer Installment     3,313,321     3.61      4,049,000     4.52
Residential Mortgage    40,896,989    44.58     42,083,000    47.01
                       -----------   ------    -----------   ------
        Total          $91,748,214   100.00%   $89,510,000   100.00%
                       ===========   ======    ===========   ======

        As of December 31, 1995,  $2,265,571 of total loans were  unsecured.  Of
those unsecured loans, $9,264 were classified as non-performing.

        G.      Loan Maturities and Sensitivity of Changes in Interest Rates

        The following  tables set forth the maturity  distribution of the Bank's
total  loans by category as of December  31,  1995 and 1994.  In  addition,  the
tables show the  distribution  between  those loans with  predetermined  (fixed)
interest rates and those with variable (floating) interest rates. Floating rates
generally fluctuate with changes in the Bank's interest cost.

        Loan  maturities  and  rate  sensitivity  of the loan  portfolio  are as
follows:

                                  December 31, 1995
                                   Loan Maturities
                 -----------------------------------------------------
                                   Over
                  One Year        One to        Over
                   or Less      Five Years   Five Years       Total
                 -----------   -----------   -----------   -----------
Commercial and
  Industrial     $24,030,515   $15,269,285   $ 6,079,932   $45,379,732
Real Estate
  Construction     2,158,172            --            --     2,158,172
Consumer Loans     2,521,639       780,917        10,765     3,313,321
Residential
  Mortgages        1,279,656     2,315,781    37,301,552    40,896,989
                 -----------   -----------   -----------   -----------
        Total    $29,989,982   $18,365,983   $43,392,249   $91,748,214
                 ===========   ===========   ===========   ===========

Loans with Variable Rates                     $76,014,590
Loans with Fixed Rates                         15,733,624
                                              -----------
Total                                         $91,748,214
                                              ===========
<PAGE>
                                  December 31, 1994
                                   Loan Maturities
                 -----------------------------------------------------
                                   Over
                   One Year       One to       Over
                   or Less      Five Years   Five Years       Total
                 -----------   -----------   -----------   -----------
Commercial and
  Industrial     $20,751,000   $15,493,000   $ 5,999,000   $42,243,000
Real Estate
  Construction     1,135,000            --            --     1,135,000
Consumer Loans     2,898,000     1,095,000        56,000     4,049,000
Residential
  Mortgages          147,000     1,940,000    39,996,000    42,083,000
                 -----------   -----------   -----------   -----------
        Total    $24,931,000   $18,528,000   $46,051,000   $89,510,000
                 ===========   ===========   ===========   ===========



Loans with Variable Rates                      $75,782,000
Loans with Fixed Rates                          13,728,000
                                               -----------
Total                                          $89,510,000
                                               ===========

        H.     Credit Risk Management

        The Bank charges off that portion of any loan which  management  or bank
examiners  consider  to  represent a loss.  A loan is  generally  considered  by
management  to represent a loss in whole or in part when an exposure  beyond any
collateral  value is  apparent,  servicing  of the  unsecured  portion  has been
discontinued or collection is not anticipated based on the borrower's  financial
condition  and general  economic  conditions  in the  borrower's  industry.  The
principal  amount of any loan which is  declared a loss is charged  against  the
Bank's allowance for credit losses.

        The following  details loans that were  nonaccrual or were accrual loans
which were  contractually  past due 90 days or more as to  principal or interest
payments at December 31, 1995 and 1994:


                                                December 31,
                                       ------------------------------
                                         1995                  1994
                                       --------              --------
Non-Accrual Loans                      $109,988              $507,000
90 days past due but
  accruing                                   --               100,000
                                       --------              --------
                          Total        $109,988              $607,000
                                       ========              ========

        The Bank's  policy of placing a loan on  non-accrual  requires  that all
loans 90 days or more past due are to be placed on  "non-accrual"  status unless
the loan is well  secured  and in the process of active  collection.  This is in
conformance  with the  guidelines  for  non-accrual  loans of the  Office of the
Comptroller of the Currency.  A loan is considered  well secured if the verified
value of the collateral  meets normal  loanable  margin  requirements  for those
collateral  assets,  considering  principal  and interest over the period it can
reasonably be expected to liquidate the asset.

        For  the  case of  real  estate  collateral,  independent  "fair  value"
appraisals,  including  professional  estimates of marketing  time,  are used to
judge whether a loan meets this criteria.

        Additionally, the following schedule details the Bank's potential future
problem loans:
<PAGE>

                                   December 31, 1995
                           ------------------------------
                              Watch    Alert
                              List      List      Total
                           ----------   ----   ----------

Commercial Loans           $3,473,452   $ --   $3,473,452
Real Estate Construction           --     --           --
Consumer Installment           14,286     --       14,286
Residential Mortgage          616,874     --      616,874
                           ----------   ----   ----------
        Total              $4,104,612   $ --   $4,104,612
                           ==========   ====   ==========

        As of December 31, 1995,  there was no  concentration of loans exceeding
ten  percent  (10%) of total  loans  which  were not  otherwise  disclosed  as a
category in the loan  portfolio  table.  As of December 31, 1995,  there were no
other  interest-bearing  assets  that would be required to be in the Credit Risk
Management section above if such assets were classified as loans.

        The  Watch  List  includes  loans  which  may or may  not be  performing
according to original terms,  or are to clients  operating in a weak industry or
in an industry currently negatively impacted by the economy.  These loans have a
well-defined  weakness which  jeopardizes  the orderly  liquidation of the debt.
Such loans are inadequately  protected by the current sound net worth and paying
capacity  of the  obligor,  or there are  questions  as to the value of  pledged
collateral,  if any.  They are  characterized  by a degree of risk which poses a
distinct  possibility that the Bank could maintain some loss if the deficiencies
are not corrected in a timely  manner.  These loans are reported to the Board of
Directors.

        Other  loans  which  may  be  included  in  the  Watch  List  are  those
collateralized  within  policy  guidelines  or as  exceptions  to  policy,  with
historical and/or current trends of only adequate earnings.  Net worth is likely
not to possess strong liquidity. These loans do not presently expose the Bank to
a sufficient  degree of risk to warrant adverse  classification;  however,  they
possess credit deficiencies  deserving of management's close attention.  Failure
to correct  such  deficiencies  could  result in a loan of  greater  risk in the
future.

        Loans  included  in the Alert List have a  weakness  found in Watch List
loans,  with the added aspect that the weakness is  pronounced to a point where,
on the  basis of  current  facts,  conditions  and  values,  there is a  clearly
identifiable  element of potential loss exposure contained therein.  These loans
are also reported to the Board of Directors.

        I.      Summary of Loan Loss Experience

        The Bank has  established  an allowance for credit losses to provide for
losses which can be reasonably  anticipated.  The allowance for credit losses is
periodically  provided for through charges to operating  expenses in the form of
provisions for credit losses.  Actual credit losses or recoveries are charged or
credited, respectively,  directly to the allowance for credit losses. The amount
of the allowance is  determined  by  management  of the Bank.  Among the factors
considered  in  determining  the  allowance  for credit  losses are the  current
financial  conditions of the Bank's borrowers and the value of the security,  if
any, for their loans. Estimates of the effect of current economic conditions and
their impact on various industries and individual  borrowers are also taken into
consideration,  as are the Bank's  historical credit loss experience and reports
rendered by governmental regulators.

        Because  these  estimates  and  evaluations  are  primarily   judgmental
factors,  no assurance can be given that the Bank may not sustain  credit losses
substantially  higher than the allowance  for credit  losses or that  subsequent
evaluation  of the loan  portfolio may not require  substantial  changes in such
allowance.  As of December 31, 1995, the credit loss allowance of $2,362,310 was
believed to be sufficient to cover all potential loan problems.

        Management  reviews  the  provisions  for credit  losses on a  quarterly
basis. This review process includes the grading or regrading for each commercial
credit. Those determined to have a strong possibility of loss for the subsequent
quarter or year are  segregated  and a provision is made for  potential  loss in
addition to the normal credit loss provision.

        The Bank's loan portfolio is divided into ten  categories:  Construction
and related,  Medical and Dental, Personal Households,  Manufacturing,  Business
Services,  other  Industries,  Installment/VIP,   VIP-Plus  Home  Equity,  First
Residential Permanent, and Business/Personal Credit Cards. Based upon historical
information and banking experience, each category is given a certain credit loss
allowance. A higher provision is used for installment and consumer loans.

        All commercial  loans are reviewed and regraded  quarterly.  Installment
and consumer  loans are not. Any  commercial  loan graded in a lower category is
reviewed  for  potential  dollar  loss  and  provided  for  in the  credit  loss
provision.  Additionally, all loan commitments (unfunded) and standby letters of
credit are reviewed  monthly.  Also, the  concentration of loans by category and
general  economic  trends  are  reviewed  quarterly  to  determine  if any other
adjustments to the credit loss provision need be made.

        The Bank also reviews  collateral values pursuant to a written appraisal
policy and  procedure.  The Bank's  appraisal  policy and  procedure  ("Policy")
includes  policies and procedures  governing  appraisals of  residential  single
family detached dwellings, one-to-four family dwellings, multi-family dwellings,
commercial  real  estate   consisting  of  retail  centers,   office  buildings,
industrial   buildings,   land  acquisition  and  development   loans  for  both
residential and commercial  purposes,  developed  residential  building lots and
residential  and  commercial  construction  loans.  In practice,  lending now is
limited  to  owner-occupied   residential  property  and  owner-occupied  office
facilities or industrial buildings. The policy requires an appraisal on any real
property securing loans above $250,000.

        The Policy sets forth the  required  content  and form of the  appraisal
report, including definitions of "market value" and "fair value" as specified in
12  CFR  Sec.   7.3025(d),   time   adjustments   (if  applicable)  and  obvious
environmental considerations.

        The  appraiser is required to utilize  three  approaches  to value.  The
policy  also  sets  forth  definitive  requirements  as  to  age,  distance  and
adjustment  percentages  of  comparable  properties.   Residential  real  estate
appraisals  are  designed to conform to the  policies  of the Federal  Home Loan
Mortgage  Corporation.  All appraisers used must be approved by the Bank's Board
of Directors after completing a detailed application and screening process.
Approved appraiser lists are reviewed annually.

        Bank Policy dictates that a "fair value"  appraisal from a Bank-approved
appraiser  be obtained on all real  property  within 60 days of  acquisition  as
OREO. In addition,  a new "fair value"  appraisal will be obtained no less often
than annually  until the OREO property has been disposed of.  Appraisals  may be
ordered more frequently  depending on economic conditions and projected property
value declines.

        The  following  provides an analysis of the Bank's loan loss  experience
for the years ended December 31, 1995 and 1994.

                                          Years ended December 31,
                                        ---------------------------
                                            1995             1994
                                        -----------     -----------
Balance Beginning of Period             $ 2,422,513     $ 1,776,129
Acquired as result of purchase
  of American National Bank                    --           806,141
Charge Offs:
  Commercial and Industrial                    --          (126,534)
  Real Estate Construction                     --              --
  Consumer Installment                      (46,996)        (15,288)
  Mortgage Loans                            (19,517)           --
Recoveries:
  Commercial and Industrial                  96,462          51,760
  Consumer Installment                        1,841           5,937
  Mortgage Loans                              6,875            --
                                        -----------     -----------
Net (charge offs) recoveries                 38,665         (84,125)
Amounts credited to operations              (98,868)        (75,632)
                                        -----------     -----------
Balance End of Period                   $ 2,362,310     $ 2,422,513
                                        ===========     ===========
Ratio of net (charge offs) recoveries
 to loans outstanding                           .04%           (.09%)


                                    Year ended December 31, 1995
                                   -----------------------------
Allowance for Loan Loss                          As a % of Total
Specific and General Reserve:         Total       Loan Category
-----------------------------      ----------    --------------

Commercial & Industrial            $  835,856         1.8%
Real Estate
 Construction                          74,484         3.5
Consumer Loans                         69,971         2.1
Residential mortgage                  789,225         1.9
Reserve for unfunded commitments       41,143
Reserve for general economic
 conditions                           551,631
                                   ----------
        Total                      $2,362,310
                                   ==========

                                    Year ended December 31, 1994
                                   ------------------------------
Allowance for Loan Loss                          As a % of Total
Specific and General Reserve:         Total       Loan Category

Commercial & Industrial            $  396,913         2.1%
Real Estate
 Construction                          93,445         2.3
Consumer Loans                        349,449         1.8
Residential mortgage                  748,178         1.5
Reserve for unfunded commitments       65,117          .3
Reserve for general economic
 conditions                           769,411
                                   ----------
        Total                      $2,422,513
                                   ==========

        J.     Deposits

        The following  table sets forth  information  for the periods  indicated
regarding the average month-end  balances of the Bank's deposits by category and
as a percentage of total average daily deposits.


                     Noninterest    Interest
                       Bearing       Bearing
                       Demand        Demand         Savings         Time
                      Deposits      Deposits       Deposits        Deposits
                      --------      --------       --------        --------

December 1995
-------------
Average Balance     $22,575,000    $28,913,000    $21,164,000    $44,005,000
Percent of Total          19.35%         24.79%         18.14%         37.72%
Average Rate Paid          --             3.15%          4.10%          5.77%

December 1994
-------------
Average Balance     $22,055,000    $37,008,000    $20,587,000    $40,981,000
Percent of Total          18.28%         30.68%         17.07%         33.97%
Average Rate Paid          --             2.22%          2.66%          4.86%

The following  table  indicates the maturity of the Bank's time  certificates of
deposit.

<TABLE>
<CAPTION>
                                    December 31, 1995
                                    Deposit Maturity
                 -------------------------------------------------------------------
                  Less than      Three to     1 Year to       Over
                Three Months    12 Months     Five Years    Five Years      Total
                 -----------   -----------   -----------   -----------   -----------
<S>              <C>           <C>           <C>           <C>           <C>
Time
  Certificates
  of Deposit
  $100,000                                                                      
  and over       $ 3,497,647   $ 7,326,066   $ 2,866,197   $      --     $13,689,910
Other Time
  Deposits         6,770,782    16,664,297     6,785,187        46,633    30,266,899
                 -----------   -----------   -----------   -----------   -----------
Total            $10,268,429   $23,990,363   $ 9,651,384   $    46,633   $43,956,809
                 ===========   ===========   ===========   ===========   ===========
</TABLE>
        K.    Short-Term Borrowings

        The Bank had Fed Funds Purchased of $1,200,000 and Repurchase Agreements
        of $5,140,500 at December 31, 1995. There were no Fed Funds Purchased at
        December 31, 1994, and Repurchase Agreements were $603,000.

        L.      Certain Ratios

        The following table sets forth annualized information with regard to the
        Company's consolidated return on average assets,  consolidated return on
        average  equity,  and  ending  equity  to assets  ratio for the  periods
        indicated.

                                      Years ended December 31,
                                    --------------------------
                                       1995           1994
                                    --------       ----------

Return on Average Assets                .53%            1.02%
Return on Average Equity               5.53%           11.85%
Ending Equity to Assets Ratio         10.01%            8.29%
Net Income                          $715,281       $1,357,375


        M.     Rate Sensitivity Report

        The  following  Rate  Sensitivity  Report  sets  forth  the  listing  of
investments, loans and deposits as of December 31, 1995.
<TABLE>

                                          Rate Sensitivity Report
                                          As of December 31, 1995
                                              (000's omitted)
<CAPTION>
                                              Six
                                            months to
                     30 days or  31 days to Less than    One to      Over
                       Less      6 months    1 Year    Five Years Five years    Total
                     --------    --------   --------    --------   --------   --------
<S>                  <C>         <C>        <C>         <C>        <C>        <C>
Investments
 and Loans:

Federal Funds
 Sold                $   --      $   --     $   --      $   --     $   --     $   --
Investment
 Securities              --         3,606      2,983      28,889      2,058     37,536
Loans                  46,709      21,047     11,097       9,806      3,089     91,748
                     --------    --------   --------    --------   --------   --------
Total Investments     
  and Loans          $ 46,709    $ 24,653   $ 14,080    $ 38,695   $  5,147   $129,284

Deposits:

Demand:
  Interest Bearing   $  8,075    $   --     $   --      $   --     $   --     $  8,075
Time Deposits
  Over $100,000         1,628       4,981      4,215       2,866       --       13,690
Time Deposits
  Under $100,000        2,284      10,723     10,454       6,806       --       30,267
Savings                40,366        --         --          --         --       40,366
                     --------    --------   --------    --------   --------   --------
Total Deposits         52,353      15,704     14,669       9,672       --       92,398
                     --------    --------   --------    --------   --------   --------
Period Gap             (5,644)      8,949       (589)     29,023      5,147     36,886
                     --------    --------   --------    --------   --------   ========
Cumulative Gap       ($ 5,644)   $  3,305   $  2,716    $ 31,739   $ 36,886   $ 36,886
                     ========    ========   ========    ========   ========   ========
</TABLE>
        The above Rate Sensitivity Report shows that the Bank's gap position for
30 days or less is negative.  This means that if interest rates increase,  short
term  earnings will be  negatively  impaired.  The Bank's gap position for a one
year time frame is "asset  sensitive." If interest  rates  increase  during this
time frame, net income would be favorably impacted.  This is due to assets being
repriced  at the higher  rate faster  than the  liabilities.  If interest  rates
decreased during this period, net income would be adversely affected.

        The one to five years cumulative gap position is also "asset sensitive."
If interest rates increase,  net income would be favorably impacted. If interest
rates decrease during this period, net income would be adversely affected.

        The book value and market value of investment securities at December 31,
1995 was $36,808,000.

ITEM 2.         PROPERTIES.

        The  Company and the Bank  offices  are  located at 2425 East  Camelback
Road, Phoenix,  Arizona 85016. The Bank is obligated under a lease agreement for
its approximate  11,697  square-foot office space until June 30, 1999. The lease
requires the Bank to pay an allotted  percentage  of the direct  expenses of the
building and project in excess of specified  levels.  The lease agreement grants
the Bank renewal  options for two  five-year  periods at the fair market rent at
the renewal date.

        On February 2, 1994, the Bank acquired  substantially all the assets and
liabilities of American National Bank. As a result of the acquisition,  the Bank
signed  a five  year  lease  on the  office  at  8700  E.  Pinnacle  Peak  Road,
Scottsdale, Arizona. The building is a two-story building with rentable space of
12,217  square  feet.  The lease  agreement  provides  renewal  options  for two
five-year periods. The Bank has subleased approximately 3,150 square feet of the
second floor space under similar terms.

        Total  rental  expense  under the  aforementioned  leases for the twelve
months ended December 31, 1995 was approximately $573,000. Future minimum rental
payments  required  under  the lease  agreements  at  December  31,  1996,  were
approximately as follows:



                    Year Ending
                    December 31,

                       1996                         616,116
                       1997                         616,116
                       1998                         618,223
                       1999                         210,636
                     Thereafter                         --
                                                  ----------
                                                  $2,061,091
                                                  ==========

        The Bank  acquired  one acre of real  estate and a  building  located at
13648  N.  Tatum in  Phoenix,  Arizona  as part of the  American  National  Bank
purchase. During 1995, the building housed the Accounting department. Management
intends to use the  building  as an  operations  center in 1996.  Approximately,
2,000 square feet of the building is leased to an insurance agency.

ITEM 3.         LEGAL PROCEEDINGS.

        There are no material legal  proceedings  pending against the Company or
its subsidiary, the Bank.

ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        No matters have been submitted to a vote of security  holders during the
fourth quarter of 1995.

                                    PART II


ITEM 5.         MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
                STOCKHOLDER MATTERS.

        Currently,  there  is no  established  public  trading  market  for  the
Company's Common Shares.

        The Company's book value per share as of December 31, 1995 is $.83.

        The number of shareholders of record as of December 31, 1995 is 337.

        The Company's  ability to pay dividends is dependent upon the receipt of
dividends from the Bank. Currently, the Company has no other sources of revenue.
No common stock  dividends have been declared or paid by the Bank or the Company
since inception,  and management of the Bank and the Company intends to follow a
policy of retaining earnings for the purpose of increasing  shareholders' equity
in the Bank.  Approval of the  Comptroller  of Currency may be required prior to
payment of dividends under certain circumstances.


ITEM 6.         SELECTED FINANCIAL DATA.

        The following selected  consolidated  financial data for the Company for
the five years ended  December 31, 1995,  1994,  1993,  1992,  and 1991 has been
derived from the audited consolidated financial statements for those periods and
should be read in connection with the consolidated  financial statements and the
related notes thereto.
<TABLE>
<CAPTION>

                                                    Year Ended December 31,
                      --------------------------------------------------------------------------------
                          1995              1994            1993             1992             1991
                      -------------    -------------    -------------    -------------   -------------
<S>                   <C>              <C>              <C>              <C>             <C>          
Total Interest
  Income              $  10,170,183    $   8,483,949    $   6,263,871    $   7,038,091   $   8,317,342
          
Net Interest
  Income                  5,771,153        5,114,081        2,979,376        3,160,845       2,813,554
Provision for
  Credit Losses             (98,868)         (75,632)        (218,573)            --            90,000
Net Interest Income
  after Provision
  for Credit
  Losses                  5,870,021        5,189,713        3,197,949        3,160,845       2,723,554
Other Operating
  Income                    838,551          709,465          509,523          598,672         486,944
Other Operating
  Expenses                5,738,202        4,761,236        2,958,218        2,965,702       2,923,778
Net Income (Loss)           715,281        1,357,375        1,449,254          613,815         286,720
Per Share Data:
Income (Loss) per
  share                         .04              .08              .09              .04             .03
Dividends declared
  per share                    --               --               --               --              --
Loans                    91,515,000       89,285,000       68,426,000       67,860,000      62,623,000
Allowances for
  Credit Losses           2,362,000        2,423,000        1,776,000        1,914,000       1,648,000
Total Assets            137,516,000      142,845,000      108,295,000      100,455,000      99,274,000
Total Deposits          116,357,000      129,228,000       95,986,000       89,200,000      88,848,000
Total Liabilities       123,745,000      130,999,000       96,764,000       90,373,000      90,456,000
Shareholders'
  Equity                 13,771,000       11,846,000       11,531,000       10,082,000       8,817,000
</TABLE>

ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Results of Operations

        In 1995,  Biltmore  Bank  Corp.  reported  consolidated  net  income  of
$715,000,  after  provision  for taxes of $255,000  versus net income in 1994 of
$1,357,000,  after a tax  credit of  $219,000  and  consolidated  net  income of
$1,449,000 in 1993. Pre-tax income from operations was $970,000 in 1995 compared
with  $1,138,000 in 1994 and $749,254 in 1993. The tax credit in 1994 arose from
application of FAS 109, "Accounting for Income Taxes" which requires the current
recognition of tax-loss carry forward  benefits as more completely  explained in
footnote 16 to the financial statements.

Net Interest Income

        Net interest income increased $657,000, or 12.8%, in 1995 as compared to
1994.  This increase  primarily  resulted  from the  company's  ability to shift
assets deployed from lower yielding investments to higher yielding loans in 1995
and the  inclusion of the purchased  loans from  American  National Bank for the
full year 1995. Average loans increased $7,050,000, or 8.7% in 1995.

        Net interest  margin  increased to 4.62% in 1995,  from 4.16% in 1994 as
the  interest  rate  environment  (rising  rates)  boosted  yields  on the  loan
portfolio,  especially  residential  mortgage  loans,  to a greater  degree than
deposit costs.

Provision for Loan Losses

        The loan portfolio of the Company's subsidiary, Biltmore Investors Bank,
is subject to twice a year  review by an internal  loan review  group of Johnson
International,  Inc., the majority shareholder. A large sample of all loans over
a minimum size are reviewed in a manner  similar to bank  regulatory  examiners,
including  an  estimate  of  possible  loss.  This  group  prepares  a report to
management on the results of their loan  evaluation and that report,  along with
management's  quarterly  internal review and annual reviews by the Office of the
Comptroller of the Currency, are used to determine the adequacy of the allowance
for loan losses. Based on this information and analysis, management believes the
reserve at year end,  $2,362,000  is  adequate  to provide  for  potential  loan
losses.

        Additionally,  as the  Allowance for Loan Loss Reserve stood at 2.71% at
12/31/94 and 2.57% at 12/31/95,  and recoveries exceeded charge-offs by $38,665,
no provision for loan losses was made in 1995.

        Total  non-accrual  loans were $110,000 at year end 1995, an improvement
of $497,000,  over 1994.  Total  potential  future  problem  loans  totaled $4.1
million at 12/31/95, or 4.4% of loans and 29.7% capital, versus $3.5 million, or
3.9% and 29.7% of total loans and capital, respectively, at 12/31/94.

Non-Interest Income

        Other  income  increased  $130,000  or  18%,  on a year  to  year  basis
primarily as a result of greater service fees and increased trust revenues.

Non-Interest Expenses

        These expenses  increased  $977,000 in the year 1995, or 20.5%.  Of this
increase,  $614,000  was in salaries and  benefits as the  Company's  subsidiary
added staff to build a proper  infrastructure  for future growth,  meet new bank
regulatory challenges and prepare for the expected growth in the Maricopa County
economy.  Management fee expense increased $152,000 under an arrangement whereby
the Bank makes payment for allocable  services  provided by our majority  owner,
Johnson  International  (See  footnote 20 of financial  statements  for detailed
explanation).  Finally, other expenses were up $167,000 primarily as a result of
accrual for costs to  restructure  and move certain  operations  and recognize a
check fraud loss early in the year on which we are  recovering  in  installments
from a former depositor.

Loans

        The loan portfolio  increased  from  $89,510,000 at December 31, 1994 to
$91,748,000  at December 31,  1995.  All of the  increase is  attributable  to a
$3,136,000 year to year rise in commercial and industrial loans.

        Unsecured  loans,  which are primarily  classified in the commercial and
industrial category, stood at $2,266,000 at year end 1995 and $2,513,000 at year
end 1994.

        The  Bank's  asset/liability  and  liquidity  policies  set a  guideline
whereby  the Bank will  maintain  a loan  portfolio  not to exceed  80% of total
deposits.  The actual  percentage of outstanding loans is based on total deposit
duration and foreseen  liquidity  needs.  The loan to deposit  ratio at year end
1995 and 1994 stood are 79% and 69%, respectively.

Deposits

        The Bank's deposits  decreased $12.8 million from year end 1994 to 1995.
Average  deposits year to year  decreased  $4.0 million,  or 3.3%.  The drop was
attributable  entirely to an $8.0 million drop in interest  sensitive,  interest
bearing demand accounts, as all of the other categories of deposits increased on
average $4.1 million in 1995 compared to 1994.  Management believes the decrease
was  primarily  driven by our clients  managing  their cash assets more closely,
using  liquidity  to finance a portion of their  growth in 1995,  as well as the
attractiveness  in 1995  of  alternative  investments,  primarily  the  domestic
equities markets.

Liquidity

        Liquid assets, which include Federal Funds sold, investment  securities,
and cash and due from banks  equalled  37% of total  deposits as of December 31,
1995 and 39% as of December 31, 1994.

        The Bank also makes use of securities under agreement to repurchase as a
short term borrowing tool as the need arises.

Asset/Liability Management

        This involves funding and investment strategies necessary to maintain an
appropriate balance between interest-sensitive assets and liabilities to produce
adequate earnings,  as well as reasonable  liquidity.  The Bank maintains active
management  of the balance  sheet  position to confine the risk of interest rate
swings on earnings.  Adequate funding sources are maintained through a full line
of competitively priced deposit products and short-term borrowing facilities and
asset diversification is assured through using both variable and fixed rate loan
products and investments.

        The Bank maintains  $6,000,000 in Federal Fund borrowing lines of credit
with local correspondent banks for short term liquidity needs. The Bank also has
a Letter of Credit line of $750,000 available from a local correspondent bank.

        At December 31,  1995,  the Bank's short term gap (30 days or less) is a
negative  $5.6  million,  4.0% of total  assets,  which means if interest  rates
increase,  short term earnings will be negatively  impacted.  The cumulative gap
for a one year  period  is "asset  sensitive"  - $1.8  million  or 1.3% of total
assets which would reflect in net income being favorably  impacted over the next
year  should  interest  rates  rise.  This is due to the  fact  assets  would be
repriced at a somewhat faster pace than deposits.  Management believes this is a
reasonable  position  to be in given  the  current  interest  rate and  economic
environment.

Capital Resources

        Shareholders  equity at  12/31/95  was $13.7  million  compared to $11.8
million  at  12/31/94.  During  1995,  37% of the  increase  resulted  from full
retention of earnings,  while the remainder  reflected an increase in the market
value of our  investment  portfolio  resulting from the general rise of interest
rates in the U.S. government securities market.

        Capital  ratios of the  Company  and the Bank  remain  well in excess of
regulatory requirements.  The Bank's Tier one capital ratio at December 31, 1995
was 13.57% (Regulatory  requirement - 4%), while the Risk-Weighted capital ratio
was 16.16% (Regulatory requirement - 8%).

        Due to Office of the  Comptroller of the Currency  regulation,  the Bank
had no retained  earnings  available for distribution to the Company at December
31, 1995 and 1994.


ITEM 8.         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        The financial statements and schedules are set forth following Part IV.


ITEM 9.         CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

        There were no changes in accountants  during the last three fiscal years
of the Company and its Subsidiary.  Arthur  Andersen,  L.L.P.  has performed the
1993,  1994, and 1995 audits and management  has had no  disagreements  with the
accountant regarding accounting and financial disclosure.




                                    PART III

ITEM  10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth certain information  concerning the Directors and
executive officers of the Company and the Bank.




                          Position With                                  Term
          Name              Company (1)        Position With Bank (2)   Expires
          ----              -----------        ----------------------   -------


DIRECTORS OF THE COMPANY AND OF THE BANK:

LeRoy C. Gust             Director, President  Chairman of the Board of   1998
                          Chief Executive      Directors, President and
                          Officer              Chief Executive Officer

William G. Ridenour       Director             Director                   1997

Lawrence L. Stuckey       Director             Director                   1996

Philip B. Bell            Director             Director                   1998
                          and Treasurer
Kimberley A. Gill-Rimsza  Director             Director                   1996

John L. Heath             Director             Director                   1996

Carrie Louis-Hulburd      Director             Director                   1997

L. Robert Peterson        Director             Director                   1998
<PAGE>

KEY EMPLOYEES/EXECUTIVE OFFICERS:

James E. Chappell         Secretary            Secretary  and              --
                                               Vice President

Richard Dunseath          Vice President       President, Phoenix          --
                                               Division

Scott R. Essex            Vice President       Vice President and          --
                                               Manager Trust Department

George P. Tyson              --                President, Scottsdale       --
                                               Division
--------------------------------

(1)     All  officer  positions  with  the  Company  and the  Bank  are held for
        one-year terms.

(2)     The term of each Director of the Bank extends from the Annual Meeting of
        the Company for a period of one year.

        No  Director  or  executive  officer  of the  Company  is a party to any
        litigation  or legal  proceedings  whereby  such  Director or  executive
        officer  is a party  adverse to the  Company or has a material  interest
        adverse to the Corporation.

        On January 23, 1996, Richard A. Hansen was elected Chairman of the Board
        of Directors of the Company.

        On February  15,  1996,  George P. Tyson  assumed  the  position of Real
        Estate  Executive.  The position of President,  Scottsdale  Division was
        eliminated.

        Non-employee  directors  of the  Company  and the Bank are paid $250 per
        board  meeting  attended.  Members  of the CRA,  Audit,  Investment  and
        Personnel  Committees  are paid  $100 for each  committee  meeting  they
        attend.  Loan Committee members are paid $150 for each committee meeting
        they attend.


                      BUSINESS BACKGROUND AND EXPERIENCE OF
                        DIRECTORS AND EXECUTIVE OFFICERS

        The following sets forth brief summaries of the backgrounds and business
experiences, including the principal occupations, of the Directors and executive
officers of the Company and the Directors and executive officers of the Bank.

        LEROY C. GUST,  age 54,  served as a management  consultant  and interim
Chief  Operating  Officer  for the Bank from June 1989 until  January  1990.  On
January 16, 1990, Mr. Gust was named  President and Chief  Executive  Officer of
the Bank.  Effective the same date he was also elected to serve as President and
Director  of both the Company and Bank.  He also is a Senior Vice  President  of
Johnson   International,   Inc.  and  has  over  twenty-five  years  of  banking
experience. His prior experience includes four years (1985-1989) as an Executive
Vice President - Retail Banking at Marshall & Ilsley Bank, Milwaukee, Wisconsin;
eight years as President of Heritage  Banks in Beloit and  Milwaukee,  Wisconsin
and a Director  and member of the  Management  Committee  of Heritage  Wisconsin
Corp., Milwaukee, Wisconsin, and thirteen years of commercial lending, primarily
at The Northern  Trust  Company,  Chicago,  Illinois.  Mr. Gust  obtained a B.A.
degree  in  Economics,  and a Master of  Science  Degree  in  Finance,  from the
University of Illinois in 1965 and 1966, respectively.

        WILLIAM  G.  RIDENOUR,  age 51, is a  practicing  attorney  in  Phoenix,
Arizona,  and a senior  partner in the law firm of Ridenour,  Swenson,  Cleere &
Evans,  P.C. Mr. Ridenour received a Bachelor of Arts degree from the University
of Arizona in 1966. In 1967, Mr. Ridenour received a Master of Arts in Political
Science  from  Rutgers  University,  New  Brunswick,  New Jersey.  Mr.  Ridenour
received  his law degree from the  University  of Arizona in 1970.  From 1980 to
1982, Mr. Ridenour was Secretary and General Counsel for Greater Arizona Savings
and Loan  Association,  a  savings  and loan  association  located  in  Phoenix,
Arizona.  Since  1980,  he has acted as pro tem judge  for the  Maricopa  County
Superior Court. Mr. Ridenour has been Director of the Company since 1985.

        LAWRENCE  L.  STUCKEY,  age 49, is the  president  and owner of  Stuckey
Insurance  Agency,  a general  insurance  agency  specializing  in property  and
casualty insurance in Phoenix,  Arizona.  Mr. Stuckey became president and owner
of Stuckey  Insurance  Agency in 1979 after  working for the company since 1967.
Mr.  Stuckey  also  is  a  partner  in  Financial  Innovations,   a  partnership
established  in 1975 to develop  and broker  commercial  real estate in Phoenix,
Arizona.  Mr.  Stuckey  graduated in 1967 from the  University of Arizona with a
Bachelor of Science  Degree in Business.  Mr.  Stuckey has been  Director of the
Company since 1985.

        PHILIP B. BELL, age 59, is chairman,  president and owner of P.B. Bell &
Associates,  Inc., a real estate management and development firm. Before forming
his own company in 1975,  Mr. Bell served in  executive  capacities  with Ramada
Inns, L.B. Nelson Corp.,  and Kaufman & Broad,  Inc. Mr. Bell is a CPA and was a
supervisor with the accounting firm of Coopers & Lybrand. Mr. Bell is a graduate
of  Dartmouth  College,  and  has an MBA  from  Amos  Tuck  School  of  Business
Administration.  Mr. Bell has been  Director and  Treasurer of the Company since
March 1986.

        JOHN L.  HEATH,  age 60, is the  retired  Chairman  of the Board of L.S.
Heath & Sons, Inc. in Robinson,  Illinois. He served as Senior Vice President of
L.S. Heath & Sons,  Inc. from 1969 to 1971 and as Chairman,  President and Chief
Executive  Officer  from 1971 to 1982.  In 1958,  he  received  his  Bachelor of
Science Degree in Social Science from Eastern Illinois  University,  Charleston,
Illinois. Mr. Heath has been Director of the Company since March 1988.

        L. ROBERT  PETERSON,  age 72, is a retired  Executive Vice President and
Member of the Office of the  Chairman of S. C. Johnson Wax Co.,  Inc.,  where he
was employed for 39 years.  He is also a former  Director of Racine  Environment
Committee and Heritage Bank and Trust, and has served as President of the Racine
Area United Way. Mr. Peterson attended Utah State  Agricultural  College and the
University  of Wisconsin.  He was  appointed  Director of the Company in January
1993.

        KIMBERLEY A. GILL-RIMSZA, age 33, is President and C.E.O. of Gill Group,
Inc.,  a food  service  equipment  company  located in  Phoenix,  Arizona.  Mrs.
Gill-Rimsza  graduated  in 1984 from  Rollins  College  with a Bachelor  of Arts
Degree in Business Administration and Economics. She is a Certified Food Service
Professional  (CFSP). Mrs.  Gill-Rimsza has been a Director of the Company since
1995.

        CARRIE  LOUIS-HULBURD,  age 36, formerly served as a Law Intern with the
Arizona Attorney General's Office, Child Support Collection Division in Phoenix,
Arizona.  Mrs.  Hulburd is a  graduate  of  Colorado  College  and the  American
Graduate School of International  Management.  She has a J.D. from Arizona State
University  Law School.  Mrs.  Hulburd has been a Director of the Company  since
1995.

        JAMES E.  CHAPPELL,  age 36, is  Secretary  of Biltmore  Bank Corp,  and
Secretary  and Trust  Officer of  Biltmore  Investors  Bank.  Mr.  Chappell is a
graduate of Iowa State University.

        RICHARD D. DUNSEATH,  age 49, is President of the Phoenix  Division.  He
joined the bank in September of 1994. Mr.  Dunseath's  previous  career included
entrepreneurial  pursuits in  equipment  leasing and  homebuilding,  Senior Vice
President and Manager of Citibank's  Community Banking Division and as a Manager
of the Phoenix Region and the Scottsdale  Region of United Bank of Arizona.  Mr.
Dunseath has an MBA degree from Arizona  State  University  and is a graduate of
the Pacific Coast Banking School.

        SCOTT R.  ESSEX,  age 43, is Vice  President  and  Manager  of the Trust
Department of the Bank.  He joined the Bank in June of 1991.  He previously  was
Business Development  Officer,  Trust Officer of Northern Trust Bank of Arizona.
He has a masters degree in Business Administration from University of Michigan.

        GEORGE P. TYSON,  age 58, is President of the  Scottsdale  Division.  He
joined  the Bank in  February  of 1994.  He  previously  served as  Senior  Vice
President,  Financial Institutions Division for Citibank, Senior Vice President,
Branch  Administration with United Bank of Arizona and founding President of The
Bank of Northern Arizona in Flagstaff, Arizona.

                                 ADVISORY BOARD

        In  addition  to the Board of  Directors,  the Bank has  established  an
Advisory Board  consisting of up to fifty (50) persons who represent the various
markets  which the Bank  expects to serve.  The  Advisory  Board is  composed of
individuals  from the local  business  and  professional  community  of Phoenix,
Arizona, who can and are expected to contribute to the Bank's development and to
its success through their expertise and experience.

ITEM 11.   SUMMARY COMPENSATION TABLE.
           ---------------------------
<TABLE>
<CAPTION>
                                              Annual Compensation
                                              -------------------

Name and Principal       Fiscal                             Other Annual      All Other
   Position               Year      Salary(1)    Bonus    Compensation(2)  Compensations(3)
   --------               ----      ---------    -----    --------------- -----------------
<S>                       <C>       <C>         <C>              <C>              <C>
LeRoy C. Gust
 President and Chief   
  Executive Officer       1995      $161,200    $29,127          --               $6,500
                          1994      $158,004    $51,699          --               $9,150
                          1993      $153,221    $32,480          --               $8,992

Richard D. Dunseath       1995      $105,000        --           --               $6,300
 President of the
  Phoenix Division
</TABLE>
----------------------
(1)     The salary of Mr. Gust is based on a recommendation  by the Compensation
        Committee of Johnson International.  The committee considers the overall
        performance  of the Bank and Mr.  Gust's  activities  within the Bank in
        making  their  recommendation,  which is then  presented to the Board of
        Directors for approval.

(2)     While  the  President  and  Chief   Executive   Officer  enjoys  certain
        perquisites, such perquisites do not exceed the lessor of $50,000 or 10%
        of his salary and bonus.

(3)     These amounts  represent the Company's  contribution  to defined benefit
        retirement plan and 401k plan for the benefit of the President and Chief
        Executive Officer.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The  following  table sets forth  information  as of December  31, 1994,
concerning  shares of the  Company's  Common  Stock  beneficially  owned by each
Director of the Company and the Bank, by all Executive Officers and Directors as
a group, and by each stockholder known by the Company to be the beneficial owner
of  more  than  five  percent  (5%) of any  class  of the  Corporation's  voting
securities, as required by 17 CFR 229.403.

                                         Amount and
Title of          Name of           Nature of Beneficial     Percent
 Class        Beneficial Owner           Ownership           of class
 -----        ----------------           ---------           --------

Common      William G. Ridenour             10,400    (1)          *
Common      Lawrence L. Stuckey             12,100    (1)          *
Common      Philip B. Bell                   5,000                 *
Common      John L. Heath                   10,500                 *
Common      LeRoy C. Gust                    4,650    (2)          *
Common      Carrie Louis-Hulburd             2,000                 *
Common      L. Robert Peterson               2,000                 *
Common      Kimberley A. Gill-Rimsza         2,000                 *
                                           -------               ----
Executive Officer and Directors as a
   group                                    48,650                 *
                                           =======               ====

Common      Johnson International, Inc. 16,010,045               96.9%
            4041 North Main Street      ==========               ====
            Racine, WI  53402

-------------------------------------
*       The   percentage   of  shares   beneficially   owned  by  each  Director
        individually,  and all Directors and Executive Officers as a group, does
        not exceed one  percent  of the  issued  and  outstanding  shares of the
        Company.
(1)     This figure does not include 10,000 shares that may be
        purchased under the 1984 Founding Directors' Nonstatutory
        Stock Option Plan.  All of these options are currently
        unexercisable.
(2)     This figure does not include 58,366 shares which Mr. Gust may be granted
        under the terms of the Stock Purchase and Investment Agreement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        There are no  existing  or proposed  material  transactions  between the
Company or the Bank and any of their Executive Officers or Directors,  except as
indicated herein.  All transactions with affiliates,  Company Executive Officers
or Directors and/or Shareholders must be approved by a majority of disinterested
Directors.

        The law  firm of  Ridenour,  Swenson,  Cleere &  Evans,  P.C.,  of which
William G.  Ridenour,  a Director of the Company and the Bank is a partner,  has
provided legal and  organizational  services to the Company and the Bank.  Also,
Mr.  Ridenour's  law firm has,  in the past,  acted as general  counsel  for the
Company and the Bank and will continue to do so in the future and paid for those
general counsel services as and when rendered.

        The Company  currently pays management fees to JI for services  provided
to the company.  Services  provided  include:  management  consulting,  internal
audit, compliance and loan review, payroll and personnel,  group purchasing, and
risk  management.  The cost of JI services is  allocated  using  acceptable  and
recognized cost accounting  techniques.  In 1995, the Company paid approximately
$428,111 to JI for such services,  which  represented 88% of the costs allocable
to the Company. Amounts charged in the future will be 100% of costs allocable to
the Company in 1996. The estimated  expense for management  fees in 1996 will be
approximately $456,000.

        Many of the  Directors and  Executive  Officers of the Company,  and the
business and  professional  organizations  with which they are associated,  have
banking transactions with the Bank in the ordinary course of business. The ratio
of the  total  amount of loans  made to  Directors  to the total  amount of Bank
equity as of  December  31, 1995 is  $624,704  to  $13,714,000,  or 4.6% of Bank
equity.  It is the Bank's  policy that any loans and  commitments  to loan funds
included in such  transactions  will be made in accordance  with applicable laws
and on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable  transactions  with other persons of
similar  creditworthiness.  Although  the Bank  does not have any  limits on the
aggregate amount it would be willing to lend to its and the Company's  Directors
and Executive  Officers as a group,  loans to individual  Directors and officers
must comply with the Bank's lending  policies and statutory  lending limits,  as
provided by federal statutes and regulations. Directors with a personal interest
in any loan  application  are  excluded  from  the  consideration  of that  loan
application  and only a majority of  disinterested  Directors can approve such a
loan. Also,  loans to such persons are not made and cannot be made,  pursuant to
federal  regulations,  on terms  more  favorable  than those  afforded  to other
borrowers.

        Many of these loan  transactions have been renewed or extended from time
to time. All renewals and extension  requests by Directors or Executive Officers
are treated no more favorably than any such request by other borrowers.

        All  renewals  and  extension  requests  are  reported  to the  Board of
Directors  along with all other loans made. All renewals and extension  requests
must be, pursuant to the Bank's lending policy,  reviewed and approved by way of
the same process and procedures  utilized in making a determination  to make the
loan initially.

        The following, in summary format, are the transactions with or involving
management  of the Company and the Bank in excess of  $60,000.  "Management"  in
this  context,  is defined as  directors,  executive  officers,  greater than 5%
stockholders,  or any member of their immediate family (which includes  in-laws)
as per Item 404 of Regulation S-K. In the following summary of transactions, the
current status discussed is as of December 31, 1995.

        William G. Ridenour, Director of the Company and of the
Bank:

        (1) A $100,000 revolving line of credit secured by a time certificate of
deposit with a current  maturity date of February 5, 1997. The loan,  originally
established  in  December  1985,  is at the rate of two  percent  (2%)  over the
certificate of deposit rate. As of December 31, 1995, the certificate of deposit
rate was 6.44% and the loan was current with a principal balance of $98,974.

        (2) A  $173,000  mortgage  loan  secured  by  Mr.  Ridenour's  principal
residence  was made on December 13, 1993.  The interest  rate is a fixed rate at
6.25%.  Maturity is January 1, 2004, and the principal balance outstanding as of
December 31, 1995 is $115,075.

        Lawrence L. Stuckey, Director of the Company and of the Bank:

        (1) A $50,000  revolving line of credit for Stuckey Insurance Agency, of
which Mr. Stuckey is the owner, was established  April 29, 1994;  maturing March
31,  1996,  at 7.68%  fixed.  The loan is  collateralized  by a  certificate  of
deposit. The principal balance outstanding as of December 31, 1995 is zero.

        (2) A $22,000  automobile  loan for  Stuckey  Insurance  Agency was made
January 10, 1992. The loan matures on January 10, 1997, and is collateralized by
a 1991 Chevrolet  Suburban.  The interest rate is 12% and the principal  balance
outstanding as of December 31, 1995 was $5,734.

        Carrie Louis-Hulburd, Director of the Company and the Bank:

        (1) A $393,750  mortgage loan secured by a second  residence was made on
December  14,  1993.  The  interest  rate is fixed at 6.625%.  The loan  matures
January 1, 2009, and the outstanding  principal balance at December 31, 1995 was
$362,371.

        Kimberley A. Gill-Rimsza, Director of the Company and the
Bank:

        (1) A $90,000  commercial  loan  secured  by the first  deed of trust on
investment  property was made on June 16, 1994. The interest rate is 1% over the
prime rate,  which was 9.5% at December 31,  1995.  The  outstanding  balance at
December 31, 1995 was $29,720.


        (2) A $500,000  unsecured  line of credit for Gill Group,  of which Mrs.
Gill-Rimsza  is President and C.E.O.,  was opened May 2, 1994. The interest rate
is at the  prime  rate  plus  1%.  The  commitment  matures  June 1,  1996.  The
outstanding balance at December 31, 1995 was zero.

        (3) An $80,000  unsecured  line of credit for Gill Group was opened June
14, 1994. The interest rate is at the prime rate plus 1%. The commitment matures
June 1, 1996. The outstanding balance at December 31, 1995 was zero.

        (4) The Gill Group has a business VISA with a line of credit of $57,500.
The  outstanding  balance at December 31, 1995 was $7,759.  The interest rate is
12%.

<PAGE>
                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
          ----------------------------------------------------------------

(a)     FINANCIAL STATEMENTS

        Biltmore Bank Corp.
          Reports of Independent Public Accountants                 Page F-2
          Financial Statements-
            Consolidated Balance Sheets -
              December 31, 1995 and 1994                            Page F-3
            Consolidated Statements of Income - For the
              Years Ended December 31, 1995, 1994 and 1993          Page F-4
            Consolidated Statements of Shareholders' Equity -
               For the Years ended December 31, 1995,
                 1994 and 1993                                      Page F-5
            Consolidated Statements of Cash Flows - For the
              Years Ended December 31, 1995, 1994 and 1993          Page F-6
            Notes to Consolidated Financial Statements -
              December 31, 1995, 1994 and 1993                      Page F-7


(b)     REPORTS ON FORM 8-K

        None.


(d)     FINANCIAL STATEMENT SCHEDULES

        All  schedules  have been  omitted  because  of the  absence  of
        conditions under which they are required or because the required
        material  information is included in the Financial Statements or
        Notes to the Financial Statements included in Item 14(a).

<PAGE>
SIGNATURES

        Pursuant to the  requirements  of Section 13 of the Securities  Exchange
Act of 1934,  the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on March 22, 1996.


                               BILTMORE BANK CORP.

                                By /s/ LeRoy C. Gust
                                   ------------------
                                   LeRoy C. Gust
                                   President 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
Company and in the capacities and on the date indicated.

     Signature

/s/ LeRoy C. Gust          Director, President and         Date March 22, 1996
----------------------                                          --------------
    LeRoy C. Gust          Chief Executive Officer

/s/ Philip B. Bell         Director and Treasurer          Date March 22, 1996
----------------------                                          --------------
    Philip B. Bell

/s/ William G. Ridenour    Director                        Date March 22, 1996
----------------------                                          --------------
    William G. Ridenour

/s/ L. Robert Peterson     Director                        Date March 22, 1996
----------------------                                          --------------
    L. Robert Peterson

/s/ Lawrence L. Stuckey    Director                        Date March 22, 1996 
----------------------                                          -------------- 
    Lawrence L. Stuckey                                    

Supplemental Information to be Furnished with Prospectus Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act.

        No annual report or proxy materials have been sent to shareholders as of
the date  hereof.  The  annual  report  and  proxy  information  will be  mailed
subsequent to this filing.
                                       

<PAGE>
                          [ARTHUR ANDERSEN LETTERHEAD]


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders and the Board of Directors of Biltmore Bank Corp.:

We have audited the  accompanying  consolidated  balance sheets of Biltmore Bank
Corp. and subsidiary  (the  "Company") as of December 31, 1995 and 1994, and the
related consolidated  statements of income,  shareholders' equity and cash flows
for the  years  ended  December  31,  1995,  1994 and 1993.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Biltmore Bank Corp.
and  subsidiary  as of  December  31,  1995 and 1994,  and the  results of their
operations and their cash flows for the years ended December 31, 1995, 1994, and
1993, in conformity with generally accepted accounting principles.

As  discussed in Note 16 to the  consolidated  financial  statements,  effective
January 1, 1993, the Company  changed its method of accounting for income taxes.
As  discussed  in Note 2 to the  consolidated  financial  statements,  effective
January 1, 1994,  the  Company  changed  its method of  accounting  for  certain
investments in debt and equity securities.

                              /s/ Arthur Andersen LLP
                              -----------------------
                                  ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin,
February 23, 1996
                                       F-2
<PAGE>
<TABLE>
                               BILTMORE BANK CORP.
                               -------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                           DECEMBER 31, 1995 AND 1994
                           --------------------------
<CAPTION>

                                     ASSETS
                                     ------

                                                                                 1995           1994
                                                                            -------------   -------------
<S>                                                                         <C>             <C>          
CASH AND DUE FROM BANKS (Note 3)                                            $   6,336,967   $   7,932,020
FEDERAL FUNDS SOLD                                                                   --         5,628,000
                                                                            -------------   -------------
        Total cash and cash equivalents                                         6,336,967      13,560,020

INVESTMENT SECURITIES AVAILABLE FOR SALE (Notes 2 and 4)                       36,808,353      36,442,647

LOANS, less allowance for credit losses of $2,362,310 and
  $2,422,513 in 1995 and 1994, respectively (Note 5)                           89,152,249      86,862,577
ACCRUED INTEREST RECEIVABLE AND OTHER ASSETS                                    1,936,204       2,697,702

PREMISES AND EQUIPMENT, net (Notes 6 and 9)                                     1,616,411       1,605,453

OTHER REAL ESTATE OWNED (Note 2)                                                  103,015            --

INTANGIBLE ASSETS (Notes 1 and 12)                                              1,562,662       1,676,594
                                                                            -------------   -------------
                                                                            $ 137,515,861   $ 142,844,993
                                                                            =============   =============

                         LIABILITIES AND SHAREHOLDERS'
                         -----------------------------
EQUITY
DEPOSITS:
  Demand-
    Noninterest-bearing                                                     $  23,984,474   $  27,261,963
    Interest-bearing                                                           28,098,433      39,968,012
  Time certificates of deposit, $100,000 and over (Note 7)                     13,689,910      14,089,586
  Other time certificates and individual retirement accounts                   30,266,899      29,076,926
  Savings                                                                      20,317,051      18,831,535
                                                                            -------------   -------------
                                                                              116,356,767     129,228,022

ACCRUED INTEREST PAYABLE                                                          199,316         218,540

SHORT TERM BORROWINGS (Note 8)                                                  6,340,500         603,000


OTHER LIABILITIES                                                                 848,600         949,103
                                                                            -------------   -------------
                                                                              123,745,183     130,998,665

COMMITMENTS AND CONTINGENCIES (Notes 9 and 13)                                       --              --

SHAREHOLDERS' EQUITY (Notes 1, 10 and 11): Preferred stock, no par value:
    Authorized and unissued, 10,000,000 shares                                       --              --
  Common stock, no par value (stated value $.50)
    Authorized, 25,000,000 shares; issued and outstanding,
         16,522,530 shares in 1995 and 1994                                     8,261,265       8,261,265
  Additional paid-in capital                                                    4,417,304       4,415,407
  Retained earnings                                                               930,377         215,096
  Net unrealized gain (loss) on securities, net of tax                            161,732      (1,045,440)
                                                                            -------------   -------------
                Total shareholders' equity                                     13,770,678      11,846,328
                                                                            -------------   -------------
                                                                            $ 137,515,861   $ 142,844,993
                                                                            =============   =============
</TABLE>
                 The accompanying notes are an integral part of
                       these consolidated balance sheets.

                                       F-3
<PAGE>
<TABLE>
<CAPTION>
                               BILTMORE BANK CORP.
                               -------------------
                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
              ----------------------------------------------------
                                                          1995            1994            1993
                                                      ------------    ------------    ------------
<S>                                                   <C>             <C>             <C>
INTEREST INCOME:         
  Interest and fees on loans                          $  7,888,928    $  6,229,328    $  4,282,422
  Other interest income (Note 14)                        2,281,255       2,254,621       1,981,449
                                                      ------------    ------------    ------------
                Total interest income                   10,170,183       8,483,949       6,263,871
INTEREST EXPENSE (Note 15)                               4,399,030       3,369,868       3,284,495
                                                      ------------    ------------    ------------
                Net interest income                      5,771,153       5,114,081       2,979,376
PROVISION FOR CREDIT LOSSES (Note 5)                       (98,868)        (75,632)       (218,573)
                                                      ------------    ------------    ------------
NET INTEREST INCOME AFTER PROVISION
  FOR CREDIT LOSSES                                      5,870,021       5,189,713       3,197,949
                                                      ------------    ------------    ------------

CUSTOMER SERVICE FEES                                      506,796         458,651         338,738
NET GAIN ON SALE OF SECURITIES                              28,261          10,715           6,607
INCOME FROM "LINK" BROKERAGE OFFICE                        113,748         126,207          56,824
TRUST REVENUES                                             189,746         113,892          51,204
NET GAIN ON SALE OF OTHER REAL ESTATE OWNED                   --              --            56,150
                                                      ------------    ------------    ------------
                                                           838,551         709,465         509,523
                                                      ------------    ------------    ------------
OPERATING EXPENSES:
Salaries and wages, net of deferred loan
 origination costs of $137,630, $143,409 and
 $89,869 at December 31, 1995, 1994 and 1993             2,229,621       1,681,001       1,105,838
Employee benefits                                          423,424         357,766         342,885
Occupancy expense                                          649,738         585,077         359,500
Equipment expense                                          354,970         299,044         181,433
Business development expense                               130,302         102,275          38,450
FDIC deposit insurance                                     143,115         284,866         218,005
Management fee expense (Note 20)                           428,111         275,520         175,783
Amortization of intangibles                                172,566         128,957          27,609
Data processing                                            314,371         317,516         168,431
Supplies and printing                                      180,160         185,055          96,817
Other expenses                                             711,824         544,159         243,467
                                                      ------------    ------------    ------------
                                                         5,738,202       4,761,236       2,958,218
                                                      ------------    ------------    ------------
INCOME BEFORE INCOME TAX EXPENSE,
  AND CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE                                     970,370       1,137,942         749,254
(PROVISION FOR) BENEFIT FROM INCOME TAXES                 (255,089)        219,433            --
                                                      ------------    ------------    ------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
  IN ACCOUNTING PRINCIPLE                                  715,281       1,357,375         749,254
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE (Note 16)                                         --              --           700,000
                                                      ------------    ------------    ------------
NET INCOME                                            $    715,281    $  1,357,375    $  1,449,254
                                                      ============    ============    ============
NET INCOME PER COMMON SHARE:
 INCOME BEFORE CUMULATIVE
  EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE            $        .04    $        .08    $        .05
 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE          --              --               .04
                                                      ------------    ------------    ------------
NET INCOME PER COMMON SHARE                           $        .04    $        .08    $        .09
                                                      ============    ============    ============
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES  
 OUTSTANDING                                            16,522,530      16,522,530      16,522,530
                                                      ============    ============    ============
</TABLE>
                 The accompanying notes are an integral part of
                         these consolidated statements.

                                       F-4
<PAGE>
<TABLE>
                               BILTMORE BANK CORP.
                               -------------------
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 -----------------------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
              ----------------------------------------------------
                                (NOTES 11 and 12)
<CAPTION>
                                                                                           Net Unrealized
                                          Common Stock          Additional     Retained     Gains (Losses)
                                    -------------------------     Paid-in      Earnings     on Securities
                                       Shares        Amount       Capital     (Deficit)      Net of Tax
                                    -----------   -----------   -----------   -----------    -----------
<S>                                 <C>          <C>           <C>           <C>            <C>
BALANCE, December 31, 1992           16,522,530   $ 8,261,265   $ 4,412,078   ($2,591,533)   $      --

        Net Income                         --            --            --       1,449,254           --

                                    -----------   -----------   -----------   -----------    -----------
BALANCE, December 31, 1993           16,522,530   $ 8,261,265   $ 4,412,078   ($1,142,279)          --

        Adoption of SFAS 115,
         "Accounting for Certain
          Investments in Debt and
       Equity Securities"                  --            --            --            --          272,212

        Net Income                         --            --            --       1,357,375           --


        Net Change in Unrealized
           Gains (Losses) on
           Securities, net
           of Tax                          --            --            --            --       (1,317,652)

        Other                              --            --           3,329          --             --
                                    -----------   -----------   -----------   -----------    -----------
BALANCE, December 31, 1994           16,522,530   $ 8,261,265   $ 4,415,407   $   215,096    ($1,045,440)

        Net Income                         --            --            --         715,281           --


        Net Change in Unrealized
           Gains (Losses) on
           Securities, net
           of Tax                          --            --            --            --        1,207,172

        Other                              --            --           1,897          --             --
                                    -----------   -----------   -----------   -----------    -----------
BALANCE, December 31, 1995           16,522,530   $ 8,261,265   $ 4,417,304   $   930,377    $   161,732
                                    ===========   ===========   ===========   ===========    ===========
</TABLE>
                 The accompanying notes are an integral part of
                         these consolidated statements.

                                       F-5
<PAGE>
<TABLE>
                               BILTMORE BANK CORP.
                               -------------------
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
              ----------------------------------------------------
<CAPTION>
                                                            1995            1994             1993
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:         
  Net income                                            $    715,281    $  1,357,375    $  1,449,254
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Provision for credit losses                            (98,868)        (75,632)       (218,573)

      Depreciation and amortization                          361,600         274,336          98,472
      Net amortization and accretion of investment
        securities premiums and discounts                     54,040         154,621         163,991
      Net gain on sale of other real estate owned               --              --           (56,150)
      Net gains on sale of securities                        (28,261)        (10,715)         (6,607)
      Net loss (gain) on sale of fixed assets                    489           6,112          (8,452)

      Recognition of preacquisition net operating
        loss carryforward                                       --           257,173          95,000
      Decrease (increase) in accrued interest
        receivable and other assets                          123,012        (498,570)       (209,987)
      (Decrease) increase in accrued interest payable
        and other liabilities                               (125,709)       (123,717)        (95,225)
      Cumulative effect of change in accounting
        principle                                               --              --          (700,000)
                                                        ------------    ------------    ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                  1,001,584       1,340,983         511,723
                                                        ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales of investment securities             9,448,103       2,980,313       1,005,625
  Proceeds from maturities of investment securities        7,000,000      15,300,000      12,050,000
  Purchase of investment securities                      (15,040,700)    (17,045,301)    (19,456,854)
  Net increase in loans                                   (2,190,804)     (4,876,134)       (485,356)
  Purchase of bank premises and equipment                   (321,810)       (378,501)       (127,566)
  Proceeds from sale of bank premises and equipment            8,329            --            12,624

  Proceeds from sales of other real estate owned                --              --           509,500
  Cash and cash equivalents of banks acquired,
        net of payment for purchase                             --         6,462,168            --

                                                        ------------    ------------    ------------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES          (1,096,882)      2,442,545      (6,492,027)
                                                        ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in demand deposits
        and savings                                      (13,661,552)      2,553,678      12,334,463
  Net increase (decrease) in time certificates
        of deposit                                           790,297        (133,669)     (5,548,283)
  Net increase (decrease) in securities sold under
        agreement to repurchase                            5,743,500         603,000        (300,000)
                                                        ------------    ------------    ------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES          (7,127,755)      3,023,009       6,486,180
                                                        ------------    ------------    ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS      (7,223,053)      6,806,537         505,876
CASH AND CASH EQUIVALENTS, beginning of year              13,560,020       6,753,483       6,247,607
                                                        ------------    ------------    ------------
CASH AND CASH EQUIVALENTS, end of year                  $  6,336,967    $ 13,560,020    $  6,753,483
                                                        ============    ============    ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
        Interest paid                                   $  4,399,030    $  3,379,954    $  3,373,013
</TABLE>


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

                                       F-6
<PAGE>
                               BILTMORE BANK CORP.
                               -------------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                        DECEMBER 31, 1995, 1994 AND 1993
                        --------------------------------
(1)  ORGANIZATION:

Biltmore Bank Corp. (the Company),  the holding  company for Biltmore  Investors
Bank (the Bank) (formerly  Biltmore  National Bank), was incorporated in Arizona
on March 19, 1984.  On August 22, 1985,  the Company  acquired all of the issued
stock of the Bank and the Bank commenced banking  operations.  In 1989,  Johnson
International Inc. (JI), a Wisconsin-based  company owned primarily by Samuel C.
Johnson  and  family  members,  acquired  approximately  76%  of  the  Company's
outstanding common stock. As a result, the Company became a subsidiary of JI. In
a November  26, 1990 stock  offering,  JI acquired  shares which  increased  its
ownership percentage to approximately 93%.

As per the 1989 Stock Purchase and Investment  Agreement,  based  primarily upon
the  level  of loan  losses  from the time of its  acquisition  in 1989  through
December  31,  1991,  JI was  entitled to and did receive  7,570,896  additional
shares of stock in 1993. This transaction,  combined with purchases of shares of
stock from other  shareholders,  increased JI's ownership to approximately  97%.
Since JI's effective  ownership exceeded 95%, the goodwill recorded by JI at the
time of its  acquisition  of the Company was required to be "pushed down" to the
Company.  Therefore,  goodwill was recorded on the Company's Balance Sheet as of
January 1, 1992.  Additional  disclosure  of this  transaction  is  included  in
footnotes (11) and (12).

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned  subsidiary,  the Bank. All material  intercompany accounts and
transactions have been eliminated in the consolidated financial statements.

The consolidated  financial statements of the Company are prepared in accordance
with generally accepted accounting principles. The following is a description of
the Company's significant accounting policies.

                Estimates -

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  or
contingent  assets and  
                                      F-7
<PAGE>
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

                Cash and Cash Equivalents-

Cash and cash equivalents, for purposes of reporting cash flows, include cash on
hand,  amounts due from banks and federal funds sold.  Generally,  federal funds
are purchased and sold for one-day periods.


                Investment Securities-

In May  1993,  the FASB  issued  Statement  No.  115,  "Accounting  for  Certain
Investments in Debt and Equity Securities," (SFAS 115).
 SFAS 115 requires,  among other things, that securities classified as available
for sale be carried at market value,  however,  market value adjustments and the
related income tax effects,  are excluded from earnings and reported  separately
as a component  of  stockholders'  equity.  This new standard was adopted by the
Company on January 1, 1994. Prior to this,  investment  securities available for
sale were carried at the lower of cost or market value.

Securities,  when  purchased,  are designated as investment  securities  held to
maturity or investment securities available for sale and remain in that category
until they are sold or mature.  The  specific  identification  method is used in
determining  the cost of  securities  sold.  The Company  does not engage in the
trading of securities,  and does not hold any  securities  classified as held to
maturity.

Investment securities available for sale are carried at market value, determined
on an aggregate basis.  While the Company has no current intention to sell these
securities, they may not be held to maturity.

                Loans-

Loans are reported at the  principal  amount  outstanding,  net of deferred loan
origination  fees and costs.  Interest  income on loans is credited to operating
income as earned based on the principal amount outstanding.  Accrual of interest
is suspended on a loan when management believes,  after considering economic and
business  conditions  and  collection  efforts,  that the  borrower's  financial
condition is such that collection of interest is doubtful.

                Loan Fees-

Loan  origination  fees and certain  related direct loan  origination  costs are
offset and the resulting  net amount is deferred and amortized  over the life of
the related loans as an adjustment to the yield of such loans.
                                      F-8
<PAGE>
In addition, commitment fees are offset against related loans and amortized as a
yield  adjustment if the commitment is exercised or, if the  commitment  expires
unexercised, it is recognized upon expiration of the commitment.

                Allowance for Credit Losses-

The loan  portfolio and other  extensions  of credit are  regularly  reviewed to
determine the adequacy of the  allowance for credit losses which is  established
through a provision for credit losses charged to expense. The impact of economic
conditions on the credit worthiness of borrowers is given major consideration in
determining the adequacy of the reserve.

A charge  against  the  allowance  for  credit  losses is made  when  management
believes that the  collectability of the loan principal is unlikely.  Management
believes the allowance is adequate to absorb losses  inherent in existing  loans
and commitments to extend credit, based on evaluations of the collectability and
prior loss experience of loans and commitments to extend credit. The evaluations
take into  consideration such factors as changes in the nature and volume of the
portfolio,  overall portfolio  quality,  loan  concentrations,  specific problem
loans,  commitments  and current and  anticipated  economic  conditions that may
affect the  borrower's  ability to pay.  Ultimate  losses may vary from  current
estimates and the amount of the provision,  which is a current  expense,  may be
either  greater  or less  than  actual  net  charge-offs.  Recoveries  of  loans
previously charged off are added back to the allowance.

                Premises and Equipment-

Premises and  equipment  are stated at cost less  accumulated  depreciation  and
amortization.  Depreciation is charged to expense over the estimated useful life
of the asset computed on the straight-line  method.  Leasehold  improvements are
amortized over the life of the lease, including optional renewal periods, or the
estimated useful life of the asset, whichever is shorter.

                Other Real Estate Owned-

Other real estate owned,  which represents real estate acquired in settlement of
loans, is initially recorded at the lower of the recorded investment in the loan
or the fair value of the real estate.

Prior to  foreclosure,  the value of the underlying  loan is written down to the
fair value of the real estate to be acquired  by a charge to the  allowance  for
credit losses, if necessary.  Any subsequent write downs to reflect declines, if
any, in net realizable value of the property are charged to expense.
                                      F-9
<PAGE>
                Net Income Per Common Share-

Net income per common share is calculated by dividing net income by the weighted
average  number of shares of common  stock  outstanding  during the year.  These
shares give  consideration  to  outstanding  stock  options  when such effect is
dilutive.

                Reclassifications-

Certain  reclassifications have been made to conform to the classifications used
in the 1995 financial statements.

(3)  CASH AND DUE FROM BANKS:

Cash includes  deposits  with the Federal  Reserve Bank of $758,648 and $343,000
maintained to satisfy federal  regulatory  requirements at December 31, 1995 and
1994, respectively.

                                      F-10
<PAGE>
(4)  INVESTMENT SECURITIES:

The amortized cost and market value of investment  securities available for sale
as of December 31 were as follows:
<TABLE>
<CAPTION>
                                          1995                       1994
                               -------------------------   -------------------------
                                Amortized       Market      Amortized       Market
                                   Cost         Value         Cost          Value
                               -----------   -----------   -----------   -----------
<S>                            <C>           <C>           <C>           <C>        
United States Treasury
  securities                   $19,858,248   $20,054,063   $20,071,091   $19,198,458
Obligations of United States
  government agencies           15,713,723    15,762,224    17,001,257    16,297,264
Corporate bonds                    500,000       502,350       500,000       492,625
Certificate of deposit             100,000        98,866       100,000       100,000
Federal Reserve Bank stock         390,850       390,850       354,300       354,300
                               -----------   -----------   -----------   -----------
                               $36,562,821   $36,808,353   $38,026,648   $36,442,647
                               ===========   ===========   ===========   ===========
</TABLE>
At December 31,  1995,  and 1994 the  Company's  investment  portfolio  included
unrealized  gains  of  approximately  $347,000  and  $5,000  respectively,   and
unrealized losses of approximately $101,000 and $1,589,000 respectively.

Gross  realized  gains and losses  amounted to $34,527  and $6,266 in 1995,  and
$27,249 and $16,534 in 1994, and $6,607 and $0 in 1993, respectively.

The following table presents the amortized cost and carrying amounts by maturity
distribution of the investment  portfolio for investments with a stated maturity
date:
<TABLE>
<CAPTION>
                                        Maturity Distribution at December 31, 1995

                   Amortized                  Amortized                   Amortized
                     Cost                        Cost                        Cost
                    Within        Market        One to        Market         Over         Market
                   One Year        Value      Five Years       Value      Five Years       Value
                  -----------   -----------   -----------   -----------   -----------   -----------
<S>               <C>           <C>           <C>           <C>           <C>           <C>      
United States
  Treasury
  securities      $ 2,014,602   $ 2,017,814   $17,843,646   $18,036,249   $      --     $      --
Obligations of
  United States
  government
  agencies          2,985,311     2,990,000    11,045,357    11,105,274     1,683,055     1,666,950
Corporate bonds       500,000       502,350          --            --            --            --
Certificate of
  deposit             100,000        98,866          --            --            --            --
Federal Reserve
  Bank Stock             --            --            --            --         390,850       390,850
                  -----------   -----------   -----------   -----------   -----------   -----------
                  $ 5,599,913   $ 5,609,030   $28,889,003   $29,141,523   $ 2,073,905   $ 2,057,800
                  ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
                                      F-11

<PAGE>
The Company had  $6,000,000  available  under federal funds lines of credit with
correspondent  banks as of both  December  31,  1995 and 1994.  The  Company has
assigned a United States  Treasury  security with a carrying value of $1,982,500
to secure a portion of one of the federal  funds lines of credit.  There were no
borrowings under this line at December 31, 1995 or 1994.

The  Company  has  a  Letter  of  Credit  Line  of  $750,000  available  with  a
correspondent bank as of December 31, 1995 and 1994.
There were no borrowings under this line.

At December 31, 1995, the Company had assigned a United States Treasury security
with a carrying  value of $1,013,750 to secure a Treasury,  Tax and Loan account
with the Federal  Reserve  Bank.  Also at  December  31,  1995,  the Company had
assigned a United States  Treasury  Security with a carrying value of $1,006,562
to secure trust account deposits.

(5)  LOANS:

Loans, which all arise from domestic  operations,  are summarized as of December
31 as follows:

                                         1995            1994
                                     ------------    ------------

Commercial and industrial            $ 45,379,732    $ 42,243,407
Real estate - construction              2,158,172       1,134,611
Consumer loans                          3,313,321       4,049,441
Residential mortgage                   40,896,989      42,082,311
                                     ------------    ------------
                                       91,748,214      89,509,770
Less - Allowance for credit losses     (2,362,310)     (2,422,513)
Deferred loan origination fees           (233,655)       (224,680)
                                     ------------    ------------
                                     $ 89,152,249    $ 86,862,577
                                     ============    ============

At  December  31,  1995 and 1994,  the  Company  had  outstanding  $624,704  and
$244,090,  respectively,  of loans made to  directors,  executive  officers  and
related parties. All such loans were made in the ordinary course of business.

The  activity  in  related  party  loans  for the  years  ended  December  31 is
summarized as follows:

                                1995         1994
                             ---------    ---------

Balance, beginning of year   $ 244,090    $ 275,577
Loan disbursements             521,639      166,662
Loan payments received        (141,025)    (198,149)
                             ---------    ---------
Balance, end of year         $ 624,704    $ 244,090
                             =========    =========

                                      F-12

<PAGE>
The  Company  has  evaluated  its loan  portfolio  as of  December  31,  1995 in
accordance with its normal practices and has given  consideration to the factors
creating potential credit losses.  While management  believes that the allowance
for credit losses provides for all currently  anticipated  problems,  management
recognizes that the Company may incur  additional  losses which cannot currently
be estimated, but which may be substantial.

Changes in the allowance for credit losses for the years ended  December 31 were
as follows:

                                       1995          1994           1993
                                   -----------    -----------    -----------

Balance, beginning of year         $ 2,422,513    $ 1,776,129    $ 1,913,793
Reserve acquired in acquisition           --          806,141           --
Provision credited to operations       (98,868)       (75,632)      (218,573)
Loans charged off                      (66,513)      (141,822)       (21,157)
Recoveries                             105,178         57,697        102,066
                                   -----------    -----------    -----------
Balance, end of year               $ 2,362,310    $ 2,422,513    $ 1,776,129
                                   ===========    ===========    ===========

In May 1993 and October 1994, the Financial  Accounting  Standards  Board issued
Statements of Financial  Accounting  Standards No. 114, "Accounting by Creditors
for  Impairment  of a Loan"  and SFAS No.  118,  an  amendment  to SFAS No.  114
(collectively  "SFAS 114").  These new standards  require that a loan's value be
measured,  and if appropriate a valuation reserve established,  when it has been
determined that the loan is impaired and loss is probable. At December 31, 1995,
the  Corporation's  recorded  investment  in  impaired  loans  is  approximately
$110,000.  Management  has  determined  that the entire amount of impaired loans
will be excluded  from  evaluation  under SFAS 114 as these are  smaller-balance
homogeneous  loans.  This  amount  is  net of  previous  direct  writedowns  and
applications of cash interest payments against the loan balance outstanding.

The average recorded  investment in total impaired loans and leases for the year
ended December 31, 1995, was not material.

Interest payments received on impaired loans and leases are recorded as interest
income unless  collection of the  remaining  recorded  investment is doubtful at
which time payments  received are recorded as  reductions  of principal.  During
1995,  interest income recognized on total impaired loans was not material.  The
gross  income  that would have been  recognized  had such loans and leases  been
performing in accordance  with their original terms would have not been material
for the same period.

At December 31, 1995,  there were no  commitments  to lend  additional  funds to
borrowers   whose  loans  are   classified  as   nonaccrual   or   renegotiated.
Substantially  all the loans  contained in the portfolio are to individuals  and
businesses located in the Phoenix metropolitan area.

                                      F-13
<PAGE>
(6)  PREMISES AND EQUIPMENT:

Major  classifications  of  premises  and  equipment  as of  December 31 were as
follows:

                                         1995           1994
                                     -----------    -----------

Land                                 $   400,000    $   400,000
Building                                 193,299         65,000
Equipment and furniture                1,288,483        940,248
Leasehold improvements                   762,471        895,950
                                     -----------    -----------
                                       2,644,253      2,301,198
Less- Accumulated depreciation and
  amortization                        (1,027,842)      (695,745)
                                     -----------    -----------
                                     $ 1,616,411    $ 1,605,453
                                     ===========    ===========

(7)  DEPOSITS:

Time  certificates  of deposit  with  balances  of  $100,000  and over and their
remaining maturities as of December 31 were as follows:

                             1995           1994
                          -----------   -----------

Less than three months   $ 3,497,647   $ 2,086,262
Three to twelve months     7,326,066     4,609,937
One year to five years     2,866,197     7,393,387
Over five years                 --            --
                         -----------   -----------
                         $13,689,910   $14,089,586
                         ===========   ===========

(8)  SHORT TERM BORROWINGS:

Short term borrowings at December 31, were as follows:

                                        1995         1994
                                     ----------   ----------

Federal funds purchased              $1,200,000   $     --
Securities sold under agreement to
  repurchase                          5,140,500      603,000
                                     ----------   ----------
                                     $6,340,500   $  603,000
                                     ==========   ==========

  As of December 31, 1995,  securities  sold under  agreement to  repurchase  of
$5,000,000   were  with  Heritage  Bank  and  Trust,   Racine,   WI,  a  Johnson
International Company.

                                      F-14
<PAGE>
(9)  COMMITMENTS AND CONTINGENCIES:

In 1988, the Company signed a ten-year  lease  agreement to lease  approximately
10,300 square feet for its current banking  offices.  The lease was subsequently
amended to  commence on October 15, 1989 and  terminate  on June 30,  1999.  The
Company  assigned the lease to the Bank  effective  December 29, 1989. The lease
agreement  requires  rental  payments to be escalated in the seventh year of the
lease by a minimum of 20% and a maximum of 30% as  determined by a formula based
upon the consumer price index, and then to remain constant through the remaining
term of the lease. Additionally, the lease requires the Bank to pay an allocated
percentage  of the direct  expenses  of the  building  and  project in excess of
specified levels. The lease agreement provides renewal options for two five-year
periods at fair-market rent at the renewal date.

On February 2, 1994,  Biltmore  Investors  Bank acquired  substantially  all the
assets and  liabilities of American  National Bank (See note 18). As a result of
the acquisition,  Biltmore  Investors Bank signed a five year lease for a branch
location in Scottsdale,  Arizona.  The lease agreement  provides renewal options
for two five-year periods.

Total  rental  expense  under the  aforementioned  leases  for the  years  ended
December 31,  1995,  1994 and 1993 was  approximately  $573,000,  $522,000,  and
$314,000, respectively.  Future minimum rental payments required under the lease
agreements at December 31, 1995 were as follows:

                    Year Ending
                    December 31,

                       1996                         616,116
                       1997                         616,116
                       1998                         618,223
                       1999                         210,636
                      Thereafter                       --
                                                 ----------
                                                 $2,061,091
                                                 ==========

In the normal  course of business,  the Company makes  various  commitments  and
incurs  certain   contingent   liabilities   which  are  not  reflected  in  the
accompanying consolidated financial statements. These commitments and contingent
liabilities  include various guarantees and commitments to extend credit arising
from normal business activities.  At December 31, 1995 and 1994,  commitments to
extend credit under loan  agreements,  net of  participations  sold,  aggregated
approximately $28,770,000 and $24,745,000,  respectively.  Commitments to extend
credit under letter of credit agreements, net of participations sold, aggregated
approximately $567,000 and $495,000 at December 31, 1995 and 1994, respectively.
The  Bank  does  not   anticipate  any  material  loss  as  a  result  of  these
transactions.
                                      F-15
<PAGE>
(10)  STOCK OPTIONS:

The  Company  has  adopted  four  stock  option  plans,  the  terms of which are
summarized as follows:

        The 1984  Nonstatutory  Stock  Option  Plan  (the  "Nonstatutory  Plan")
        provides  for the  issuance  of a  maximum  of  20,000  options  for the
        purchase  of one share of common  stock  each.  All  full-time  salaried
        officers,  key employees  and directors are eligible to receive  options
        under the Nonstatutory Plan. The option price is $10 per share.  Options
        are  exercisable  in 25%  increments  each year  subsequent to the first
        anniversary  of the date of grant and  expire six years from the date of
        grant.

        The Incentive Stock Option Plan (the "Incentive  Plan") provides for the
        issuance of a maximum of 40,000 options for the purchase of one share of
        common stock each. The exercise price of the option may not be less than
        the fair market value of the stock at the date of grant.  Options may be
        granted under the Incentive Plan to any director, officer or employee of
        the Company or the Bank. Options granted under the Incentive Plan expire
        ten years  from date of grant and are  exercisable  at the option of the
        holder. All options under this plan were forfeited in 1994.

        The Founding  Directors  Nonstatutory  Stock Option Plan (the  "Founding
        Directors  Plan")  provides  for the  issuance  of a  maximum  of 60,000
        options  for the  purchase of one share of common  stock  each.  The six
        founding  directors are the only participants in the Founding  Directors
        Plan. Each founding director has been granted options to purchase 10,000
        shares of common stock at a purchase price of $12 per share. All options
        under this plan expired in 1994.

        On September  26, 1989,  the Company  executed an amendment to the Stock
        Purchase  Agreement with JI (see Note 10) which included an agreement to
        issue an  additional  $150,000 in options to a new employee of the Bank,
        at the per share investment price of the JI transaction. The option plan
        was approved in 1990 as the 1990  Incentive  Stock  Option Plan.  The JI
        transaction closed on December 29, 1989 at $2.57 per share which equated
        to 58,366  shares under the option  agreement.  As of December 31, 1995,
        390 of the options had been granted and exercised.
                                      F-16
<PAGE>
        Statement of Financial  Accounting  Standards No. 123,  "Accounting  for
        Stock-Based  Compensation" ("FAS 123") was issued in October 1995 by the
        Financial  Accounting  Standards  Board and is required to be adopted in
        1996. FAS 123 establishes  financial  accounting and reporting standards
        for stock-based  employee  compensation.  Currently the Company does not
        recognize compensation cost on options issued under Accounting Principal
        Board Opinion No. 25  "Accounting  For Stock Issued to Employees"  ("APB
        25") as the exercise price is the same as or higher than the fair market
        value at time of  issuance.  FAS 123  permits the Company to continue to
        follow this treatment as long as pro-forma disclosures of net income and
        earnings  per share are  presented  as if the fair value based method of
        accounting  defined in FAS 123 had been  applied.  The fair value  based
        method requires measurement of compensation cost on the grant date based
        on the fair value of the award using an option pricing model. Management
        has not yet determined whether it will adopt the fair value based method
        defined by FAS 123 or continue to use the APB 25 method.
                                      F-17
<PAGE>
The following  summarizes the activity in stock options under the four plans for
each of the years in the two-year period ended December 31, 1995 and 1994:
                                          Outstanding      Option    Exercisable
                                            Options        Price       Options
                                            -------        -----       -------

        BALANCE, December 31, 1993          71,400       $10 - $13     11,400

          Options expired                  (60,000)            $12       -
          Options forfeited                 (9,400)            $13    (9,400)
                                           -------                    -------
        BALANCE, December 31, 1994           2,000             $10      2,000
          Options expired                   (2,000)            $10     (2,000)
                                           -------                    -------
        BALANCE, December 31, 1995               0                          0
                                           =======                    =======

(11)  STOCK OFFERINGS AND COMMON STOCK:

On March 2,  1989,  the  Company  signed a  definitive  agreement  with JI which
allowed  them to acquire a  controlling  interest in the  Company  (Note 1). The
agreement was to purchase approximately  $3,000,000 of newly-issued stock at the
December 31, 1988,  book value per share.  In September  1989,  an amendment was
signed by the Company and JI to change the price per share to the unaudited book
value per share of the Company's common shares as of the end of November,  1989,
which both parties  agreed was $2.57.  The purchase,  which was  consummated  on
December 29, 1989 and which required regulatory  approval,  gave JI ownership of
approximately 76% of the Company's outstanding stock.

The definitive  agreement  contained a warrant purchase agreement granting to JI
the right to purchase  warrants at the price of $.01 per warrant and to purchase
common  stock  equal in number and option  price  with  respect to other  shares
eligible to be purchased under all of the Company's  option plans.  The warrants
contain  anti-dilution  provisions  providing  for the  issuance  of  additional
warrants  or  changes  to the  warrant  prices,  as the case may be,  should the
Company  take any action in the future to issue  options,  rights,  warrants  or
other  securities  convertible into common stock, or take any other action which
will or may have the effect of diminishing  JI's  proportionate  interest in the
Company's common stock.

During 1990, pursuant to the terms of the agreement, the Company issued a common
stock  offering to its  stockholders.  As a result of this  offering,  7,414,345
shares of stock were sold for $8,600,640.  JI purchased  7,181,106 shares in the
1990  offering,  increasing  its  ownership  of the Company  from 76% to 93%. In
addition to the stock  offering,  390 stock options were  exercised at $2.57 per
share by an employee of the Bank.

Under the terms of the 1989 definitive  agreement,  JI would pay additional cash
to the  Company  or receive  additional  shares of common  stock of the  Company
depending  primarily  upon  losses  in the loan  portfolio  from the date of the
agreement  in 1989  through  December  31,  1991.  Based upon actual loan losses
incurred,  7,570,896 additional shares were due and payable to JI as of December
31, 1991. The shares were issued to JI on April 30, 1992. A reclassification was
made to Common Stock from Additional Paid-in Capital for the stated value of the
shares.
                                      F-18
<PAGE>
This  transaction,  combined with purchases of shares of common stock from other
shareholders, increased JI's ownership of the Company to approximately 97%.

(12)  INTANGIBLE ASSETS:

Because the stock to be issued under the terms of the 1989 definitive  agreement
was due and payable as of December 31, 1991, JI's effective  ownership  exceeded
95%.  Therefore,  the  remaining  unamortized  goodwill,  which  was  originally
recorded by JI at the time of JI's  acquisition of the Company,  was required to
be "pushed down" to the Company.

Accordingly,  goodwill in the amount of $640,094 was  recorded on the  Company's
Balance  Sheet as of  January  1, 1992 with an  offsetting  amount  recorded  to
retained  earnings.  The  goodwill is being  amortized  using the  straight-line
method  over 25 years,  and had  approximately  23 years  remaining  when it was
"pushed down" to the Company from JI.

As per Accounting Principles Board Opinion No. 16 (APB 16), retained earnings of
the Company was required to be restated on the date of  application  of pushdown
accounting.  The restated  retained  earnings  included the  remaining  minority
ownership's  percentage  of the retained  earnings  (accumulated  deficit at the
time),  plus JI's  recorded  equity in the income and losses of the Company from
the time of the  original  acquisition,  less all  amortization  of the goodwill
recorded  by JI  relating  to the  acquisition  of  the  Company.  Therefore,  a
reclassification  of $2,639,069  was made from  retained  earnings to additional
paid-in capital on January 1, 1992

Additional  goodwill in the amount of $10,431  was "pushed  down" to the Company
from JI in  1992  relating  to  additional  shares  purchased  by JI from  other
shareholders during the year.

Goodwill was  $114,059  and $65,294 at December 31, 1995 and 1994  respectively.
The core deposit intangible  resulting from the acquisition of ANB, as described
in note  17,  was  $1,384,584  and  $1,611,300  at  December  31,  1995 and 1994
respectively. The core deposit intangible is amortized over 10 years.

Negative  goodwill  generated  from a  previous  acquisition  was  $163,449  and
$224,773 at December 31, 1995 and 1994, respectively.

                                      F-19
<PAGE>
(13)  REGULATORY MATTERS:

The activities of the Bank are regulated by the Office of the Comptroller of the
Currency  (the OCC).  Approval  by the OCC may be  required  prior to payment of
dividends by the Bank to the Company under certain circumstances.  Additionally,
regulations  prevent the Bank from transferring funds to the Company for reasons
other than the payment of dividends or the purchase of services and supplies.

Therefore,  included in the balance  sheet at  December  31, 1995 and 1994,  are
$13,714,000 and $11,527,000 respectively, of net assets restricted to use by the
Bank only.

The Federal Reserve Board has adopted capital regulations which require the Bank
to maintain two separate minimum capital ratios. Included are the Tier 1 Capital
Ratio and the Total  Risk-Weighted  Capital Ratio. The Bank's capital ratios are
shown,  along with the minimum required ratios as of December 31, 1995, and 1994
respectively, in the following table:

                                                Total Risk-
                                        Tier 1   Weighted
                                        Capital  Capital
                                        -------  -------

Capital Ratio at December 31, 1995      13.57%   16.16%
Capital Ratio at December 31, 1994      12.96%   14.23%
Regulatory Capital Requirement           4.00%    8.00%

The federal banking agencies have also adopted leverage capital guidelines which
banking  organizations must meet. Under these guidelines,  the most highly rated
banking  organizations  must meet a leverage ratio of at least 3% Tier 1 capital
to total assets,  while lower rated banking  organizations must maintain a ratio
of at least 4% to 5%. The Bank's  leverage  ratios for the years ended  December
31, 1995 and 1994 were 8.88% and 7.12% respectively.

At December 31, 1995 and 1994, due to OCC Regulations,  the Bank had no retained
earnings available for distribution as dividends to the Company.

(14)  OTHER INTEREST INCOME:

Other interest income for the years ended December 31 is summarized as follows:
                                    1995         1994         1993
                                 ----------   ----------   ----------

Interest on federal funds sold   $  216,886   $  142,360   $  106,913
Interest on deposits in other
  financial institutions              2,775        2,500        2,329
Interest on investment
  securities                      2,061,594    2,109,761    1,872,207
                                 ----------   ----------   ----------
                                 $2,281,255   $2,254,621   $1,981,449
                                 ==========   ==========   ==========

                                      F-20
<PAGE>
(15)  INTEREST EXPENSE:

Interest expense for the years ended December 31 is summarized as follows:


                                     1995         1994         1993
                                  ----------   ----------   ----------

  Demand deposits and savings     $1,778,941   $1,371,399   $  939,280
  Time certificates of deposit,
    $100,000 and over                824,972      604,580      521,449
  Other time deposits              1,714,099    1,389,057    1,820,239
  Securities sold under
agreement to repurchase               59,883        4,832        3,527
  Federal funds purchased             21,135         --           --
                                  ----------   ----------   ----------
                                  $4,399,030   $3,369,868   $3,284,495
                                  ==========   ==========   ==========

(16)  INCOME TAXES:

Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which was issued by
the Financial Accounting Standards Board. Under this method, deferred tax assets
and  liabilities  are  recognized  for  future  tax  consequences   relating  to
differences between the book and tax accounting treatment of existing assets and
liabilities as of the balance sheet dates.  Deferred tax assets and  liabilities
are  calculated  using enacted tax rates  expected to apply to taxable income in
the years in which the  book-to-tax  accounting  differences  are expected to be
reversed.

The following is a reconciliation between the amount of the provision for income
taxes and the amount of tax computed by applying the  statutory  Federal  income
tax rate of 34% for each year:

                                                          1995           1994
                                                      -----------     ---------

        Tax computed at statutory rate                  $ 329,926     $ 386,900
        Other                                             (74,837)      (42,333)
        Adjustment of valuation allowance                     -        (564,000)
                                                      -----------     ---------
                Total income tax expense (benefit)      $ 255,089     $(219,433)
                                                      ===========     =========

                                      F-21
<PAGE>
The tax effects of temporary  differences that give rise to significant elements
of the deferred tax assets and deferred tax  liabilities  for each year,  are as
follows:




                                                        1995            1994
                                                     -----------    -----------
Deferred tax assets:

        Allowance for credit losses                  $   803,185    $   549,576
        Mortgage loan premium                             13,283        168,960
        Net deferred loan fees                            79,443         76,392
        Net operating loss carryforwards                 377,526        847,676
        Net unrealized depreciation on
         investment securities available for sale           --          538,560
        Other                                             16,229         90,049
                                                     -----------    -----------
 Total deferred tax assets                           $ 1,289,666    $ 2,271,213
                                                     -----------    -----------

Deferred tax liabilities:

        Fixed assets, primarily due to
         depreciation                                $   (31,516)   $  (100,713)
        Discount accretion on bonds                      (71,120)       (43,120)
        Net unrealized depreciation on
         investment securities available for sale        (83,800)          --
        Other                                           (301,162)       (42,120)
                                                     -----------    -----------
                Total deferred tax liabilities          (487,598)      (185,953)
                                                     -----------    -----------

                                                         802,068      2,085,260
Valuation Allowance                                         --         (352,000)
                                                     -----------    -----------
        Net deferred tax assets                      $   802,068    $ 1,733,260
                                                     ===========    ===========

Changes in the valuation allowance were as follows:

                                                            1995           1994
                                                     -----------    -----------

        Balance, beginning of year                   $   352,000    $ 1,817,000
        Expiration of State NOL                         (352,000)      (624,000)
        Recognition of previously generated
          federal NOLs                                      --         (841,000)
                                                     -----------    -----------
        Balance, end of year                         $      --      $   352,000
                                                     ===========    ===========

                                      F-22
<PAGE>
The  Company  has a tax NOL  carryforwards  of  approximately  $1.1  million for
federal  income  taxes as of December 31,  1995.  The $1.1  million  federal NOL
carryforward is comprised of prechange NOLs (before JI purchased a 76% ownership
on December 29, 1989) and  postchange  NOLs (from  December 29, 1989 to November
26, 1990 when JI became a 93% owner of the Company).

The federal  prechange NOL  approximates  $201,000,  and must be utilized by the
Company  (it cannot be used by JI) no later than the year 2003.  The  postchange
federal NOL, which approximates  $910,000,  must be utilized by the Company (but
not by JI) in full by no  later  than the  year  2004.  The  Company  has  fully
benefitted all NOL's existing at December 31, 1995.

The  cumulative  effect of adopting  SFAS 109 at January 1, 1993,  was  $700,000
representing  the  recognition of the net deferred tax assets at January 1, 1993
plus the  Company's  estimate  of the amount of  postchange  NOLs it  reasonably
expected to realize at the time. 

(17) NEW PRONOUNCEMENTS:

In March,  1995, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  No.  121  (SFAS  121),   "Accounting  for  the
Impairment of  Long-Lived  Assets and for Long- Lived Assets to Be Disposed Of."
This  standard,  which  must be adopted in 1996,  requires  long-lived  impaired
assets to be carried at fair value and all  long-lived  assets to be disposed of
to be reported at the lower of carrying amount or fair value less cost to sell.

SFAS 121  prescribes  a cash flow  test for  recoverability  whenever  events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be recoverable.  For purposes of SFAS 121,  assets include certain  identifiable
intangibles and goodwill if the asset tested for  recoverability was acquired in
a business combination accounted for using the purchase method.

The Corporation does not anticipate that SFAS 121 will have a material impact on
the consolidated financial statements.

                                      F-23

<PAGE>
(18)  BUSINESS COMBINATION:

On  February  1, 1994,  the Bank  acquired  substantially  all of the assets and
liabilities of American National Bank (ANB), which had one office in Scottsdale,
Arizona and one office in Phoenix,  Arizona.  The acquisition was funded through
available capital of the Bank at a cost of approximately $1.1 million.

The transaction was accounted for as a purchase and is included in the Company's
results of operations as of February 1, 1994. The following table shows the fair
value of assets acquired, fair value of liabilities assumed, and net cash paid:

        Fair Value of Assets Acquired                     $32,422,667
        Fair Value of Liabilities Assumed                  31,335,419
                                                         ------------
        Cash Paid for Acquisitions                          1,087,248
        Cash Received in Acquisition                       (7,549,416)
                                                          -----------
        Net Cash and Cash Equivalents Received             $6,462,168
                                                          ===========

The pro-forma  impact on the Company's  results of operations for the year ended
December 31, 1994,  assuming  ANB had been  acquired as of the  beginning of the
year,  are not  materially  different  than the Company's  actual  results.  The
unaudited  pro-forma  impact on the Company's  results of operation for the year
ended December 31, 1993 had the ANB transaction described above been consummated
January 1, 1993 is as follows:

                                      For the Year Ended
                                      December 31, 1993
                                             (Unaudited)

        Net Interest Income                 $4,253,000

        Provision for Loan Losses           $  219,000

        Net Income                          $1,119,000

        Net Income per Share                     $ .07


                                      F-24
<PAGE>
(19) FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following tables present the estimated fair values of financial  instruments
as of December 31, 1995 and 1994:

                                                  1995
                                      ---------------------------
                                         Carrying         Fair
                                          Value           Value
                                      ------------   ------------
Financial Assets:
   Cash and Cash Equivalents          $  6,337,000   $  6,337,000
   Investments Securities Available
     for Sale                           36,808,000     36,808,000
   Net Loans                            89,152,000     89,199,000
   Interest Receivable                   1,109,000      1,109,000

Financial Liabilities:
   Deposits                            116,357,000    116,919,000
   Short Term Borrowings                 6,341,000      6,201,000
   Interest Payable                        199,000        199,000

                                                 1994
                                      ---------------------------
                                        Carrying          Fair
                                          Value           Value
                                      ------------   ------------
Financial Assets:
   Cash and Cash Equivalents          $ 13,560,000   $ 13,560,000
   Investments Securities Available
     for Sale                           36,443,000     36,443,000
   Net Loans                            86,863,000     81,382,000
   Interest Receivable                   1,018,000      1,018,000

Financial Liabilities:
   Deposits                            129,228,000    121,281,000
   Short Term Borrowings                   603,000        603,000
   Interest Payable                        219,000        219,000


Where readily available,  quoted market prices were utilized by the Company.  If
quoted  market  prices were not  available,  fair values were based on estimates
using  present  value  or  other  valuation  techniques.  These  techniques  are
significantly  affected by the assumptions used, including the discount rate and
estimates of future cash flows. The calculated fair value estimates,  therefore,
cannot be  substantiated  by  comparison to  independent  markets and may not be
realized  in  immediate   settlement  of  the  instrument.   Certain   financial
instruments  and all  nonfinancial  instruments  are  excluded  from  disclosure
requirements.  Accordingly,  the aggregate  fair value amounts  presented do not
represent the underlying value of the Company.

The following methods and assumptions were used in estimating the fair value for
financial instruments.

                                      F-25
<PAGE>
Cash and cash equivalents, interest receivable, securities sold
under agreements to repurchase, and interest payable

The carrying amounts  reported for these financial  instruments are a reasonable
estimate of fair value.

Investment securities available for sale

Fair value is based on quoted market prices or dealer quotes.

Loans

Loans that reprice or mature  within three months of year end were assigned fair
values based on their  carrying  values.  For  remaining  loans,  fair value was
estimated by discounting the expected  future cash flows using current  interest
rates  at  which  similar  loans  would  be  made  to  borrowers  of  comparable
creditworthiness.


Deposits

The fair value of fixed-maturity time deposits was estimated based on discounted
cash flows  using rates  currently  offered  for  deposits of similar  remaining
maturities.

Though demand and savings deposits may have duration characteristics which could
justify  fair  value   estimation  using  methods  similar  to  those  used  for
fixed-maturity  time  deposits,  their fair value was  considered to be carrying
value pursuant to the disclosure requirements.

(20) MANAGEMENT FEE:

The Company  pays its  allocable  portion of  expenses  to JI in an  arrangement
similar to all of JI's  subsidiaries.  The arrangement calls for partial payment
of allocable expenses in the early years after becoming a subsidiary of JI.

In 1993,  the Company paid  $175,783 in  management  fees,  equalling 63% of its
allocable portion of expenses.  In 1994, the Company paid $275,520 in management
fees,  equalling 83% of its allocable portion of expenses.  In 1995, the Company
paid  $428,111 in  management  fees,  equaling 88% of its  allocable  portion of
expenses.

Future payments as a percentage of the Company's  allocable  portion of expenses
are expected to be 100% in 1996.

                                      F-26
<PAGE>
         (21)  CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY


CONDENSED BALANCE SHEETS DECEMBER 31            1995         1994
                                            -----------   -----------

ASSETS:

CASH                                        $       424   $       120
DEFERRED TAXES                                     --         257,173
INVESTMENT IN BILTMORE INVESTORS BANK        13,714,165    11,527,411
PREPAID EXPENSES                                  1,826         2,160
GOODWILL                                         64,019        65,294
                                            -----------   -----------
TOTAL ASSETS                                $13,780,434   $11,852,158
                                            ===========   ===========



LIABILITIES AND SHAREHOLDERS' EQUITY:

OTHER LIABILITIES                           $     9,756   $     5,830
                                            -----------   -----------
TOTAL SHAREHOLDER'S EQUITY                   13,770,678    11,846,328
                                            -----------   -----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY   $13,780,434   $11,852,158
                                            ===========   ===========

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME FOR THE YEARS
ENDED DECEMBER 31:                               1995           1994           1993
                                             -----------    -----------    -----------
<S>                                          <C>            <C>            <C>        
 EQUITY IN NET INCOME OF BILTMORE
   INVESTORS BANK                            $   722,418    $ 1,376,788    $   771,879

 EXPENSES:
   General and administrative                      6,009         10,334          2,926
   Amortization of goodwill                        3,172          9,079         19,699
                                             -----------    -----------    -----------
 TOTAL EXPENSES                                   (9,181)       (19,413)       (22,625)
                                             -----------    -----------    -----------

 INCOME BEFORE INCOME TAX EXPENSE
   AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING ACCOUNTING PRINCIPAL               713,237      1,357,375        749,254
   BENEFIT FROM INCOME TAXES                      (2,044)          --             --
                                             -----------    -----------    -----------
 INCOME BEFORE CUMULATIVE EFFECT OF
   CHANGE IN ACCOUNTING PRINCIPLE                715,281      1,357,375        749,254
 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
   PRINCIPLE                                        --             --          700,000

                                             -----------    -----------    -----------
 NET INCOME                                  $   715,281    $ 1,357,375    $ 1,449,254
                                             ===========    ===========    ===========
</TABLE>
                                      F-27
<PAGE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31                                1995           1994            1993
                                                            -----------    -----------    -----------
<S>                                                         <C>            <C>            <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
 RECONCILIATION OF NET INCOME TO NET CASH
  USED BY OPERATING ACTIVITIES:
   Net income                                               $   715,281    $ 1,357,375    $ 1,449,254
   Adjustments to reconcile net income to
        net cash provided (used) by operating activities-
     Equity in net income of Biltmore
        Investors Bank                                         (722,418)    (1,376,788)      (771,879)
     Amortization of goodwill                                     3,172          9,079         19,699
     Recognition of preacquisition net
        operating loss carryforward                                --          257,173         95,000
     Cumulative effect of a change in
        accounting principal                                       --             --         (700,000)
     Increase in investment in Biltmore
        Investors Bank due to utilization of
        preacquisition net operating loss
        carryforward                                               --         (257,173)       (95,000)
     (Decrease) increase in other
        liabilities                                               3,934           (621)       (12,888)
     Decrease in other assets                                       335            518            278
                                                            -----------    -----------    -----------
Net cash provided (used) by operating
          activities                                                304        (10,437)       (15,536)
                                                            -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:                              --             --             --

CASH FLOWS FROM FINANCING ACTIVITIES:                              --             --             --

DECREASE IN CASH AND CASH EQUIVALENTS                               304        (10,437)       (15,536)

CASH AND CASH EQUIVALENTS,
     beginning of period                                            120         10,557         26,093
                                                            -----------    -----------    -----------
CASH AND CASH EQUIVALENTS, end of period                    $       424    $       120    $    10,557
                                                            ===========    ===========    ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:
   Interest paid                                            $       176    $      --      $      --
                                                            ===========    ===========    ===========

NON-CASH TRANSACTION:
  Pushdown of goodwill from Parent                          $     1,897    $     3,329    $      --
                                                            ===========    ===========    ===========
</TABLE>
                                      F-28