EXHIBIT 13


<PAGE>


                SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>


                                                          At December 31,
                                            -----------------------------------------
                                              1992        1993       1994       1995       1996
                                              ----        ----       ----       ----       ----
                                                                (In Thousands)
Selected financial data:
<S>                                         <C>        <C>        <C>        <C>        <C>     
  Total assets ..........................   $365,018   $379,585   $440,603   $497,290   $533,826
  Loans receivable, net .................    263,330    261,469    268,532    291,215    321,528
  Mortgage-backed securities ............     41,305     40,109     64,865    114,790    131,469
  Investment securities .................     43,207     49,010     80,309     71,113     61,210
  Cash and cash equivalents .............      8,154     17,393     16,387      7,683      6,634
  Deposits ..............................    333,295    335,976    337,256    377,975    397,435
  Other borrowings ......................      6,500     12,500     11,250     29,250     60,000
  Equity capital/stockholders' equity....     23,772     29,753     90,859     88,059     74,481

</TABLE>

<TABLE>
<CAPTION>

                                           For the Year Ended December 31,
                                  ---------------------------------------------------
                                    1992     1993      1994        1995        1996
                                  -------   -------   -------     -------     -------
                                                   (In Thousands)
Selected operating data:
<S>                               <C>       <C>       <C>         <C>         <C>    
Interest income ...............   $29,962   $28,430   $29,380     $37,683     $40,993
Interest expense ..............    17,742    14,726    14,783      19,212      21,182
                                  -------   -------   -------     -------     -------
  Net interest income .........    12,220    13,704    14,597      18,471      19,811
Provision for credit losses ...       726       900       600         255          60
                                  -------   -------   -------     -------     -------
  Net interest income after                                                  
   provision for credit losses     11,494    12,804    13,997      18,216      19,751
                                  -------   -------   -------     -------     -------
Noninterest income ............     1,699     1,700       896       1,054       1,321
                                  -------   -------   -------     -------     -------
Noninterest expense ...........     6,974     7,134     7,496       9,084      12,569 (3)
                                  -------   -------   -------     -------     -------
Income before income taxes and                                               
 extraordinary item ...........     6,219     7,370     7,397      10,186       8,503
Income tax expense ............     2,303     2,702     2,694       3,712       3,040
                                  -------   -------   -------     -------     -------
  Net income before                                                          
   extraordinary item .........     3,916     4,668     4,703       6,474       5,463
Cumulative effect at January 1,                                              
 1993 of change in accounting                                                
 for income taxes .............        --       679        --          --          --
                                  -------   -------   -------     -------     -------
  Net income ..................   $ 3,916   $ 5,347   $ 4,703     $ 6,474     $ 5,463
                                  =======   =======   =======     =======     =======
                                                                             
Per Share Data:                                                              
  Net income per share(1) .....        --        --     $0.79(2)  $  1.11(2)  $  1.06
  Dividends per share .........        --        --        --     $  0.30(2)  $ 0.375
                                                                           
</TABLE>

------------------------------
(1)   Based on the weighted  average number of shares of common stock and common
      stock equivalents outstanding.
(2)   Restated for two for one stock split paid June 5, 1996.
(3)   Includes a $2,230 one-time assessment to recapitalize SAIF.

                                       3
<PAGE>



             SELECTED CONSOLIDATED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>


                                                             At or For the Year Ended December 31,
                                                 -------------------------------------------------------------
                                                    1992         1993          1994        1995         1996
                                                 ---------     --------     ---------    --------     --------
<S>                                                <C>          <C>          <C>          <C>          <C>  
Performance Ratios:
Return on average assets (net income
  divided by average total assets) .......           1.09%        1.43%        1.17%        1.35%        1.05%

Return on average equity (net income
  divided by average equity) .............          18.03        20.05        10.63         7.15         6.68

Interest rate spread during period (1)....           3.33         3.62         3.40         3.12         3.30

Net interest margin (2) ..................           3.51         3.81         3.75         3.97         3.94

Net yield on average interest-earning
  assets .................................           8.61         7.91         7.56         8.10         8.16

Net interest income after provision for
credit losses, to total noninterest
expenses .................................         164.81       179.48       186.73       200.53       157.14

Noninterest expense to average assets.....           1.93         1.91         1.86         1.89         2.41

Asset Quality Ratios:
Non-performing loans to total assets......           1.72         1.20          .79          .52          .33
Non-performing loans to total loans ......           2.33         1.68         1.28          .88          .54
Non-performing assets to total assets.....           1.79         1.30          .81          .52          .36
Allowance for credit losses to
  non-performing assets ..................          36.14        52.06        85.35       123.83       172.94


Capital Ratios:
Average equity to average assets ratio
  (average equity divided by average total
  assets) ................................           6.02         7.15        10.99        18.88        15.68
Capital to assets at period end ..........           6.51         7.84        20.62        17.71        13.95

Average interest-earning assets to average
  interest-bearing liabilities ...........         103.65       104.72       109.40       120.62       115.23

Other data:
Number of:
  Real estate loans outstanding(3) .......          5,873        5,470        5,172        5,104        4,982
  Deposit accounts .......................         36,398       35,546       37,189       42,839       43,311
  Full service offices ...................             10           10           10           11           12

</TABLE>

---------------------------------
(1)   Interest rate spread  represents the difference  between the average yield
      on  interest-earning  assets  and the  average  cost  of  interest-bearing
      liabilities.
(2)   Net interest  margin is net interest  income  before  provision for credit
      losses divided by average interest-earning assets.
(3)   Does not include open-end lines of credit.

                                       4
<PAGE>



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



Business of the Company
-----------------------

      FFVA  Financial  Corporation  (the  "Company")  is a Virginia  corporation
organized in May 1994. On October 12, 1994, the Company acquired all the capital
stock of First Federal  Savings Bank of Lynchburg (the "Bank") in the conversion
of the Bank from a federal  mutual savings bank to a federal stock savings bank.
The Company, as a unitary savings and loan holding company, under existing laws,
generally is not restricted in the types of business  activities in which it may
engage  provided  that the Bank  retains a  specified  amount  of its  assets in
housing-related investments.

      Management  believes  that the  holding  company  structure  will  provide
flexibility for possible diversification of business activities through existing
or newly-formed  subsidiaries,  or through  acquisitions of or mergers with both
savings  institutions and commercial banks, as well as other financial  services
related companies.

      The  Company's  business  activities  to date  have  been  limited  to its
investment in the Bank, other equity investments, and loans made to the Bank for
use in the normal course of its business,  and to the First Federal Savings Bank
Employee  Stock  Ownership  Plan (the "ESOP") which enabled the ESOP to purchase
shares of the Company's common stock in the initial public  offering.  The loans
bear interest rates and have terms and conditions  which prevailed in the market
place at the time they were originated. During the year ended December 31, 1996,
the Company repurchased and retired 1,013,712 shares of its common stock through
open market transactions.

Business of the Bank
--------------------

      The business of the Bank consists  principally of attracting deposits from
the general  public and using such deposits to originate  mortgage loans secured
by one- to four-family  residences  and to purchase U.S.  Government and federal
agency securities,  mortgage-backed  and related securities and other investment
securities.   To  a  lesser  extent,  the  Bank  also  originates  multi-family,
commercial real estate, construction, land and land development and consumer and
other  loans.  The Bank's  profitability  depends  primarily on its net interest
income  which is the  difference  between the income it receives on its loan and
investment  portfolios and its cost of funds, which consists of interest paid on
deposits and borrowed funds.  To a lesser extent,  the Bank's  profitability  is
also  affected  by the level of other  noninterest  income and  expenses.  Other
noninterest  income consists of fees of loans,  customer service charges,  gains
from sale of  investments  and other  miscellaneous  income.  Other  noninterest
expenses  consist of personnel,  occupancy  related  expenses,  federal  deposit
insurance premiums, data processing, advertising and other operating expenses.

      The operations of the Bank are influenced  significantly by local economic
conditions  and  by  policies  of  financial  institution  regulatory  agencies,
including  the OTS and the  FDIC.  The  Bank's  cost of funds is  influenced  by
interest  rates  on  competing  investments  and by  rates  offered  on  similar
investments by competing  financial  institutions  in the Bank's market area, as
well as general market  interest rates.  Lending  activities are affected by the
demand for  financing of real estate and other types of loans,  which in turn is
affected by the interest rates at which such financing may be offered.


                                       5
<PAGE>



Asset/Liability Management
--------------------------

      The Company's  earnings depend to a significant extent on its net interest
income,  which is the  difference  between  (i) the  interest  income  on loans,
mortgage-backed  securities and  investments,  and (ii) the interest  expense on
deposits  and  borrowings.  The  Company is subject  to  interest  rate risk and
corresponding  fluctuations in its net interest  income,  to the extent that its
interest-bearing  liabilities  and  interest-earning  assets  do not  mature  or
reprice at the same time. Asset/liability management policies are employed in an
effort to reduce the Company's  exposure to interest  rate risk by matching,  to
the  extent  deemed  feasible  and  appropriate,  the  repricing  periods of the
Company's  interest-earning assets and interest-bearing  liabilities and thereby
reducing the volatility of net interest income.

      The matching of the repricing  characteristics  of assets and  liabilities
may be analyzed by examinining  the extent to which such assets and  liabilities
are "interest rate sensitive" and by monitoring an  institution's  interest rate
sensitivity  "gap." An asset or liability is said to be interest rate  sensitive
within a specific time period if it will mature or reprice within that same time
period.  The interest rate sensitivity gap is defined as the difference  between
the  amount  of  interest-earning   assets   anticipated,   based  upon  certain
assumptions, to mature or reprice within a specific time frame and the amount of
interest-bearing  liabilities  anticipated,  based on  certain  assumptions,  to
mature or reprice within that same time frame. A gap is considered positive when
the amount of interest  rate  sensitive  assets  maturing or repricing  within a
specific time frame exceeds the amount of interest  rate  sensitive  liabilities
maturing or repricing within that same time frame. A gap is considered  negative
when the amount of interest  rate  sensitive  liabilities  maturing or repricing
within a specific  time frame  exceeds  the amount of  interest  rate  sensitive
assets  maturing  or  repricing  within the same time frame.  Accordingly,  in a
rising interest rate environment, an institution with a positive gap would be in
a better position to invest in higher yielding assets, which would result in the
yield  on  its  assets  repricing  at a  pace  greater  than  the  cost  of  its
interest-bearing  liabilities.  During a period of falling  interest  rates,  an
institution  with a positive  gap would tend to have its assets  repricing  at a
faster  rate than one with a negative  gap,  which  would tend to  restrain  the
growth of or reduce its net interest income.

      The one year  cumulative  gap expressed as a percentage of earning  assets
was  calculated  to be a  negative  1.10% at  December  31,  1996.  The ratio of
interest-bearing assets to interest-bearing liabilities at December 31, 1996 was
114.53%.  Total  interest  earning assets  increased  $35.4 million during 1996,
while interest-bearing liabilities increased by $49.6 million.

      The Company  seeks to limit its exposure to interest  rate risk,  in part,
through the origination of ARM loans and shorter-term consumer loans. Management
believes that,  although  investment in ARM loans may reduce short-term earnings
below amounts  obtainable through  investments in fixed-rate  mortgage loans, an
ARM loan  portfolio  reduces the  Company's  exposure to adverse  interest  rate
fluctuations  and  enhances  longer  term   profitability.   While  the  Company
originates  fixed-rate mortgage loans, it monitors the outstanding  balances and
terms of all fixed rate  mortgage  loans to ensure  that the  addition  of these
assets do not result in undue risk.

      A  large   portion  of  the   Company's   assets  have  been  invested  in
mortgage-backed and mortgage-related  securities and investment  securities with
short  and  intermediate  average  lives.  While the  Company's  mortgage-backed
securities  portfolio does contain  approximately $82.7 million of loans with 30
year terms,  $43.2 million of these securities were  collateralized by ARM loans
as of December 31,  1996.  The  investment  policy of the Company is designed to
manage the interest rate sensitivity of its assets and liabilities,  to generate
a favorable return without incurring undue interest rate risk, to supplement the
Company's lending activities, and to provide and maintain liquidity.




                                       6
<PAGE>
      The following table sets forth the amount of  interest-earning  assets and
interest-bearing  liabilities  outstanding  at  December  31,  1996,  which  are
anticipated by the Company,  based upon certain assumptions  described below, to
reprice or mature in each of the future  time  periods  shown.  Except as stated
below,  the  amounts of assets and  liabilities  shown  which  reprice or mature
during a particular  period were  determined in  accordance  with the earlier of
term to repricing or the contractual terms of the asset or liability. Prepayment
rates for mortgage loans,  mortgage-backed  securities and other loans are based
upon national  prepayment  estimates  published by major Wall Street  investment
banking firms,  depending upon the coupon rate of the asset.  Deposit decay rate
assumptions  supplied by the Federal Home Loan Bank of Atlanta have been applied
to demand deposit accounts,  savings accounts and money market deposit accounts.
Management believes that these assumptions are appropriate and reasonable.
<TABLE>
<CAPTION>
                                                                          At December 31, 1996
                                             -------------------------------------------------------------------------------------
                                                                                                  Over      
                                                Less        Three                    Over One     Three
                                                Than      Months to      Six to      Through     Through        Over
                                               Three         Six         Twelve       Three       Five         Five
                                               Months       Months       Months       Years       Years        Years        Total
                                               ------       ------       ------       ------      -----        -----        -----
                                                                           (Dollars in Thousands)
Interest-earning assets:
  Mortgage loans and mortgage-backed
<S>                                           <C>           <C>        <C>          <C>          <C>         <C>         <C>      
  and related securities(1)(2)..............  $  70,482     $ 35,427   $ 112,006    $ 67,180     $ 48,205    $88,230     $ 421,530
  Consumer and other loans(1)...............     17,894        1,112       2,026       5,942        5,348         --        32,322
  Investments and interest-earning
    deposits(2)(3) .........................      6,542        3,500      12,001      21,972        8,314      9,965        62,294
                                              ---------     --------   ---------    --------     --------   ---------    ---------
      Total interest-earning assets.........     94,918       40,039     126,033      95,094       61,867     98,195       516,146
                                              ---------     --------   ---------    --------     --------   ---------    ---------
Interest-bearing liabilities:
NOW and Super NOW accounts .................      3,620        3,225       5,433      11,239        3,007      6,437        32,961
Savings accounts ...........................      1,571        1,500       2,797       8,913        5,810     13,929        34,520
Money market deposit accounts...............     14,129        9,564      10,858       4,812        2,290      2,078        43,731
Certificates of deposit ....................     47,126       37,010      74,021      86,647       34,629         --       279,433
                                              ---------     --------   ---------    --------     --------   ---------    ---------
      Total interest-bearing deposits(4)....     66,446       51,299      93,109     111,611       45,736     22,444       390,645
                                              ---------    ---------   ---------   ---------     ---------  ---------    ---------
FHLB-Atlanta advances and other
 borrowed funds ............................     49,000        2,000       5,000       2,000        2,000         --        60,000
                                              ---------     --------   ---------    --------     --------   ---------    ---------
      Total interest-bearing liabilities ...    115,446       53,299      98,109     113,611       47,736      22,444      450,645
                                              ---------     --------   ---------    --------     --------   ---------    ---------
Interest sensitivity gap....................  $ (20,528)    $(13,260)  $  27,924    $(18,517)    $ 14,131      75,751    $  65,501
                                              =========    =========   =========   =========     =========  =========    =========
Cumulative interest sensitivity gap.........  $ (20,528)    $(33,788)  $  (5,864)   $(24,381)    $(10,250)  $  65,501
                                              =========     ========   =========    ========     ========   =========

Cumulative interest sensitivity gap
  as a percentage of total assets...........      (3.85)%      (6.33)%     (1.10)%      (4.57)%      (1.92)%    12.27%       12.27%
Ratio of interest-earning assets to
interest-bearing liabilities................      82.22 %      79.98 %      97.80%      93.59 %      97.61 %   114.53%      114.53%

</TABLE>

-------------------------------------
(1)  For purposes of the gap  analysis,  mortgage and other loans are reduced by
     non-performing  loans,  but are not  reduced  by the  allowance  for credit
     losses.
(2)  Includes  assets  available  for sale,  but does not include mark to market
     adjustments reflected in unrealized holding gain (loss).
(3)  Includes interest-bearing cash equivalents.
(4)  Does not include noninterest-bearing deposits totalling $6,790.

      Certain  shortcomings are inherent in the method of analysis  presented in
the foregoing  table.  For example,  although certain assets and liabilities may
have similar  maturities  or periods to  repricing,  they may react in different
degrees to changes in market interest rates. Also, the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market rates.  Additionally,  certain assets,  such as ARM loans,  have features
which restrict changes in interest rates on a short-term basis and over the life
of the asset.  Further,  in the event of a change in interest rates,  prepayment
and early  withdrawal  levels  would  likely  deviate  significantly  from those
assumed  in  calculating  the  table.  As a result of these  limitations,  it is
difficult to correlate changes in net interest income to changes in the level of
interest rates.


                                       7
<PAGE>
Analysis of Net Interest Income
-------------------------------

      The  following  table  sets  forth  certain  information  relating  to the
Company's  statements of financial  condition  and  statements of income for the
years ended December 31, 1994,  1995, and 1996 and reflects the average yield on
assets and average cost of liabilities  for the periods  indicated.  Such yields
and costs are  derived by dividing  income or expense by the average  balance of
assets and liabilities,  respectively,  for the periods shown.  Average balances
are derived from month end balances. Management does not believe that the use of
month end  balances  instead of average  daily  balances has caused any material
difference  in  the  information  presented.   The  average  balances  of  loans
receivable  include  loans  on  which  the  Company  has  discontinued  accruing
interest.  The yields and costs include fees which are considered adjustments to
yields.  Market value  adjustments  recorded in compliance with SFAS 115 are not
considered when computing the yields and costs of securities.
<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                  -------------------------------------------------------------------------------------------------
                                                1994                             1995                            1996
                                  --------------------------------   ------------------------------   -----------------------------
                                  Average                Average     Average               Average    Average             Average
                                  Balance     Interest  Yield/Cost   Balance   Interest  Yield/Cost   Balance  Interest  Yield/Cost
                                  -------     --------  ----------   --------  --------  ----------   -------  --------  ----------
                                                                              (In Thousands)
Assets:
Interest-earning assets:
<S>                               <C>          <C>           <C>     <C>       <C>          <C>      <C>        <C>        <C>  
  Mortgage loans, net............ $251,935     $20,717       8.22%   $266,097  $23,437      8.81%    $279,433   $24,714    8.84%
  Consumer and other loans,                                                                
   net ..........................   10,888       1,018       9.35      16,224    1,703     10.50       25,911     2,487    9.60
  Mortgage-backed and related                                                              
   securities(1) ................   51,526       3,333       6.47      99,829    6,884      6.90      123,959     8,662    6.99
  Overnight and short term                                                                 
    deposits ....................   12,470         488       3.91       5,945      422      7.10        4,361       283    6.49
  Investment securities(1)(2)....   61,939       3,824       6.17      76,903    5,237      6.81       68,561     4,847    7.07
                                  --------     -------               --------  -------               --------   -------    
    Total interest-earning                                                               
       assets ...................  388,758      29,380       7.56     464,998   37,683      8.10      502,225    40,993    8.16
                                               -------                         -------                          -------    
Noninterest-earning assets.......   13,739                             14,664                          19,162
                                  --------                           --------                        --------  
      Total assets .............. $402,497                           $479,662                        $521,387
                                  ========                           ========                        ========
Liabilities and Stockholders'                                                              
 Equity:                                                                                   
 Interest-bearing liabilities:                                                             
  Deposits:                                                                                
   Transaction accounts.......... $ 89,728       2,684        2.99    $ 80,140   2,555      3.19     $ 82,527   $ 2,319       2.81
   Savings and certificates......  252,438      11,210        4.44     274,675  14,705      5.35      303,085    16,063       5.30
                                  --------     -------                -------- -------               --------   -------    
      Total deposits ............  342,166      13,894        4.06     354,815  17,260      4.86      385,612    18,382       4.77
  FHLB advances and other                                                                  
   borrowings ...................   13,199         889        6.74      30,702   1,952      6.36       50,236     2,800       5.57
                                  --------     -------                --------  -------               --------   -------    
      Total interest-bearing                                                               
       liabilities ..............  355,365      14,783        4.16     385,517  19,212      4.98      435,848    21,182       4.86
                                               -------                          -------                          -------
Other liabilities ...............    2,890                               3,604                          3,801
                                  --------                            --------                       --------  
      Total liabilities..........  358,255                             389,121                        439,649
                                  --------                            --------                       -------- 
Stockholders' equity ............   44,242                              90,541                         81,738
                                  --------                            --------                       --------  
      Total liabilities and                                                                
       stockholders' equity...... $402,497                            $479,662                       $521,387
                                  ========                            ========                       ========
Net interest income/interest                                                                                             
 rate spread(3) .................             $ 14,597        3.40%            $18,471      3.12%               $19,811      3.30%
                                              ========                         =======                          =======     
Net earning assets/net interest                                                            
 margin(4) ...................... $ 33,393                    3.75%    $79,481              3.97%     $66,377                3.94%
                                  ========                             =======                        =======     
Ratio of interest-earning assets                                                           
 to interest-bearing liabilities.   109.40%                             120.62%                        115.23%
                                   =======                             =======                        ======= 
</TABLE>
-----------------------------------
(1)  Includes assets available for sale.
(2)  Includes FHLB-Atlanta stock.
(3)  Interest-rate  spread represents the difference between the average rate on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(4)  Net interest margin represents net interest income before the provision for
     credit losses divided by average interest-earning assets.

                                       8
<PAGE>



Rate\Volume Analysis
---------------------

      The following table presents the extent to which changes in interest rates
and  changes  in the  volume of  interest-earning  assets  and  interest-bearing
liabilities  have affected the Company's  interest  income and interest  expense
during the periods  indicated.  Information  is provided in each  category  with
respect to (i)  changes  attributable  to changes in volume  (changes  in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate  multiplied  by prior  volume),  and (iii) the net  change.  The changes
attributable  to the  combined  impact  of volume  and rate have been  allocated
proportionately to the changes due to volume and the changes due to rate.

<TABLE>
<CAPTION>

                                                            Year Ended December 31,
                                      ---------------------------------------------------------------
                                                1995 vs. 1994                1996 vs. 1995
                                      -----------------------------     -----------------------------
                                             Increase (Decrease)           Increase (Decrease)
                                                  Due to                          Due to
                                      -----------------------------     -----------------------------
                                       Volume      Rate       Net       Volume      Rate        Net
                                      --------   --------  --------     ------    ---------   -------
                                                              (In Thousands)
Interest-earning assets:
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>    
  Mortgage loans, net .............   $ 1,201    $ 1,519    $ 2,720    $ 1,179    $    98    $ 1,277
  Consumer and other loans ........       548        137        685        941       (157)       784
  Mortgage-backed and related
    securities(1) .................     3,317        234      3,551      1,685         93      1,778
  Overnight and short term deposits      (337)       271        (66)      (105)       (34)      (139)
  Investment securities(1)(2) .....       991        422      1,413       (584)       194       (390)
                                      -------    -------    -------    -------    -------    -------
      Total .......................     5,720      2,583      8,303      3,116        194      3,310
                                      -------    -------    -------    -------    -------    -------

Interest-bearing liabilities:
  Transaction accounts ............      (298)       169       (129)        74       (310)      (236)
  Savings and certificate accounts      1,048      2,447      3,495      1,507       (149)     1,358
                                      -------    -------    -------    -------    -------    -------
      Total deposits ..............       750      2,616      3,366      1,581       (459)     1,122
  Borrowings ......................     1,115        (52)     1,063      1,114       (266)       848
                                      -------    -------    -------    -------    -------    -------
      Total .......................     1,865      2,564      4,429      2,695       (725)     1,970
                                      -------    -------    -------    -------    -------    -------
  Net change in net interest income   $ 3,855    $    19    $ 3,874    $   421    $   919    $ 1,340
                                      =======    =======    =======    =======    =======    =======

</TABLE>

---------------------------------
(1)   Includes assets available for sale.
(2)   Investment securities include FHLB-Atlanta stock.


Financial Condition and Results of Operation

Comparison of Financial Condition at December 31, 1995 and 1996

      General.  Total assets increased $36.5 million or 7.34%, to $533.8 million
at December  31,  1996 from $497.3  million at  December  31,  1995,  reflecting
increases in the Company's loan and mortgage-backed securities portfolio.

      Loans Receivable, Net. The Company's loans receivable, net increased $30.3
million or 10.41% to $321.5  million at December 31, 1996 from $291.2 million at
December 31, 1995. The loan categories  experiencing the most significant growth
during 1996 were the residential, one to four family category which increased by
$11.8 million,  the consumer loan category which increased by $11.6 million, and
the commercial loan category which increased by $4.6 million.



                                       9
<PAGE>




      Mortgage-backed   Securities.  The  Company's  mortgage-backed  securities
portfolio  increased $16.7 million, or 14.55%, to $131.5 million at December 31,
1996  from  $114.8  million  at  December  31,  1995.  The  Company's  portfolio
encompasses a variety of both fixed rate and adjustable  rate products.  A total
of $84.9 million  mortgage-backed  securities  are  designated as "available for
sale," while $46.6 million are  classified as "held to maturity" at December 31,
1996.

      Investment Securities.  The Company's investment securities decreased $9.9
million or 13.92% to $61.2  million at December  31, 1996 from $71.1  million at
December 31, 1995 as the Company  concentrated  its asset growth in the loan and
mortgage-backed securities portfolios during 1996.

      Deposits.  The  Company's  deposits  increased  $19.4  million or 5.13% to
$397.4 million at December 31, 1996 from $378.0 million at December 31, 1995.

      Advances  from FHLB and Other  Borrowed  Money.  Advances from the Federal
Home Loan  Bank of  Atlanta  increased  by $11.7  million  to $41.0  million  at
December  31, 1996 from $29.3  million at December 31,  1995.  During 1996,  the
Company also entered into reverse  repurchase  agreements  with a regional bank.
The balance outstanding under reverse repurchase agreements at December 31, 1996
was $19.0 million.  Funds from the additional  borrowings  were used to fund the
purchase of mortgage backed securities and collateralized  mortgage  obligations
and to fund the growth of the Company's loan portfolio.

      Stockholders'  Equity.  Stockholders'  equity decreased $13.6 million from
$88.1  million at December 31, 1995 to $74.5  million at December 31, 1996.  The
decrease in  stockholders'  equity was a result of the  Company's  repurchase of
1,013,712  shares of common stock at a cost of $18.0  million  during 1996.  The
decrease  in  stockholders'  equity  which  occurred  as a result  of the  stock
repurchases  was  partially  offset by income  from  operations.  Other  factors
contributing  to the  decrease  was a  decrease  in the  value of the  Company's
"available  for sale"  portfolio  as  reflected  in the value of the  unrealized
holding gain component of stockholders' equity and the payment of cash dividends
totalling  $1.9  million.  At December 31,  1996,  the ratio of capital to total
assets was 13.95%.

Comparison of Operating Results for the Years Ended December 31, 1995 and 1996

      Net Income. Net income decreased $1.0 million to $5.5 million for the year
ended  December 31, 1996 from $6.5 million for the year ended December 31, 1995.
This decrease was primarily due to a special FDIC assessment to recapitalize the
SAIF portion of the insurance  fund.  The Company's  portion of this  assessment
totalled $2.2 million.  Excluding the special  assessment,  non interest expense
increased a total of $1.3 million.  This was partially  offset by an increase of
$1.3 million in the  Company's  net interest  income to $19.8 million from $18.5
million in the prior  year.  Income tax  expense  also  decreased  $670,000 as a
result.

      Interest Income.  Interest income increased approximately $3.3 million, or
8.8%,  from $37.7  million  for the 1995  period to $41.0  million  for the 1996
period. This increase was primarily due to a $37.2 million, or 8.0%, increase in
the average  balance of total  interest  earning  assets from $465.0  million at
December 31, 1995 to $502.2  million at December 31, 1996.  The average yield on
interest earning assets was 8.10% for the year ended December 31, 1995 and 8.16%
for the year ended December 31, 1996.

      Interest Expense.  Interest expense increased $2.0 million, or 10.42% from
$19.2  million for the 1995 period to $21.2  million for the 1996  period,  as a
result  of an  increase  in  deposits  and other  interest-bearing  liabilities.
Average  interest-bearing  liabilities  increased $50.3 million or 13.05%,  from

                                       10
<PAGE>

$385.5  million in the 1995  period to $435.8  million in the 1996  period.  The
average  cost of  interest-bearing  liabilities  decreased  12 basis points from
4.98% in the 1995 period to 4.86% in the 1996 period.

     Net Interest Income. Net interest income for the 1996 period increased $1.3
million or 7.03% from $18.5 million for the 1995 period to $19.8 million for the
1996  period.  There was an increase in the  average  interest  rate spread from
3.12%  for the 1995  period  to 3.30% for the 1996  period  which was  partially
offset by a 5.39% decrease in the ratio of  interest-earning  assets to interest
bearing  liabilities.  The decrease in the ratio of  interest-earning  assets to
interest-bearing  liabilities  can be attributed  to the  Company's  decision to
repurchase  over one million  shares of common stock at a cost of $18.0  million
during 1996.

      Provision for Credit Losses.  The provision for credit losses decreased by
$195,000  from  $255,000 for the 1995 period to $60,000 for the 1996 period.  At
December 31, 1996, allowances for credit losses were $3.3 million,  representing
1.01% of total loans and 188.07% of non-performing  loans. The Company maintains
an allowance for credit losses at a level  considered  adequate to absorb credit
losses. The determination of the adequacy of the valuation allowance is based on
a  detailed  analysis  of loans with known or  anticipated  adverse  performance
characteristics,  and includes  consideration of historical  patterns,  industry
experience,  current  economic  conditions,  changes  in  composition  and  risk
characteristics of the loan portfolio,  and other factors deemed relevant to the
collectibility  of the loans  outstanding.  The Company  maintains a loan review
system which allows for a periodic  review of its loan  portfolio  and the early
identification of potential problem loans. Such system takes into consideration,
among other things,  delinquency  status,  size of loans, type of collateral and
financial  condition  of the  borrowers.  Specific  credit loss  allowances  are
established for identified  loans based on a review of such  information  and/or
appraisals of the  underlying  collateral.  General  credit loss  allowances are
based upon a combination of factors including, but not limited to, actual credit
loss  experience,  composition  of  the  loan  portfolio  and  current  economic
conditions.  Although  management  believes that adequate general allowances for
losses have been  established,  actual losses are  dependent  upon future events
and,  as such,  further  additions  to the  level  of the  general  credit  loss
allowance may be necessary.

      Noninterest Income.  Noninterest income increased 18.18% from $1.1 million
for the 1995 period to $1.3 million for the 1996 period primarily as a result of
a $182,000 increase from $431,000 to $613,000 in other income.

      Noninterest Expense.  Noninterest expense increased $3.5 million or 38.46%
from $9.1 million for the 1995 period to $12.6 million for the 1996 period.  The
Company  recorded  an  expense  of $2.2  million  for a  one-time  special  FDIC
assessment  to  recapitalize  the  SAIF  portion  of the  insurance  fund  which
accounted  for 62.86% of the increase.  The Company also  experienced a $900,000
increase in  compensation  and employee  benefit  plan  expense.  A  significant
portion of this increase can be attributed to increased staff  requirements as a
result of growth  experienced by the Company,  partially due to the opening of a
new  branch  office  in 1996 and  increased  benefit  plan  costs as a result of
growth.  Office  occupancy and equipment  costs and data  processing  costs also
increased as a result of the additional branches and new accounts.

      Income Taxes.  The provision for income taxes  decreased from $3.7 million
in 1995 to $3.0  million  in 1996 as a result  of the  Company's  decreased  net
income for 1996.

Comparison of Financial Condition at December 31, 1994 and 1995

      General. Total assets increased $56.7 million or 12.87%, to $497.3 million
at December  31,  1995 from $440.6  million at  December  31,  1994,  reflecting
increases in the Company's loan and mortgage-backed securities portfolio.

                                       11
<PAGE>

      Loans Receivable, Net. The Company's loans receivable, net increased $22.7
million or 8.45% to $291.2  million at December 31, 1995 from $268.5  million at
December 31, 1994.  Growth in the loan portfolio during 1995 was concentrated in
the residential, one to four family category which increased by $7.6 million and
the consumer loan category which increased by $7.9 million.

      Mortgage-backed   Securities.  The  Company's  mortgage-backed  securities
portfolio  increased $49.9 million, or 76.89%, to $114.8 million at December 31,
1995  from  $64.9  million  at  December  31,  1994.  The  Company's   portfolio
encompasses  a variety of both  fixed rate and  adjustable  rate  products.  The
Company's   purchases   during  1995  were   concentrated   in  adjustable  rate
mortgage-backed  securities  which  comprise  approximately  54%  of  the  total
mortgage-backed  securities  portfolio as of December 31, 1995. A total of $78.8
million  mortgage-backed  securities  were  designated as "available  for sale,"
while $35.9 million were classified as "held to maturity" at December 31, 1995.

      Investment Securities.  The Company's investment securities decreased $9.2
million or 11.46% to $71.1  million at December  31, 1995 from $80.3  million at
December 31, 1994 as the Company  concentrated  its asset growth in the loan and
mortgage-backed securities portfolios during 1995.

      Deposits.  The  Company's  deposits  increased  $40.7 million or 12.07% to
$378.0  million at December  31, 1995 from $337.3  million at December 31, 1994.
The  acquisition  of the  Keysville  Branch  of  Crestar  Financial  Corporation
resulted in deposit growth of approximately  $22.0 million,  while the remaining
deposit growth was generated in the normal course of business.

      Advances  from FHLB.  Advances  from the Federal Home Loan Bank of Atlanta
increased  by $18.0  million to $29.3  million at  December  31, 1995 from $11.3
million at December 31,  1994.  During March 1995,  the Company  borrowed  $25.0
million from the Federal  Home Loan Bank under a variable  rate  advance.  These
proceeds  were used to fund the  purchase  of  adjustable  rate  mortgage-backed
securities. A portion of the advance was repaid prior to year end.

      Stockholders'  Equity.  Stockholders'  equity  decreased $2.8 million from
$90.9  million at December 31, 1994 to $88.1  million at December 31, 1995.  The
decrease in stockholders' equity was a direct result of the Company's repurchase
of 300,000  shares of common  stock at a cost of $8.5 million  during 1995.  The
decrease  in  stockholders'  equity  which  occurred  as a result  of the  stock
repurchases  was partially  offset by income from  operations and an increase in
the value of the Company's  "available  for sale"  portfolio as reflected in the
value of the unrealized  holding gain component of stockholders'  equity.  Other
factors contributing to the decrease was the Company's purchase of 80,000 shares
of common stock to be held in the Management Stock Bonus Plan and the payment of
cash  dividends  totalling  $1.8  million.  At December 31,  1995,  the ratio of
capital to total assets was 17.71%.

Comparison of Operating Results for the Years Ended December 31, 1994 and 1995

      Net Income. Net income increased $1.8 million to $6.5 million for the year
ended  December 31, 1995 from $4.7 million for the year ended December 31, 1994.
This  increase was primarily due to an increase of $3.9 million in the Company's
net interest  income to $18.5 million from $14.6 million in the prior year. This
increase in net interest income was partially  offset by a $1.6 million increase
in noninterest expense and a $1.0 million increase in income tax expense.

                                       12
<PAGE>

     Interest Income.  Interest income increased  approximately $8.3 million, or
28.2%,  from $29.4  million  for the 1994  period to $37.7  million for the 1995
period. This increase was primarily due to an increase in the average balance of
total  interest  earning  assets  during 1995  coupled with an increase in their
average yield.  Average  interest  earning assets  increased  $76.2 million,  or
19.60% from $388.8  million at December  31, 1994 to $465.0  million at December
31, 1995. The average yield on interest earning assets increased .54% from 7.56%
for the year ended  December  31, 1994 to 8.10% for the year ended  December 31,
1995.

      Interest Expense.  Interest expense increased $4.4 million, or 29.73% from
$14.8  million for the 1994 period to $19.2  million for the 1995  period,  as a
result of an increase in deposits and other interest-bearing liabilities, and an
increase in the average cost paid on those interest-bearing liabilities. Average
interest-bearing  liabilities  increased  $30.1  million or 8.47%,  from  $355.4
million in the 1994  period to $385.5  million in the 1995  period.  At the same
time, the average cost of interest-bearing liabilities increased 82 basis points
from 4.16% in the 1994 period to 4.98% in the 1995 period.

      Net Interest  Income.  Net interest  income for the 1995 period  increased
$3.9 million or 26.71% from $14.6  million for the 1994 period to $18.5  million
for the 1995 period.  The increase in net interest  income was  primarily due to
increased  earnings as a result of the  investment of net  conversion  proceeds.
There  was an  11.22%  increase  in the  ratio  of  interest-earning  assets  to
interest-bearing  liabilities  which was partially  offset by a reduction in the
average  interest  rate  spread  from 3.40% for the 1994 period to 3.12% for the
1995 period.

      Provision for Credit Losses.  The provision for credit losses decreased by
$345,000 from  $600,000 for the 1994 period to $255,000 for the 1995 period.  At
December 31, 1995, allowances for credit losses were $3.2 million,  representing
1.08% of total loans and 123.83% of non-performing loans.

      Noninterest  Income.  Noninterest  income increased $158,000 from $896,000
for the 1994 period to $1,054,000 for the 1995 period primarily as a result of a
$191,000 increase from $18,000 to $209,000 in income recognized from the sale of
investment securities.

      Noninterest Expense.  Noninterest expense increased $1.6 million or 21.33%
from $7.5 million for the 1994 period to $9.1  million for the 1994 period.  The
increase  resulted  primarily from a $1.1 million  increase in compensation  and
employee benefit plan expense.

      A significant portion of the increase can be attributed to increased staff
requirements as a result of growth experienced by the company,  partially due to
the purchase of a new branch in 1995. The Company experienced  increased benefit
plan costs as a result of this  growth and the  implementation  of a  Management
Stock Bonus Plan. The Company also adopted an Employee  Stock  Ownership Plan in
conjunction with the Bank's  conversion to stock form. Other operating  expenses
including  professional fees,  printing and supplies,  and various  registration
fees and charges also  increased as a result of the  Company's  conversion  to a
publicly held company.

      Income Taxes.  The provision for income taxes  increased from $2.7 million
in 1994 to $3.7  million  in 1995 as a result  of the  Company's  increased  net
income for 1995.

                                       13
<PAGE>

Liquidity and Capital Resources
-------------------------------

     The  Company's  liquidity  is a product  of its  operating,  investing  and
financing  activities.  The  Company's  primary  sources of funds are  deposits,
borrowings,  amortization,  prepayments and maturities of outstanding  loans and
mortgage-backed  securities,  maturities  of  investment  securities  and  funds
provided from  operations.  While  scheduled  payments from the  amortization of
loans and  mortgage-backed  securities  and maturing  investment  securities are
relatively  predictable sources of funds, deposit flows and loan prepayments are
greatly   influenced  by  general  interest  rates,   economic   conditions  and
competition. In addition, the Company invests excess funds in overnight deposits
to fund cash  requirements  experienced  in the normal  course of business.  The
Company has been able to generate  sufficient  cash through its deposits as well
as  borrowings  (consisting  of  advances  from the FHLB of Atlanta  and reverse
repurchase  agreements).  At December 31, 1996, the Company had $41.0 million of
outstanding advances from the FHLB of Atlanta and $19.0 million outstanding with
a regional bank under reverse repurchase agreements.

      Liquidity  management is both a daily and  long-term  function of business
management.  Excess cash is  generally  invested  in  overnight  deposits.  On a
longer-term  basis,  the Company  maintains a strategy of purchasing  investment
securities and  mortgage-backed  securities.  The Company attempts to ladder the
maturities  of  its  investment  portfolio  to  provide  an  ongoing  source  of
liquidity.  The Company uses its sources of funds  primarily to meet its ongoing
commitments, to pay maturing savings certificates and savings withdrawals,  fund
loan  commitments  and maintain a portfolio of  mortgage-backed  and  investment
securities.   At  December  31,  1996,  the  total  approved  loan   commitments
outstanding amounted to $4.0 million. At the same date, commitments under unused
lines of credit amounted to $20.0 million.  Certificates of deposit scheduled to
mature  in one  year  or less at  December  31,  1996  totaled  $158.2  million.
Management  believes that a significant portion of maturing deposits will remain
with the Company.  The Bank had an average  liquidity ratio of 12.00% during the
quarter ended  December 31, 1996,  which  exceeded the required  minimum  liquid
asset ratio of 5.0%.

      The bank's  deposits  are  insured up to the legal  maximum by the Savings
Associations  Insurance Fund ("SAIF") as  administered by the FDIC. In the past,
First Federal and most other SAIF members have paid an annual insurance  premium
between .23% and .31% of total  deposits  held.  Effective  January 1, 1996, the
FDIC lowered the annual insurance premium for most members of the Bank Insurance
Fund ("BIF"),  primarily commercial banks, to $2,000. Recent federal legislation
required  the FDIC to impose a  one-time  assessment  on all  members of SAIF in
order to  recapitalize  the SAIF to the federally  mandated level of 1.25%.  The
assessment  equalled .65% of an institutions  domestic  deposits as of March 31,
1995 and was  approximately  $2.2 million for First Federal  Savings Bank.  SAIF
premiums have been lowered which will reduce somewhat the competitive  advantage
commercial banks have had regarding deposit insurance premiums.

      On August 20,  1996,  The Small  Business Job  Protection  Act of 1996 was
signed into law.  Under this law, the tax bad debt reserve  method that had been
available to thrift  institutions  was repealed  for tax years  beginning  after
1995.  According  to  the  legislation,   applicable  excess  reserves  must  be
recaptured as income over five years  beginning  with fiscal 1997. The amount to
be recaptured is the excess of the  accumulated  reserves since fiscal 1987 over
the  amount  allowed  by use of the actual  charge-off  method for those  years.
Thrifts can delay those payments by two years if they meet a residential lending
requirement.  Since  the  Bank has  provided  deferred  taxes on those  bad debt
reserves accumulated since 1987, management believes that the enactment of these
proposals  will  have no  material  effect  on the  earnings  of the Bank or the
Company.

                                       14
<PAGE>

      At December 31, 1996,  the Bank had  regulatory  capital which was well in
excess of  applicable  limits.  At December 31,  1996,  the Bank was required to
maintain tangible capital of 1.5% of adjusted total assets, core capital of 3.0%
of adjusted  total  assets,  and  risk-based  capital of 8.0% of adjusted  risk-
weighted  assets.  At December 31, 1996, the Bank's  tangible  capital was $53.0
million,  or 9.95% of adjusted total assets,  core capital was $53.0 million, or
9.95% of adjusted  total assets and  risk-based  capital was $56.3  million,  or
20.60% of adjusted  risk-weighted  assets,  exceeding the  requirements by $45.0
million, $37.0 million, and $34.4 million, respectively.

      The following table sets forth the Bank's capital position at December 31,
1996, as compared to the minimum regulatory capital  requirements imposed by the
OTS at that date.
                                                           December 31, 1996
                                                         -----------------------
                                                                      Percent of
                                                                       Adjusted
                                                          Amount        Assets
                                                         --------      ---------
                                                         (Dollars in Thousands)
First Federal Savings Bank
--------------------------

Tangible Capital:
Regulatory capital...................................    $52,973          9.95%
Regulatory requirement...............................    $ 7,984          1.50%
                                                         -------         -----

     Excess..........................................    $44,989          8.45%
                                                          ======         =====
Core Capital:
Regulatory capital ..................................    $52,973          9.95%
Regulatory requirement...............................    $15,967          3.00%
                                                         -------         -----
     Excess..........................................    $37,006          6.95%
                                                          ======         =====
Risk-Based Capital:
Regulatory capital...................................    $56,254         20.60%
Regulatory requirement...............................    $21,846          8.00%
                                                         -------         -----
      Excess.........................................    $34,408         12.60%
                                                          ======         =====


Impact of new accounting standards:


      In April 1995, the FASB issued SFAS 121, "Accounting for the Impairment of
Long-Lived  Assets and for Long-Lived  Assets to be Disposed Of".  Statement 121
establishes standards for recognizing and measuring the impairment of long-lived
assets, certain identifiable intangibles, and goodwill, when an entity is unable
to recover the carrying amount of those assets. This statement was effective for
fiscal years  beginning after December 15, 1995. SFAS 121 has not had a material
effect on the Company's financial statements.

      In May 1995, the FASB issued SFAS 122,  "Accounting for Mortgage Servicing
Rights". This Statement amends SFAS 65, "Accounting for Certain Mortgage Banking
Activities", to require that a mortgage banking enterprise recognize as separate
assets rights to service  mortgage  loans for others,  however  those  servicing
rights are acquired.  This Statement requires that a mortgage banking enterprise
assess its capitalized  mortgage  servicing  rights for impairment  based on the
fair value of those rights.  SFAS 122 was  effective for fiscal years  beginning
after December 15, 1995.  SFAS 122 was to be applied  prospectively  and has not
had a material effect on the Company's financial statements.

                                       15
<PAGE>
     In October 1995, the FASB issued SFAS No. 123,  Accounting for  Stock-Based
Compensation,  which became effective for the Company beginning January 1, 1996.
SFAS No. 123 requires increased  disclosure of compensation expense arising from
both fixed and performance stock compensation plans. Such expense is measured as
the fair  value of the award at the date it is granted  using an  option-pricing
model  that takes into  account  the  exercise  price and  expected  volatility,
expected dividends on the stock and the expected risk-free rate of return during
the term of the  option.  The  compensation  cost would be  recognized  over the
service period, usually the period from the grant date to the vesting date. SFAS
No. 123 encourages,  rather than requires,  companies to adopt a new method that
accounts for stock  compensation  awards based on their  estimated fair value at
the date  they are  granted.  Companies  are  permitted,  however,  to  continue
accounting under Accounting Principles Board ("APB") Opinion No. 25. The Company
will continue to apply APB Opinion No. 25 in their financial  statements and has
disclosed pro forma net income and earnings per share in a footnote,  determined
as if the Company had applied the new method.

      In June,  1996,  the FASB issued SFAS 125,  "Accounting  for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities". This statement
provides  accounting  and  reporting  standards  for  transfers and servicing of
financial  assets  and  extinguishment  of  liabilities.  After  a  transfer  of
financial  assets,  an entity  recognizes the financial and servicing  assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished. In
addition,  a transfer of  financial  assets in which the  transferor  surrenders
control  over  those  assets  is  accounted  for as a sale  to the  extent  that
consideration  other than  beneficial  interests  in the  transferred  assets is
received in  exchange.  SFAS 125 is effective  for  transfers  and  servicing of
financial assets and extinguishment of liabilities  occurring after December 31,
1996  and  is to be  applied  prospectively.  Management  does  not  expect  the
application  of this  pronouncement  to have a material  effect on the financial
statements of the company.

Impact of Inflation and Changing Prices

      The  Financial  Statements  and Notes thereto  presented  herein have been
prepared in accordance  with GAAP,  which require the  measurement  of financial
position  and  operating   results  in  terms  of  historical   dollars  without
considering the changes in the relative  purchasing power of money over time due
to inflation.  The impact of inflation is reflected in the increased cost of the
Company's operations.  Unlike industrial companies, nearly all of the assets and
liabilities  of the Company are  monetary.  As a result,  interest  rates have a
greater  impact on the  Company's  performance  than do the  effects  of general
levels  of  inflation.  Interest  rates  do not  necessarily  move  in the  same
direction or to the same extent as the price of goods and services.


                                       16
<PAGE>



[GRAPHIC OMITTED]








                         Report of Independent Auditors







The Board of Directors and Stockholders
FFVA Financial Corporation
Lynchburg, Virginia


We have audited the accompanying  consolidated statements of financial condition
of FFVA Financial  Corporation  and Subsidiary as of December 31, 1995 and 1996,
and the related  consolidated  statements  of income,  changes in  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 1996.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  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 financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 FFVA  Financial
Corporation  and Subsidiary as of December 31, 1995 and 1996, and the results of
their  operations and their cash flows for each of the three years in the period
ended  December  31,  1996 in  conformity  with  generally  accepted  accounting
principles.



/s/ Cherry, Bekaert & Holland, L.L.P.


Lynchburg, Virginia
January 31, 1997

                                       17
<PAGE>






                       FFVA FINANCIAL CORPORATION AND SUBSIDIARY
                    Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>

                                                                                  December 31
                                                                              -------------------
                                                                                1995       1996
                                                                              --------   --------
                                                                              (Dollars in thousands)
Assets
<S>                                                                           <C>        <C>     
   Cash and cash equivalents                                                  $  7,683   $  6,634
   Investment securities, held to maturity (estimated market
      of $34,045 and $36,498 in 1995 and 1996, respectively)                    33,314     36,290
   Investment securities, available for sale, at market                         34,724     21,652
   Investment securities, restricted, at cost                                    3,075      3,268
   Mortgage-backed securities, held to maturity (estimated market
      of $36,471 and $46,738 in 1995 and 1996, respectively)                    35,946     46,570
   Mortgage-backed securities, available for sale, at market                    78,844     84,899
   Loans receivable, net                                                       291,215    321,528
   Foreclosed real estate                                                           --        154
   Property and equipment, net                                                   5,665      6,283
   Accrued interest receivable                                                   4,092      4,054
   Prepaid expenses and other assets                                             1,004        886
   Goodwill                                                                      1,728      1,608
                                                                              --------   --------

          Total assets                                                        $497,290   $533,826
                                                                              ========   ========


Liabilities and stockholders' equity
Liabilities
   Deposits                                                                   $377,975   $397,435
   Advances from Federal Home Loan Bank and other borrowed funds                29,250     60,000
   Advances from borrowers for taxes and insurance                               1,071        917
   Other liabilities                                                               935        993
                                                                              --------   --------

          Total liabilities                                                    409,231    459,345
                                                                              --------   --------

Commitments and contingencies

Stockholders' equity
   Preferred stock, par value $.10.  Authorized 500,000 shares, none issued         --         --
   Common stock, par value $.10.  Authorized 11,500,000 shares, 2,851,832
      and 4,692,552 shares outstanding for 1995 and 1996, respectively             285        469
   Additional paid-in capital                                                   55,057     45,336
   Less unearned ESOP and MSBP shares                                           (4,615)    (3,726)
   Retained earnings, substantially restricted                                  35,824     31,220
   Unrealized holding gain on securities, available for sale                     1,508      1,182
                                                                              --------   --------

          Total stockholders' equity                                            88,059     74,481
                                                                              --------   --------

          Total liabilities and stockholders' equity                          $497,290   $533,826
                                                                              ========   ========
</TABLE>
                                                                      


See notes to consolidated financial statements.

                                       18
<PAGE>
                        FFVA FINANCIAL CORPORATION AND SUBSIDIARY
               Consolidated Statements of Changes in Stockholders' Equity

<TABLE>
<CAPTION>                                                               
                                                                                        Unrealized
                                                                                        Gain (Loss)
                                                Common Stock                            on Assets          
                                           --------------------  Additional             Available    Unearned   Unearned
                                             Shares               Paid-in   Retained       For         ESOP       MSBP
                                           Outstanding   Amount   Capital   Earnings     Sale, Net    Shares     Shares      Total
                                           -----------   ------   -------   --------     ---------    ------     ------      -----
                                                              (Dollars in thousands, except per-share data)

<S>                                        <C>            <C>    <C>        <C>          <C>          <C>       <C>       <C>    
Balance at December 31, 1993                      --     $  --   $     --   $ 29,119     $  634       $    --   $   --    $  29,753
   Net income                                     --        --         --      4,703         --            --       --        4,703

   Change in unrealized gain (loss)
      on assets, available for sale, net          --        --         --         --    ( 1,954)           --       --       (1,954)

   Sale of stock                           3,151,832       315     60,761         --         --        (3,149)      --       57,927

   Allocated/earned ESOP shares                   --        --        (47)        --         --           477       --          430
                                           ---------       ---     ------   --------     -------     --------  -------     --------

Balance at December 31, 1994               3,151,832       315     60,714     33,822     (1,320)       (2,672)      --       90,859

   Net income                                     --        --         --      6,474         --            --       --        6,474

   Change in unrealized gain (loss)
      on assets, available for sale, net          --        --         --         --      2,828            --       --        2,828

   Purchase of unearned MSBP
      shares                                      --        --         --         --         --            --   (2,276)      (2,276)

   Repurchase of common stock               (300,000)      (30)    (5,784)    (2,706)        --            --       --       (8,520)

   Cash dividends paid ($.60 per
      pre-split share)                            --        --         --     (1,766)        --            --       --       (1,766)

   Allocated/earned ESOP shares                   --        --        127         --         --           333       --          460
                                           ---------       ---     ------   --------     -------     --------  -------     --------

Balance at December 31, 1995               2,851,832       285     55,057     35,824      1,508        (2,339)  (2,276)      88,059

   Net income                                     --        --         --      5,463         --            --       --        5,463

   Change in unrealized gain (loss)
      on assets, available for sale, net          --        --         --         --       (326)           --       --         (326)

   Allocation of unearned MSBP
      shares                                      --        --        (97)        --         --            --      550          453

   Repurchase of common stock,
      pre-split                             (139,000)      (14)    (2,680)    (1,564)        --            --       --       (4,258)

   Two-for-one stock split                 2,713,832       271       (271)        --         --            --       --           --

   Repurchase of common stock,
      post-split                            (735,712)      (73)    (7,055)    (6,600)        --            --       --      (13,728)

   Cash dividends paid ($.375 per
      share)                                      --        --         --     (1,903)         --           --       --       (1,903)

   Allocated/earned ESOP shares                   --        --        351         --          --          339       --          690

   Exercise of stock options                   1,600        --         31         --          --           --       --           31
                                           ---------       ---     ------   --------     -------     --------  -------     --------

Balance at December 31, 1996               4,692,552      $469    $45,336   $ 31,220     $ 1,182     $ (2,000) $(1,726)    $ 74,481
                                           =========       ===     ======   ========     =======     ========  =======     ========

</TABLE>


See notes to consolidated financial statements.

                                       19
<PAGE>
                       FFVA FINANCIAL CORPORATION AND SUBSIDIARY
                           Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31
                                                                              ----------------------------
                                                                                 1994      1995     1996
                                                                              ---------  -------- --------
                                                                     (Dollars in thousands, except per-share data)
Interest income
<S>                                                                            <C>       <C>       <C>    
   Loans                                                                       $21,735   $25,140   $27,201
   Mortgage-backed securities                                                    3,282     6,884     8,662
   U.S. Government obligations, agencies, and other investments
      including overnight deposits                                               4,363     5,659     5,130
                                                                               -------   -------   -------

          Total interest income                                                 29,380    37,683    40,993
                                                                               -------   -------   -------
Interest expense
   Deposits                                                                     13,894    17,260    18,382
   Borrowed money                                                                  889     1,952     2,800
                                                                               -------   -------   -------

          Total interest expense                                                14,783    19,212    21,182
                                                                               -------   -------   -------
          Net interest income                                                   14,597    18,471    19,811
Provision for credit losses                                                        600       255        60
                                                                               -------   -------   -------

          Net interest income after provision for credit losses                 13,997    18,216    19,751
                                                                               -------   -------   -------

Noninterest income
   Service charges and fees on loans                                               496       423       456
   Net gain on sale of investments                                                  18       209       251
   Net gain (loss) on sale of equipment                                             (3)       (9)        1
   Other income                                                                    385       431       613
                                                                               -------   -------   -------

          Total noninterest income                                                 896     1,054     1,321
                                                                               -------   -------   -------

Noninterest expenses
   Compensation and other personnel costs                                        4,037     5,089     5,973
   Office occupancy and equipment                                                  923       944     1,039
   Federal insurance of accounts                                                   772       780       774
   SAIF premium assessment                                                          --        --     2,230
   Data processing                                                                 677       788       940
   Advertising                                                                     250       325       328
   Net loss on foreclosed real estate                                               14        11         2
   Other                                                                           823     1,147     1,283
                                                                               -------   -------   -------

          Total noninterest expense                                              7,496     9,084    12,569
                                                                               -------   -------   -------

          Income before income tax expense                                       7,397    10,186     8,503
Income tax expense                                                               2,694     3,712     3,040
                                                                               -------   -------   -------

          Net income                                                           $ 4,703   $ 6,474   $ 5,463
                                                                               =======   =======   =======

Primary earnings per share                                                     $   .79*  $  1.11*  $  1.06
Fully diluted earnings per share                                               $   .79*  $  1.11*  $  1.05


</TABLE>

* Restated to reflect two-for-one stock split paid June 5, 1996

See notes to consolidated financial statements.

                                       20
<PAGE>






                       FFVA FINANCIAL CORPORATION AND SUBSIDIARY
                         Consolidated Statements of Cash Flows

                                                                          Page 1
<TABLE>
<CAPTION>


                                                                                      Year Ended December 31
                                                                              ----------------------------------
                                                                                 1994        1995         1996
                                                                              --------    --------     ---------
                                                                                      (Dollars in thousands)
Operating activities
<S>                                                                            <C>         <C>         <C>     
   Net income                                                                  $  4,703    $  6,474    $  5,463
   Adjustments to reconcile net income to net cash provided by
      operating activities
         Provision for credit losses                                                600         255          60
         (Gain) loss on disposition of equipment                                      3           9          (1)
         Provision for depreciation and amortization                                381         450         604
         Amortization of premium on sale of loans                                    41          26          23
         Deferred income taxes                                                       89         142         130
         Realized investment security gains, net                                    (18)       (209)       (251)
         Loss on sale of foreclosed real estate                                      --           9           2
         (Increase) decrease in interest receivable                                (874)       (563)         38
         (Increase) decrease in other assets                                      2,806        (840)        139
         Increase (decrease) in other liabilities                                  (166)        778         (59)
                                                                                -------     -------     ------- 

          Net cash provided by operating activities                               7,565       6,531       6,148
                                                                                -------     -------     ------- 

Investing activities
   Proceeds from maturities of investment securities, held to maturity            7,063      16,316       7,097
   Purchases of investment securities, held to maturity, and FHLB stock         (33,321)    (26,932)    (10,266)
   Proceeds from sales of investment securities, available for sale              10,938      21,301      22,698
   Purchases of investment securities, available for sale                       (17,564)        (65)     (9,842)
   Proceeds from collections on mortgage-backed securities, held to maturity     13,531       6,570       6,263
   Purchase of mortgage-backed securities, held to maturity                     (30,263)    (19,766)    (16,887)
   Proceeds from sales of and collections on mortgage-backed
      securities, available for sale                                              2,275       4,149      23,555
   Purchases of mortgage-backed securities, available for sale                  (11,749)    (37,622)    (29,657)
   Net increase in loans receivable                                              (7,704)    (22,964)    (30,396)
   Purchases of premises and equipment                                             (479)     (1,352)     (1,101)
   Purchases of foreclosed real estate                                             (168)       (120)       (212)
   Proceeds from sales of foreclosed real estate                                    483         196          56
   Proceeds from sales of equipment                                                  --         161          --
   Payment of branch acquisition premiums (goodwill)                                 --      (1,724)         --
                                                                                -------     -------     ------- 

          Net cash used by investing activities                                 (66,958)    (61,852)    (38,692)
                                                                                -------     -------     ------- 

</TABLE>



                                   (continued)

                                       21
<PAGE>






                       FFVA FINANCIAL CORPORATION AND SUBSIDIARY
                         Consolidated Statements of Cash Flows

                                                                        Page 2

<TABLE>
<CAPTION>


                                                                                  Year Ended December 31
                                                                            --------------------------------
                                                                              1994        1995         1996
                                                                            --------    --------     -------
                                                                                  (Dollars in thousands)
Financing activities
<S>                                                                         <C>         <C>         <C>     
   Net increase in deposit accounts                                         $  1,280    $ 19,068    $ 19,460
   Acquisition of deposits                                                        --      21,651          --
   Proceeds from advances and other borrowed money                            15,589      36,880      74,980
   Repayments of advances and other borrowed money                           (16,839)    (18,880)    (44,230)
   Proceeds from sale of stock                                                61,076          --          --
   Purchase of stock by ESOP                                                  (3,149)         --          --
   Allocation of ESOP shares                                                     430         460         690
   Repurchase of common stock                                                     --      (8,520)    (17,986)
   Purchase MSBP shares                                                           --      (2,276)         --
   Payment of cash dividends                                                      --      (1,766)     (1,903)
   Allocation of MSBP shares                                                      --          --         453
   Proceeds from exercise of options                                              --          --          31
                                                                             -------    --------    --------

          Net cash provided by financing activities                           58,387      46,617      31,495
                                                                             -------    --------    --------

          Decrease in cash and cash equivalents                               (1,006)     (8,704)     (1,049)

Cash and cash equivalents at beginning of year                                17,393      16,387       7,683
                                                                             -------    --------    --------

Cash and cash equivalents at end of year                                    $ 16,387    $  7,683    $  6,634
                                                                            ========    ========    ========



Supplemental disclosures
   Gross unrealized gain (loss) on securities, available for sale            $(2,095)   $  2,376    $  1,861
   Deferred income tax                                                           775        (868)       (679)
                                                                             -------    --------    --------

          Net unrealized gain (loss) on securities, available for sale       $(1,320)   $  1,508    $  1,182
                                                                             =======    ========    ========



   Cash paid for:
      Interest on deposits and borrowed funds                               $ 14,828    $  19,231   $ 21,056
      Income taxes                                                             2,797        3,514      2,942



</TABLE>


See notes to consolidated financial statements.

                                       22
<PAGE>






                    FFVA FINANCIAL CORPORATION AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                        December 31, 1994, 1995 and 1996
       (Columnar dollars in notes are in thousands, except per-share data)


FFVA Financial  Corporation (the "Parent" or  "Corporation") is a unitary thrift
holding  company whose  principal asset is its  wholly-owned  subsidiary,  First
Federal Savings Bank of Lynchburg (the "Bank" or "First Federal"). First Federal
is a federally  chartered  savings bank,  organized under the United States Home
Owner's  Loan  Act.  The  Bank  has five  locations  in the  City of  Lynchburg,
Virginia,  and locations at Altavista,  Farmville,  Keysville,  Madison Heights,
South Boston (2) and South Hill,  Virginia.  In these  financial  statements the
consolidated group is referred to collectively as the "Company."

The Office of Thrift Supervision  ("OTS") is the primary regulator for federally
chartered savings  associations,  as well as savings and loan holding companies.
The Federal  Deposit  Insurance  Corporation  ("FDIC")  is the  federal  deposit
insurance  administrator for both banks and savings  associations.  The FDIC has
specified  authority to prescribe  and enforce such  regulations  and issue such
orders  as it deems  necessary  to  prevent  actions  or  practices  by  savings
associations  that pose a serious  threat to the Savings  Association  Insurance
Fund ("SAIF").

The accounting  and reporting  policies of the Company and the Bank conform with
generally  accepted  accounting  principles  ("GAAP").  A brief  description  of
significant accounting policies is presented below.


Note 1 - Summary of significant accounting policies

Principles of consolidation

The  consolidated  financial  statements  include the accounts of FFVA Financial
Corporation  and its  wholly-owned  subsidiary,  First  Federal  Savings Bank of
Lynchburg.  All  material  intercompany  accounts  and  transactions  have  been
eliminated  in the  consolidation.  Prior year  amounts  are  reclassified  when
necessary to conform with current year classifications.

Estimates

The  preparation  of  financial  statements  in  conformity  with GAAP  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial  statements and the reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those estimates.

Cash and cash equivalents

For purposes of the statements of cash flows,  the Company  considers all highly
liquid debt instruments with maturities of three months or less, when purchased,
to be cash  equivalents.  Cash  and cash  equivalents  for the  years  presented
consisted  of cash on hand,  funds  due  from  banks,  and  federal  funds  sold
(overnight deposits).

                                       23
<PAGE>






                   Notes to Consolidated Financial Statements


Note 1 - Summary of significant accounting policies (continued)

Debt and equity securities

The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards  No.  115,  Accounting  for  Certain  Investments  in Debt and  Equity
Securities  (SFAS  115),  as of  December  31,  1993.  SFAS  115  requires  that
securities be designated in one of three categories; held to maturity, available
for sale,  or trading.  On December 13, 1995,  the Bank  transferred  a total of
$57,700,000 investment and mortgage-backed  securities from the held to maturity
category to the  available  for sale  category in  accordance  with the one-time
reclassification  granted  by the  Financial  Accounting  Standards  Board  in a
special report concerning the implementation of SFAS 115 (see Notes 3 and 4).

The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards No. 119,  Disclosure About Derivative  Financial  Instruments and Fair
Value of  Financial  Instruments  (SFAS  119),  as of January 1, 1995.  SFAS 119
requires  information  about all  derivative  financial  instruments,  including
separate  disclosures for instruments held or issued for trading and non-trading
purposes.  In addition,  certain  amendments have been made to SFAS 105 and SFAS
107 relating to additional  disclosures for derivative financial instruments and
the fair value of financial instruments.

Investment securities, held to maturity

Investment  securities,  held to maturity,  are stated at cost, and adjusted for
amortization of premium and accretion of discount using the interest method over
the terms of the  securities.  This  category of  securities  is not adjusted to
market value as management has the ability and maintains the positive  intent to
hold these securities to maturity.

Mortgage-backed and related securities, held to maturity

Mortgage-backed securities, held to maturity,  represent participating interests
in pools of 5 to 30-year  first-mortgage  loans  originated  and serviced by the
issuers of the  securities.  These  securities  are purchased  with the positive
intent and  ability of being held to their  maturity  and are  carried at unpaid
principal  balances,  adjusted for unamortized  premiums and unearned discounts.
Premiums  and  discounts  are  amortized  using  the  interest  method  over the
remaining period to contractual maturity, adjusted for prepayments.

Securities, available for sale

Securities  classified  as  available  for sale consist of U.S.  Government  and
agency securities,  corporate  obligations,  and mortgage-backed  securities and
other related mortgage-backed  products.  Securities classified as available for
sale are carried at their  current  market  value.  The  difference  between the
amortized  cost and  current  market  value,  net of  deferred  income  tax,  is
reflected  as a component  of equity  capital and is  designated  as  unrealized
holding gain/loss on securities available for sale.

Investment securities, restricted

Due to the nature of, and  restrictions  placed upon the Company's  common stock
investment in the Federal Home Loan Bank of Atlanta,  these securities have been
classified  as  restricted   equity   securities   and  carried  at  cost  which
approximates  market.  These  restricted  securities  are  not  subject  to  the
investment security classifications of SFAS 115.

                                       24
<PAGE>






                   Notes to Consolidated Financial Statements


Note 1 - Summary of significant accounting policies (continued)

Loans and allowance for credit losses

The  allowance  for  credit  losses  is  maintained  at a  level  considered  by
management to be adequate to absorb future loan losses currently inherent in the
loan  portfolio.  Management's  assessment  of the adequacy of the  allowance is
based upon type and  volume of the loan  portfolio,  past loan loss  experience,
existing and anticipated  economic  conditions,  and other factors which deserve
current recognition in estimating future loan losses. Additions to the allowance
are charged to operations. Loans are charged to the allowance account, partially
or wholly,  at the time management  determines  collectibility  is not probable.
Recoveries  on  previously  charged  off loans  are  credited  to the  allowance
account.  Management's assessment of the adequacy of the allowance is subject to
evaluation and adjustment by the Company's regulators.

Effective January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 114 (SFAS 114),  Accounting by Creditors for  Impairment of a Loan
(as amended by SFAS No. 118,  Accounting by Creditors for  Impairment of a Loan-
Income Recognition and Disclosures). The effect of adopting these new accounting
standards was  immaterial to the operating  results of the Company for the years
ended December 31, 1995 and 1996.

Under SFAS 114, a loan is considered to be impaired when it is probable that the
Company will be unable to collect all principal and interest  amounts  according
to the contractual terms of the loan agreement.  The allowance for credit losses
related to loans  identified as impaired is primarily based on the excess of the
loan's  current  outstanding  principal  balance over the estimated  fair market
value of the related  collateral.  For a loan that is not  collateral-dependent,
the  allowance  is  recorded  at the amount by which the  outstanding  principal
balance  exceeds the current best  estimate of the future cash flows on the loan
discounted at the loan's original  effective  interest rate. Prior to January 1,
1995,  the allowance for credit losses for all loans which would have  qualified
as impaired  under the new  accounting  standards was  primarily  based upon the
estimated fair market value of the related collateral.

For impaired  loans that are on nonaccrual  status,  cash payments  received are
generally applied to reduce the outstanding principal balance. However, all or a
portion of a cash payment  received on a nonaccrual  loan may be  recognized  as
interest income to the extent allowed by the loan contract,  assuming management
expects to fully collect the remaining principal balance on the loan.

Foreclosed real estate

Foreclosed  real estate  consists of property  acquired in  settlement of loans,
whether  through actual  foreclosure or  in-substance  foreclosure on delinquent
loans.  Such property is stated initially at the lower of cost or fair value and
is  subsequently  maintained  at the lower of cost or fair value less  estimated
cost to sell.

Property, equipment and depreciation

The various  classes of property are stated at cost and are  depreciated  by the
straight-line method over estimated useful lives of 20 to 40 years for buildings
and 3.5 to 10 years for  furniture and  equipment.  Leasehold  improvements  are
capitalized and amortized by the straight-line  method over the shorter of their
estimated  useful  lives or the terms of the  leases.  Repairs  are  expensed as
incurred. The cost and accumulated  depreciation of property are eliminated from
the accounts upon disposal of the  property,  and any resulting  gain or loss is
included in the determination of net income.

                                       25
<PAGE>






                   Notes to Consolidated Financial Statements


Note 1 - Summary of significant accounting policies (continued)

Income taxes

Deferred  income taxes are  recognized  for the tax  consequences  of "temporary
differences" by applying enacted  statutory tax rates applicable to future years
to  differences  between the financial  statement  carrying  amounts and the tax
bases of existing  assets and  liabilities.  The effect of a change in tax rates
upon  deferred  taxes is  recognized  in income in the period that  includes the
enactment date.

Prior to 1996,  savings  banks  that met  certain  definitional  tests and other
conditions  prescribed  by  the  Internal  Revenue  Code  were  allowed,  within
limitations,  to deduct from taxable  income an allowance for bad debts based on
actual  loss  experience,  a  percentage  of taxable  income  (8%)  before  such
deduction,  or an amount based on a percentage of eligible loans. The cumulative
bad debt  reserve,  upon  which no  taxes  have  been  paid,  was  approximately
$6,330,000 as of December 31, 1996.

As a result of 1996 tax  legislation,  the Company will compute its tax bad debt
deduction by use of the actual charge-off  method,  for tax years beginning with
1996.  According  to the  legislation,  "applicable  excess  reserves"  must  be
recaptured as taxable  income over five years  beginning  with fiscal year 1997.
Thrifts can delay those payments by two years if they meet a residential lending
requirement.  The  amount to be  recaptured  is the  excess  of the  accumulated
reserves  since  1987 over the amount  allowed  by use of the actual  charge-off
method for those years.  Since the Bank has provided deferred taxes on those bad
debt  reserves  accumulated  since 1987,  management  does not believe  that the
legislation will have a material effect on the Company's financial statements.

Loan origination fees, costs, discounts and premiums

Loan origination and commitment fees and certain direct loan  origination  costs
are deferred. Upon the expiration of unfunded commitments,  the related fees are
recognized  in income as loan fees.  Loan  origination  fees on loans and funded
commitments and their related direct costs are amortized into income on loans as
yield  adjustments  over  the  contractual  life  of  related  loans  using  the
level-yield method.

Discounts  and premiums on loans  purchased  are  recognized as income using the
level-yield method over the average life of the loan.

Sales of foreclosed real estate

If foreclosed  real estate is sold on financing  terms more  favorable  than the
prevailing market terms for loans with similar collateral, a loss is imputed and
recognized in the financial statements for the year of the sale.

Advertising

The Company expenses  advertising costs as incurred.  Such expenses are shown in
the consolidated  statements of income; no amounts of advertising are carried as
assets.

                                       26
<PAGE>






                   Notes to Consolidated Financial Statements


Note 1 - Summary of significant accounting policies (continued)

Earnings per share

Earnings  per share of common  stock for the years ended  December  31, 1995 and
1996 have been determined by dividing the net income for the twelve-month period
by the  calculated  weighted-average  number of common  stock and  common  stock
equivalents. The December 31, 1994 calculation was computed as if the conversion
from mutual  ownership to stock  ownership  had occurred on the first day of the
fiscal year rather than on October 12,  1994.  Shares  acquired by the  employee
stock  ownership  plans  (ESOP)  are  accounted  for in  accordance  with  AICPA
Statement of Position 93-6 and are not considered in the weighted-average shares
outstanding  until the shares have been earned by the employees and/or committed
to be  released.  The  weighted-average  number of common and common  equivalent
shares outstanding for the periods indicated are as follows:

                                                   Primary   Fully Diluted
                                                    Shares      Shares
                                                  ---------  -------------

      October 12, 1994 - December 31, 1994        5,994,038*   5,994,038*
      January 1, 1995 - December 31, 1995         5,864,284*   5,864,284*
      January 1, 1996 - December 31, 1996         5,136,962    5,220,295

*Restated to reflect two-for-one stock split paid June 5, 1996

Conversion to stock ownership

On October 12, 1994, the  Corporation was formed to be the parent company of the
Bank.  Net  proceeds  from the sale of the  Corporation's  common  stock,  after
deducting  conversion expenses and underwriters'  discounts of $1,960,000,  were
$61,076,640 and are reflected as common stock and additional  paid-in capital in
the accompanying consolidated statements of financial condition (see Note 14).

As part of the  conversion  to stock form,  the  Company  formed an ESOP for the
eligible employees. The ESOP purchased common stock of the Company issued in the
conversion.  The purchase was funded by a loan from the Company.  In  accordance
with generally accepted  accounting  principles,  the unpaid balance of the ESOP
loan has been eliminated from the Company's consolidated statements of financial
condition. Stockholders' equity has been reduced by the aggregate purchase price
of the  shares  owned  by the  ESOP  net of  shares  that  have  been  released.
Contributions  to the ESOP by the  Company  are made to fund the  principal  and
interest  payments on the debt of the ESOP.  As of December  31,  1996,  114,934
shares had been released and 200,000 shares remain unallocated.

Impact of new accounting standards

In  April  1995,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed Of (SFAS 121). This statement  established standards for recognizing
and  measuring  the  impairment  of  long-lived  assets,   certain  identifiable
intangibles,  and  goodwill,  when an entity is unable to recover  the  carrying
amount of those assets.  This  statement  was  effective for the year  beginning
January  1,  1996.  SFAS  121 has not had a  material  effect  on the  Company's
financial statements.

                                       27
<PAGE>






                   Notes to Consolidated Financial Statements


Note 1 - Summary of significant accounting policies (continued)

In May 1995,  the FASB issued  Accounting  for Mortgage  Servicing  Rights (SFAS
122). This statement amended  Accounting for Certain Mortgage Banking Activities
(SFAS 65), to require that a mortgage banking  enterprise  recognize as separate
assets  rights to service  mortgage  loans for others  however  those  servicing
rights are acquired.  This statement requires that a mortgage banking enterprise
assess its capitalized  mortgage  servicing  rights for impairment  based on the
fair value of those rights.  This statement was effective for the year beginning
January  1,  1996.  SFAS  122 has not had a  material  effect  on the  Company's
financial statements.

In October 1995, the FASB issued Accounting for Stock-Based  Compensation  (SFAS
123),  which became  effective for the Company  beginning  January 1, 1996. This
statement  required  increased  disclosure of compensation  expense arising from
both fixed and performance stock compensation plans. Such expense is measured as
the fair  value of the award at the date it is granted  using an  option-pricing
model  that takes into  account  the  exercise  price and  expected  volatility,
expected dividends on the stock and the expected risk-free rate of return during
the term of the option.  The  compensation  cost is recognized  over the service
period,  usually the period from the grant date to the  vesting  date.  SFAS 123
encourages,  rather than requires, companies to adopt a new method that accounts
for stock  compensation  awards based on their  estimated fair value at the date
they are granted. Companies are permitted, however, to continue accounting under
Accounting  Principles  Board ("APB") Opinion No. 25. The Company has elected to
continue to apply APB Opinion No. 25 in their  financial  statements.  Pro forma
net  income  and  earnings  per  share  are  presented  in  accordance  with the
requirements of SFAS 123 (see Note 15).

In June 1996, the Financial  Accounting  Standards Board issued its Statement of
Financial Accounting Standards No. 125 (SFAS 125),  Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. This Statement
provides  accounting  and  reporting  standards  for  transfers and servicing of
financial  assets  and  extinguishments  of  liabilities.  After a  transfer  of
financial  assets,  an entity  recognizes the financial and servicing  assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished. In
addition,  a transfer of  financial  assets in which the  transferor  surrenders
control  over  those  assets  is  accounted  for as a sale  to the  extent  that
consideration  other  than  beneficial  interest  in the  transferred  assets is
received in  exchange.  SFAS 125 is effective  for  transfers  and  servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996,  and is to be  applied  prospectively.  Management  does  not  expect  the
application  of this  pronouncement  to have a material  effect on the financial
statements of the Company.


Note 2 - Interest-earning deposits

Cash  and  cash  equivalents  included   interest-earning   federal  funds  sold
(overnight  deposits) totaling $4,413,000 at December 31, 1995 and $1,270,000 at
December 31, 1996.

                                       28
<PAGE>






                   Notes to Consolidated Financial Statements


Note 3 - Investment securities

Investments consisted of U.S. Government and agency securities,  corporate,  and
other securities as follows:

<TABLE>
<CAPTION>

                                                          December 31, 1995 
                                               -----------------------------------------
                                                          Gross Unrealized  
                                               Amortized  ----------------   Estimated
                                                Costs     Gains    Losses   Market Value
                                               ---------  -----    -------  ------------  
Held to maturity                                                            
<S>                                            <C>       <C>       <C>        <C>    
   U.S. Government and agency obligations      $31,482   $   746   $    19    $32,209
   Other asset-backed securities                 1,832        13         9      1,836
                                               -------   -------   -------    -------
                                                                            
                                               $33,314   $   759   $    28    $34,045
                                               =======   =======   =======    =======
                                                                            
Available for sale                                                          
   U.S. Government and agency obligations      $10,996   $   308   $    16    $11,288
   Corporate obligations                        20,618       225        53     20,790
   FHLMC preferred stock and other corporate                                
      equity securities                          2,598        48        --      2,646
                                               -------   -------   -------    -------
                                                                            
                                               $34,212   $   581   $    69    $34,724
                                               =======   =======   =======    =======

</TABLE>

<TABLE>
<CAPTION>
                                                                           
                                                       December 31, 1996
                                           ------------------------------------------
                                                       Gross Unrealized   
                                           Amortized   ----------------   Estimated
                                             Costs     Gains    Losses   Market Value
                                           ---------   -----    ------   ------------
Held to maturity
<S>                                         <C>       <C>       <C>        <C>    
   U.S. Government and agency obligations   $35,558   $   315   $   117    $35,756
   Other asset-backed securities                732        10        --        742
                                            -------   -------   -------    -------
                                                                         
                                            $36,290   $   325   $   117    $36,498
                                            =======   =======   =======    =======
                                                                         
Available for sale                                                       
   U.S. Government and agency obligations   $ 5,999   $    64   $   --     $ 6,063
   Corporate obligations                      9,985       126        3      10,108
   FHLMC/FNMA preferred stock and other                                  
      corporate equity securities             5,481        --       --       5,481
                                            -------   -------   -------    -------
                                                                         
                                            $21,465   $   190   $     3    $21,652
                                            =======   =======   =======    =======
</TABLE>

                                       29
<PAGE>






                   Notes to Consolidated Financial Statements


Note 3 - Investment securities (continued)

The amortized cost and estimated market value of the debt securities at December
31,  1996,  are as follows in  thousands.  Expected  maturities  may differ from
contractual  maturities  because  issuers  may  have  the  right  to  call  some
obligations without penalty.
<TABLE>
<CAPTION>

                                                      Held to Maturity          Available for Sale
                                                    ----------------------  --------------------------
                                                    Amortized   Estimated    Amortized      Estimated
                                                      Cost     Market Value     Cost       Market Value
                                                    ---------  ------------   ---------   ------------
                                                              
      <S>                                           <C>          <C>           <C>           <C>    
      Due in one year or less                       $ 8,000      $ 8,118       $ 7,014       $ 7,047
      Due after one year through five years          22,311       22,455         7,974         8,121
      Due after five years                            5,979        5,925           996         1,003
                                                    -------      -------       -------       -------
                                                                                           
                                                     36,290       36,498        15,984        16,171
                                                                                           
      Other equity securities                            --           --         5,481         5,481
                                                    -------      -------       -------       -------
                                                                                          
                                                    $36,290      $36,498       $21,465       $21,652
                                                    =======      =======       =======        =======
</TABLE>



Note 4 - Mortgage-backed securities

The amortized costs and estimated  market values of  mortgage-backed  securities
are summarized as follows:

<TABLE>
<CAPTION>
                                                                           December 31, 1995
                                                               ---------------------------------------------
                                                                            Gross Unrealized     
                                                               Amortized    ----------------     Estimated
                                                                 Costs      Gains     Losses    Market Value
                                                               ----------   -----     ------    ------------

<S>                                                            <C>        <C>        <C>          <C>     
     Mortgage-backed securities, held to maturity              $ 35,946   $    701   $    176     $ 36,471
     Mortgage-backed securities, available for sale              76,980      1,866          2       78,844
                                                               --------   --------   --------     --------
                                                                112,926   $  2,567   $    178     $115,315
                                                               ========   ========   ========     ========
</TABLE>

<TABLE>
<CAPTION>

                                                                                  December 31, 1996
                                                                ---------------------------------------------
                                                                              Gross Unrealized    
                                                                  Amortized   ----------------    Estimated
                                                                   Costs      Gains     Losses   Market Value
                                                                ---------     -----     ------   -------------

<S>                                                              <C>        <C>        <C>         <C>     
     Mortgage-backed securities, held to maturity                $ 46,570   $    484   $    316    $ 46,738
     Mortgage-backed securities, available for sale                83,224      1,756         81      84,899
                                                                 --------   --------   --------    --------

                                                                 $129,794   $  2,240   $    397    $131,637
                                                                 ========   ========   ========    ========
</TABLE>

                                       30
<PAGE>






                      Notes to Consolidated Financial Statements


Note 4 - Mortgage-backed securities (continued)

Gross realized gains and gross  realized  losses on sales of  available-for-sale
securities were as follows:

                                                           1994    1995    1996
                                                           ----    ----    ----
   Gross realized gains
      U.S. Government and agency securities                $ 96   $  215  $ 135
      Mortgage-backed securities                             10       --     99
      Option fees earned                                     --       --     42
                                                           ----   ------  -----
                                                           $106   $  215  $ 276
                                                           ====   ======  =====
   
   Gross realized losses
      U.S. Government and agency securities                $178   $    6  $  25
      Mortgage-backed securities                              3       --     --
      Mutual funds invested in mortgage-backed securities    18       --     --
                                                           ----   ------  -----
   
                                                           $199   $    6  $  25
                                                           ====   ======  =====
   
   Approximate income tax on net gain (loss)               $(34)  $   76  $  90
                                                           ====   ======  =====


Note 5 - Loans receivable

Loans receivable at the end of each year were as follows:

<TABLE>
<CAPTION>


                                                                      December 31
                                                                  -------------------
                                                                    1995      1996
                                                                  --------  ---------
      Mortgage loans:
<S>                                                               <C>       <C>     
         Residential, one to four family                          $220,433  $232,237
         Residential, multi-family                                  15,361    15,226
         Construction                                                9,453    12,554
         Land and land development loans                             2,494     1,939
         Commercial                                                 30,414    35,006
      Other loans:
         Consumer loans                                             19,514    31,097
         Loans to depositors secured by savings                      1,317     1,292
                                                                   -------   -------

                Total                                              298,986   329,351
      Less:
         Undisbursed portion of loans in process                    (3,585)   (3,533)
         Deferred loan fees and costs, net                            (969)     (980)
         Allowance for credit losses                                (3,217)   (3,310)
                                                                   --------  -------

                Total                                             $291,215  $321,528
                                                                   =======   =======
</TABLE>


Residential real estate loans have been pledged under a blanket floating lien to
the Federal Home Loan Bank of Atlanta as collateral  for advances from that bank
(see Note 11).

                                       31
<PAGE>


                      Notes to Consolidated Financial Statements


Note 5 - Loans receivable (continued)

An analysis of the allowance for credit losses is as follows:

                                                 Year Ended December 31
                                               ------------------------
                                                1994     1995     1996
                                               ------  -------   ------

      Balance at beginning of year             $2,576   $3,054   $3,217
      Provision charged to operations             600      255       60
      Loans charged off                          (198)    (154)     (27)
      Recoveries of loans charged off              76       62       60
                                                -----    -----    -----

                Balance at end of year         $ 3,054  $3,217   $3,310
                                                 =====   =====    =====

At December 31, 1995 and 1996,  the Company had no loans that were  specifically
classified  as impaired.  During the year ended  December 31, 1995,  the Company
recognized  as impaired two related loans with an average  aggregate  balance of
approximately $1,095,000. The loans were renegotiated during 1995 to correct the
impairment.


Note 6 - Loan servicing

Mortgage  loans  serviced  for  others  are  not  included  in the  accompanying
statements of financial condition.  The unpaid principal balances of these loans
are summarized as follows:

                                                  December 31
                                           -----------------------
                                            1994     1995     1996
                                           ------   ------   -----

      FHLMC                                $ 8,206  $ 6,961  $ 5,821
      Other investors                           88       86       85
                                            ------   ------   ------

                                           $ 8,294  $ 7,047  $ 5,906
                                            ======   ======   ======

Custodial  escrow  balances  maintained  in connection  with the foregoing  loan
servicing were $65,000 and $57,000 at December 31, 1995 and 1996, respectively.


Note 7 - Foreclosed real estate

Foreclosed  real estate acquired in settlement of loans, at the lower of cost or
fair value, totaled $-0- at December 31, 1995 and $154,000 at December 31, 1996.

The net loss on foreclosed real estate consisted of:

                                                     Year Ended December 31
                                                    ------------------------
                                                     1994     1995     1996
                                                    ------   ------   ------

      Maintenance, utilities, taxes and insurance   $    14  $     2  $   -
      Net loss on sale of foreclosed real estate          -        9      2
                                                     ------   ------   ----

                Net loss                            $    14  $    11  $   2
                                                     ======   ======   ====

                                       32
<PAGE>






                   Notes to Consolidated Financial Statements


Note 8 - Property, equipment and depreciation

Property and equipment were as follows:

                                                            December 31
                                                       ---------------------   
                                                          1995       1996
                                                       ---------   ---------
      Land                                             $   1,474   $ 1,474
      Building                                             4,162     4,586
      Leasehold improvements                                  31        24
      Furniture, fixtures and equipment                    3,128     3,463
      Autos                                                   56        83
                                                        --------   -------

                                                           8,851     9,630
      Less accumulated depreciation                        3,186     3,347
                                                        --------   -------

                Net property and equipment             $   5,665   $ 6,283
                                                        ========   =======


Note 9 - Accrued interest receivable

Accrued interest receivable was as follows:

                                                                December 31
                                                           --------------------
                                                              1995       1996
                                                           ---------  ---------

       Interest on loans                                   $  1,968   $  2,147
       Interest and dividends on investment securities        1,361      1,065
       Interest on mortgage-backed securities                   763        842
                                                            -------    -------

                                                           $  4,092   $  4,054
                                                            =======    =======


Note 10 - Deposits

Savings deposits, summarized by interest rate, were as follows:

                                                           December 31
                                                      ---------------------
                                                         1995       1996
                                                      ----------  ---------
      Negotiable order of withdrawal deposits
         2.25% to 3.50%                               $  76,306   $  76,692
         Non-interest bearing                             6,218       6,790
                                                      ---------   ---------

                Total NOW deposits                       82,524      83,482

      Passbook and statement deposits, 3.00%             33,956      34,520
      Certificates of deposit                           261,495     279,433
                                                      ---------   ---------

                                                      $ 377,975   $ 397,435
                                                      =========   =========

                                       33
<PAGE>






                   Notes to Consolidated Financial Statements


Note 10 - Deposits (continued)

Certain  large  certificates  of  deposit,  including  municipal  deposits,  are
collateralized by mortgage-backed  securities with market values at December 31,
1995 and 1996 of approximately $1,623,000 and $1,424,000, respectively.

The aggregate  amounts of certificates of deposit with minimum  denominations of
$100,000  were  $30,865,000  and  $40,589,000  at  December  31,  1995 and 1996,
respectively.

At December 31, 1996,  scheduled maturities of certificates of deposit by actual
maturity  for  fixed-rate  certificates  and  by the  next  repricing  date  for
variable-rate  certificates  and  the  weighted-average-contract  rates  were as
follows:

                                      Weighted-
           Maturity in               Average Rate             Balance
      -----------------------      ----------------       --------------

         One year or less                5.214%            $   158,156
        One to three years               5.610%                 86,648
       More than three years             6.505%                 34,629
                                                           -----------

                                                           $   279,433
                                                           ===========


Note 11 - Borrowed funds

At December 31, 1996, the Company had  $41,000,000 in outstanding  advances from
the  Federal  Home Loan Bank of Atlanta  (FHLB -  Atlanta)  and  $19,000,000  in
outstanding reverse repurchase agreements.

The following table sets forth certain information  regarding advances and other
borrowings at the dates or for the periods indicated:

<TABLE>
<CAPTION>
                                                                  Year Ended December 31
                                                                  ----------------------
                                                                     1995        1996
                                                                  ---------    ---------

<S>                                                                 <C>        <C>    
Average balance outstanding                                         $ 30,702   $50,236
Maximum amount outstanding at any month-end during the period         43,250    60,000
Balance outstanding at end of period                                  29,250    60,000
Weighted-average interest rate during the period                        6.36%     5.57%
Weighted-average interest rate at the end of period                     5.97%     5.69%

</TABLE>
                                       34
<PAGE>






                   Notes to Consolidated Financial Statements


Note 11 - Borrowed funds (continued)

The  following  table sets forth the  repayment  schedule at December  31, 1996,
which includes interest rates and amounts due by year in thousands:

             Year Due              Interest Rate              Amount
             --------              -------------              ------

               1997                    5.66%               $    56,000
               1998                    5.51%                     2,000
               2000                    6.16%                     2,000
                                                           -----------

                                                           $    60,000
                                                           ===========

Residential real estate loans aggregating $54,667,000 at December 31, 1996, have
been pledged as collateral  for advances from the FHLB - Atlanta under a blanket
floating lien agreement.

The par value of the  mortgage-backed  securities  collateralizing  the  reverse
repurchase agreements was $19.5 million at December 31, 1996.


Note 12 - SAIF premium assessment

Pursuant to the Economic Growth and Paperwork Reduction Act of 1996 (the "Act"),
the FDIC imposed a special  assessment on SAIF members to capitalize the SAIF at
the  designated  reserve level of 1.25% of insured  deposits as of September 30,
1996.  Based on the  Company's  deposits  as of  March  31,  1995,  the date for
measuring the amount of the special assessment  pursuant to the Act, the Company
paid a special  assessment of $2,230,000 on November 27, 1996 to capitalize  the
SAIF.  The FDIC  has  lowered  the  premium  for  deposit  insurance  to a level
necessary to maintain the SAIF at its required reserve level. The Bank's premium
for deposit insurance for 1997 is currently .0648% of assessable deposits.


Note 13 - Income taxes

The provision for income taxes, in thousands, is summarized as follows:

                                                    Year Ended December 31
                                                   -----------------------
                                                    1994    1995     1996
                                                   ------  -------  ------

      Federal                                      $2,379  $3,293   $2,565
      State                                           226     277      345
                                                    -----   -----    -----

                                                    2,605   3,570    2,910

      Deferred tax expense                             89     142      130
                                                    -----   -----    -----

                Total provision for income taxes   $2,694  $3,712   $3,040
                                                    =====   =====    =====

                                       35
<PAGE>






                      Notes to Consolidated Financial Statements


Note 13 - Income taxes (continued)

The provision for income tax expense differs from that computed at the statutory
tax rate as follows:

<TABLE>
<CAPTION>
                                                                         Year Ended December 31
                                                            --------------------------------------------------
                                                                     Amount           Percent of Pretax Income
                                                            ------------------------  ------------------------
                                                             1994     1995     1996    1994    1995     1996
                                                            ------   ------   ------  ------  ------   -------

<S>                                                         <C>      <C>      <C>      <C>     <C>       <C> 
Tax at statutory rate                                       $2,515   $3,463   $2,891   34.0    34.0      34.0
Increase (decrease) in taxes resulting from:
   State income taxes, net of federal tax benefit              149      183      228    2.0     1.8       2.7
   Other                                                        30       66      (79)    .4      .6       (.9)
                                                            ------   ------   ------   ----    ----      ----
            Income tax expense                              $2,694   $3,712   $3,040   36.4    36.4      35.8
                                                            ======   ======   ======   ====    ====      ====
</TABLE>


The significant  components of the net deferred tax (liability) asset are listed
as follows:

<TABLE>
<CAPTION>
                                                                      December 31
                                                                  --------------------
                                                                     1995      1996
                                                                  ---------  ---------
      Components of the deferred tax asset
<S>                                                               <C>       <C>     
         Tax bad debt reserves                                    $    700  $    727
         Deferred income                                               240       150
         Stock bonus plan                                              166       163
                                                                   -------    ------

                                                                     1,106     1,040
      Valuation allowance                                               -          -
                                                                   -------    ------

                Total deferred tax asset                             1,106     1,040
                                                                   -------    ------

      Components of the deferred tax liability
         Accelerated depreciation                                     (230)     (281)
         Loan sale imputed gain                                        (13)       (8)
         Pension expense                                               (33)      (51)
         Unrealized appreciation on securities, available for sale    (868)     (679)
                                                                   --------   -------

                Total deferred tax liability                        (1,144)   (1,019)
                                                                   --------   -------

                Net deferred tax (liability) asset                $    (38) $     21
                                                                   ========   ======
</TABLE>

The Company's  federal income tax returns have been examined by tax  authorities
through 1992.

                                       36
<PAGE>


                   Notes to Consolidated Financial Statements


Note 14 - Restricted retained earnings

In accordance with the current regulations  concerning  conversion from a mutual
to a stock  organization,  the Bank was  required  to  establish  a  liquidation
account equal to its net worth as of the latest statement of financial condition
contained in the final  offering  circular.  Such  liquidation  account is to be
maintained, as of the eligibility record date December 31, 1992, for the benefit
of  depositors  who  continue to maintain  their  deposits in the Bank after the
conversion,  in the event of a complete liquidation of the Bank. If, however, on
any annual closing date of the Bank  subsequent to December 31, 1992, the amount
in any  deposit  account  is less than the  amount in such  deposit  account  on
December 31, 1992, then the interest in the liquidation account relating to such
deposit  account  would be  reduced by the  amount of such  reduction,  and such
interest will cease to exist if such deposit account is closed. The Bank may not
declare or pay a cash  dividend,  or repurchase  any of its capital stock if the
effect  thereof would cause the net worth of the Bank to be reduced below either
the  amount  required  for the  liquidation  account or the  minimum  regulatory
capital requirements.  At December 31, 1996, the unadjusted  liquidation account
totaled $30,017,000, and minimum regulatory capital was $21,846,000.


Note 15 - Retirement plans and employee benefit programs

The  Company  has  a  noncontributory  defined  benefit  pension  plan  covering
substantially  all of its employees.  The benefits are based on years of service
and the employee's  compensation  during the last five years of employment.  The
Company's funding policy is to contribute annually the maximum amount allowed by
law.  Contributions are intended to provide not only for benefits  attributed to
service to date, but also for those expected to be earned in the future.

Net  periodic  pension  cost  for  1994,  1995 and 1996  include  the  following
components based on the actuaries' report in thousands:

<TABLE>
<CAPTION>


                                                           Year Ended December 31
                                                       ------------------------------
                                                         1994       1995      1996
                                                       -------    --------  ---------

<S>                                                    <C>        <C>       <C>     
      Service cost, benefits earned during the period  $    219   $    203  $    245
      Interest cost on projected benefit obligation         305        324       375
      Actual return on plan assets                         (245)      (257)     (327)
      Net amortization and deferral                          58         58        58
                                                         ------    -------    ------

                Net periodic pension cost              $    337   $    328  $    351
                                                         ======    =======    ======
</TABLE>

                                       37
<PAGE>






                   Notes to Consolidated Financial Statements


Note 15 - Retirement plans and employee benefit programs (continued)

The  following  table sets forth the funded  status of the plan and the  amounts
recognized in the Company's statements of financial condition:

<TABLE>
<CAPTION>

                                                                                December 31
                                                                       ----------------------------
                                                                        1994        1995     1996
                                                                       --------    -------  -------
Accumulated benefit obligation including $2,637,000,
<S>                                                                    <C>         <C>      <C>   
   $2,995,000, and $3,489,000 in vested benefits                       $2,747      $3,124   $3,641
Additional benefits due to projected future compensation levels         1,635       1,700    1,921
                                                                       ------      ------   ------

          Projected benefit obligation                                  4,382       4,824    5,562
                                                                       ------      ------   ------

Plan assets at fair value                                               3,452       4,398    5,078*
                                                                       ------      ------   ------

Projected benefit obligation in excess of plan assets                    (930)       (426)    (484)
Unrecognized prior service cost                                           807         742      676
Unrecognized net (gain) loss                                              272        (129)      34
Unrecognized transitional asset                                           (99)        (92)     (84)
                                                                       ------      ------   ------

         Prepaid pension cost                                          $   50      $   95   $  142
                                                                       ======      ======   ======
</TABLE>

* Includes $294,000 of savings deposits in the Bank at December 31, 1996.

Assumptions used in determining the net periodic pension cost were:

                                                         1994    1995    1996
                                                         ----    ----    -----
      Discount rate                                      7.5%     7.5%    7.5%
      Rate of increase in compensation levels            6.0%     6.0%    6.0%
      Expected long-term rate of return on assets        7.5%     7.5%    7.5%

Employee stock ownership plan

The Company has an ESOP  covering all full-time  employees,  over the age of 21,
with at least one year of service.  The ESOP borrowed  funds from the Company to
purchase 314,934 (157,467  pre-split)  shares of the Company's common stock, the
loan being  collateralized  by the common stock.  Contributions  by the Company,
along with dividends received on unallocated  shares, are used to repay the loan
with shares being  released from the  Company's  lien  proportional  to the loan
repayments.  Annually on December 31, the released  shares are  allocated to the
participants  in the  same  proportion  that  their  wages  bear  to  the  total
compensation of all the participants.  A total of 33,304 (16,652  pre-split) and
33,852 shares of the Company's  common stock were released for allocation to the
Plan   Participants   during  the  years  ended  December  31,  1995  and  1996,
respectively.

                                       38
<PAGE>






                   Notes to Consolidated Financial Statements


Note 15 - Retirement plans and employee benefit programs (continued)

The Company accounts for its ESOP in accordance with Statement of Position 93-6.
Accordingly,  the shares  pledged as  collateral  are reported as a reduction of
stockholders' equity in the consolidated  statements of financial condition.  As
shares are released from collateral,  the Company reports  compensation  expense
equal  to the  current  market  price  of the  shares,  and  the  shares  become
outstanding  for earnings per share  computations.  Dividends on allocated  ESOP
shares  are  recorded  as  a  reduction  of  retained  earnings;   dividends  on
unallocated  ESOP shares are recorded as a reduction  of debt.  The total amount
charged to expense for the years ended December 31, 1995 and 1996,  based on SOP
No. 93-6, was $460,000 and $690,000, respectively. The fair value of the 200,000
unearned  ESOP  shares  at  December  31,  1996 was  $4,100,000.  There  were no
commitments to repurchase ESOP shares.

Recognition and retention plan

The  stockholders  approved the  establishment  of a Management Stock Bonus Plan
(MSBP) and Trust (the plan) on April 27,  1995.  The plan  states that the Trust
shall not purchase more than 4% of the  aggregate  shares of common stock issued
by the Company in the mutual-to-stock conversion of the Bank (252,146 post-split
shares).  During  1995,  the Bank  purchased  160,000  post-split  shares of the
Company's  common stock at an average  adjusted  price of $14.25 per share to be
awarded to directors, officers and employees in accordance with the provision of
the plan.  The costs of the shares  held by the plan are  recorded  as  unearned
compensation,  a contra  equity  account,  and are  recognized  as an expense in
accordance  with the vesting  requirements  under the plan.  For the years ended
December 31, 1995 and 1996, the amounts  included in  compensation  expense were
$453,000 and  $628,000,  respectively.  The status of the shares in this plan at
December 31, 1996 is shown as follows:

                                                    Unawarded   Awarded
                                                      Shares     Shares
                                                    ---------   --------

      Total established by plan                      126,073           -
      Granted                                       (123,552)    123,552
      Vested                                               -           -
                                                    --------    --------

               Balance at December 31, 1995           2,521      123,552

      Granted                                             -            -
      Vested                                              -      (24,714)
      Forfeiture                                        838         (838)
      Two-for-one stock split                         3,359       98,000
                                                   --------     --------

                Balance at December 31, 1996          6,718      196,000
                                                   ========     ========

                                       39
<PAGE>






                   Notes to Consolidated Financial Statements


Note 15 - Retirement plans and employee benefit programs (continued)

Stock option plans

The stockholders also approved the establishment of a stock option plan on April
27, 1995 for  directors,  officers and  employees.  The exercise price under the
plan is $12.50 per share,  the fair market price,  adjusted for the stock split,
on the date of the grant. Both non-incentive stock options,  and incentive stock
options may be granted under the plan.  Rights to exercise  options granted vest
at the rate of 20% per year,  beginning on the first anniversary of the grant. A
summary of the stock option activity is as follows:

<TABLE>
<CAPTION>

                                         Available    Options      Vested and
                                         for Grant  Outstanding   Exercisable
                                         ---------  -----------   -----------

<S>                                      <C>          <C>           <C>        
At inception                              315,183          --           --
Granted                                  (308,884)    308,884           --
Vested                                         --          --           --
                                         --------     -------       ------
                                                                   
          Balance at December 31, 1995      6,299     308,884           --
Granted                                        --          --           --
Vested                                         --     (61,777)      61,777
Exercised                                      --          --       (4,333)
Forfeiture                                  2,096      (2,096)          --
Two-for-one stock split                     8,395     245,011       60,777
                                         --------     -------       ------
                                                                   
          Balance at December 31, 1996     16,790     490,022      118,221
                                         ========     =======      =======
</TABLE>


The Company  applies APB Opinion 25 in  accounting  for  employee  stock  option
plans. Accordingly, no compensation cost has been recognized in 1995 and 1996.

Pro forma information regarding net income and earnings per share is required by
SFAS 123,  and has been  determined  as if the  Company  had  accounted  for its
employee stock options under the fair value method of that  Statement.  The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:  risk-free
interest rate of 6.89%; dividend yields of 3.20%;  volatility factor of 27%; and
a weighted-average expected life of the option of 6.76 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  The  Company's  pro
forma information follows:
                                                1995          1996
                                               -------      -------
      Pro forma net income                     $ 5,908      $ 4,865
      Pro forma earnings per share
         Primary                               $  1.01      $   .95
         Fully diluted                         $  1.01      $   .93

                                       40
<PAGE>






                   Notes to Consolidated Financial Statements


Note 16 - Commitments and contingencies

The Company had outstanding commitments to purchase  mortgage-backed  securities
having a face value of  $9,669,000  for  $9,889,000  as of  December  31,  1995.
Additionally,  the Company was contingently  liable for the possible purchase of
$5,000,000 of 7% FHLMC  participations as a result of the sale of a "put" option
expiring in February 1996.

There were no outstanding commitments to purchase or sell securities at December
31, 1996.

The Company is lessee under a ten-year  lease,  effective  January 1991, for its
branch  bank space in River Ridge Mall,  Lynchburg,  Virginia.  Base rent is due
monthly in advance.  Rent may be increased due to increases in real estate taxes
and insurance.  In addition to rent,  monthly charges for the marketing fund and
pro rata  utilities  are  billed  to the  Company.  The  minimum  annual  rental
commitment under the above  noncancelable  lease is $34,200 through December 31,
2000.  Total  rent  expense  in  1994,  1995 and  1996  for all  cancelable  and
non-cancelable leases was $54,000, $55,000 and $59,000, respectively.

The Company is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments consist primarily of commitments to extend credit.  These
instruments  involve,  to varying degrees,  elements of credit risk in excess of
the amount recognized in the statements of financial condition.  The contract or
notional  amounts of those  instruments  reflect the extent of  involvement  the
Company has in particular classes of financial instruments.

The  Company's  exposure  to credit loss in the event of  nonperformance  by the
other party to the  financial  instrument  for  commitments  to extend credit is
represented by the contractual  notional amount of those instruments as follows.
The Company uses the same credit policies in making  commitments and conditional
obligations as it does for on-balance-sheet instruments.

<TABLE>
<CAPTION>
                                                                      Contract or Notional Amount
                                                                      ---------------------------
                                                                               December 31
                                                                      ---------------------------
                                                                             1995       1996
                                                                           ---------  --------
Financial instruments whose contract amounts represent credit risk
<S>                                                                        <C>      <C>  
   Commitments to finance real estate acquisitions and construction        $ 3,818   $ 3,962
   Unfunded lines-of-credit                                                 21,037    19,955
                                                                           -------   -------

                                                                           $24,855   $23,917
                                                                           =======   =======
</TABLE>

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require payment of a fee. Since many of the commitments are expected to be drawn
upon, the total commitment amounts generally represent future cash requirements.
The Company evaluates each customer's credit-worthiness on a case-by-case basis.
The amount of collateral,  if deemed  necessary by the Company upon extension of
credit,  is  based  on  management's  credit  evaluation  of the  counter-party.
Collateral normally consists of real property.

Fixed  rate  loan  commitments  totaled  $3,027,000,  and  adjustable  rate loan
commitments  totaled  $935,000 at December  31,  1996.  All present  outstanding
commitments expire in 90 days or less.

The Company had issued  $1,520,000 and $791,000 in standby  letters of credit as
of  December   31,  1995  and  1996,   respectively;   a  portion  of  which  is
collateralized  by cash on deposit with the Company.  A standby letter of credit
represents  a  potential  liability  of the  Company in the event  that  certain
contractual  obligations  of the Company's  loan  customers are not met, but the
Company does not expect to fund these letters of credit.

                                       41
<PAGE>
  





                   Notes to Consolidated Financial Statements


Note 17 - Financial instruments with off-balance-sheet risk

During 1996, the Company  entered into interest rate swap  agreements  ("swaps")
for purposes of managing its interest rate sensitivity.  The Company  designates
swaps to on-balance-sheet instruments to alter the interest rate characteristics
of such instruments and to modify interest rate  sensitivity.  Swaps involve the
periodic exchange of payments over the life of the agreements.  Amounts received
or paid on swaps are used to manage interest rate  sensitivity.  At December 31,
1996, the Company had two swap agreements  outstanding,  the net effect of which
is to effectively convert $7.0 million of variable rate FHLB advances to a fixed
rate of 5.20% until January 1998 and $8.0 million of variable rate FHLB advances
to a fixed rate of 5.27% until February 1999. Changes in the fair value of swaps
are not reflected in the accompanying  financial statements.  The estimated fair
value of these  instruments  at December  31, 1996 was  $245,000.  There were no
interest rate swaps outstanding at December 31, 1995.

The Company's credit exposure on swaps is limited to the value of the swaps that
have  become  favorable  to the  Company in the event of  nonperformance  by the
counterparties.  The Company does not require collateral from  counterparties on
its existing  agreements.  The Company  actively  monitors the credit ratings of
counterparties and does not anticipate nonperformance by the counterparties with
which it transacts its swaps.


Note 18 - Significant group concentrations of credit risk

The Company grants residential,  commercial,  and installment loans to customers
mainly in the Central and Southside regions of Virginia.  The Company has a loan
portfolio,  consisting  principally  of  residential  mortgage  loans and is not
dependent upon any particular  economic sector although the portfolio as a whole
may be  affected  by general  economic  factors  of the  Central  and  Southside
Virginia regions.

The Company  maintains cash balances at several financial  institutions  located
within its market area.  Accounts at each institution are insured by the Federal
Deposit  Insurance  Corporation up to $100,000.  Uninsured  balances  aggregated
$3,063,000 at December 31, 1995 and $3,342,000 at December 31, 1996. The Company
has  invested  in  bonds  issued  by  major  national  corporations.  Such  bond
investments,  with par values  aggregating  $20,500,000 at December 31, 1995 and
$9,000,000 at December 31, 1996,  have been limited to  $3,000,000  par value in
any one issuer.


Note 19 - Related-party transactions

The  Company  has made  loans in the  ordinary  course of  business  to  various
officers and directors  generally  collateralized  by the individuals'  personal
residences or by savings accounts in the Savings Bank. The aggregate balances of
such loans which exceed $60,000 in aggregate outstanding amount to any executive
officer or director, in thousands, is summarized as follows:

                                                 1995      1996
                                               --------  --------
      Beginning balance                        $    295  $    272
      Additions                                       -         -
      Repayments                                    (23)      (25)
                                               --------- --------

                Ending balance                 $    272  $    247
                                               ========  ========

                                       42
<PAGE>






                   Notes to Consolidated Financial Statements


Note 20 - Reduced income

Loans are placed on  nonaccrual  when a loan is  specifically  determined  to be
impaired or when  principal or interest is delinquent  for 90 days or more.  Any
unpaid  interest  previously  accrued on those  loans is reversed  from  income.
Interest  income  generally is not recognized on specific  impaired loans unless
the likelihood of further loss is remote.  Interest  income on other  nonaccrual
loans is recognized only to the extent of interest payments received.

This activity resulted in lost income shown as follows:

                                                         Year Ended December 31
                                                         ----------------------
                                                           1994  1995    1996
                                                         ------- ----  --------
Interest removed on non-accrued loans or not accrued on
   loans under foreclosure                                $ 23   $151   $ 35
Net interest reserved (recovered) on delinquent loans      (55)   (89)   (92)
                                                          ----   ----   ----

          Reduced (recovered) income                      $(32)  $ 62   $(57)
                                                          ====   ====   ==== 
                                                       

Note 21 - Regulatory capital

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate  certain  mandatory and possibly  additional  discretionary  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bank's  financial   statements.   Under  capital  adequacy  guidelines  and  the
regulatory  framework for prompt corrective  action, the Bank must meet specific
capital  guidelines  that involve  quantitative  measures of the Bank's  assets,
liabilities,  and certain off-balance-sheet items as calculated under regulatory
accounting  practices.  The Bank's capital amounts and  classification  are also
subject to  qualitative  judgments  by the  regulators  about  components,  risk
weightings, and other factors.

As of December 31, 1996, the most recent  notification from the Office of Thrift
Supervision  categorized  the Bank as "well  capitalized"  under the  regulatory
framework for prompt corrective action.  There are no conditions or events since
that  notification  that  management  believes  have  changed the  institution's
category.

The Bank is required by the Office of Thrift  Supervision to maintain capital at
least sufficient to meet three requirements: tangible capital, core capital, and
risk-based capital.  Management has determined that the Bank's capital meets and
exceeds all three capital  requirements shown as follows as of December 31, 1995
and 1996.

                                       43
<PAGE>






                   Notes to Consolidated Financial Statements


Note 21 - Regulatory capital (continued)

Tangible and core capital  levels are shown as a  percentage  of adjusted  total
assets.  Risk-based  capital  levels are shown as a percentage of  risk-weighted
assets.

<TABLE>
<CAPTION>
                                                                          First Federal Savings Bank
                                                  --------------------------------------------------------------------------
                                                      Tangible Capital            Core Capital          Risk-Based Capital
                                                  ------------------------   --------------------    -----------------------
December 31, 1995
<S>                                                <C>              <C>      <C>          <C>        <C>             <C>
   GAAP Capital                                    $   69,518                $69,518                 $ 69,518
   Goodwill and other intangible assets                (1,728)                (1,728)                  (1,728)
   Qualifying general loan allowance                       --                     --                    3,193
                                                   ----------                -------                 --------

          Regulatory capital computed                  67,790       13.66%    67,790      13.66%       70,983        26.76%

   Minimum capital requirement                          7,444        1.50     14,888       3.00        21,222         8.00
                                                   ----------       -----    -------      -----      --------        -----

          Regulatory capital excess                    60,346       12.16%   $52,902      10.66%     $ 49,761        18.76%
                                                   ==========       =====    =======      =====      ========        =====
</TABLE>

<TABLE>
<CAPTION>
                                                                          First Federal Savings Bank
                                                  --------------------------------------------------------------------------
                                                      Tangible Capital            Core Capital          Risk-Based Capital
                                                  ------------------------   --------------------    -----------------------

December 31, 1996
<S>                                                  <C>             <C>     <C>           <C>       <C>             <C>
   GAAP Capital                                      $ 55,763                $ 55,763                $ 55,763
   Unrealized gain on securities,
      available for sale                               (1,182)                 (1,182)                 (1,182)
   Goodwill and other intangible assets                (1,608)                 (1,608)                 (1,608)
   Qualifying general loan allowance                       --                      --                   3,281
                                                     --------                --------                --------

          Regulatory capital computed                  52,973        9.95%     52,973      9.95%       56,254        20.60%

   Minimum capital requirement                          7,984        1.50      15,967      3.00        21,846         8.00
                                                     --------      ------    --------     -----      --------        -----

          Regulatory capital excess                    44,989        8.45%   $ 37,006      6.95%     $ 34,408        12.60%
                                                     ========      ======    ========     =====      ========        =====

</TABLE>

Note 22 - Disclosures about fair value of financial instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.

Cash and short-term investments

For cash  and  short-term  investments,  the  carrying  amount  is a  reasonable
estimate of fair value.

Investment securities and mortgage-backed securities

The fair  value of  investment  securities  and  mortgage-backed  securities  is
determined by reference to exchange or dealer- quoted market prices. If a quoted
market  price is not  available,  fair value is estimated  using  quoted  market
prices for similar securities.

                                       44
<PAGE>


                   Notes to Consolidated Financial Statements


Note 22 - Disclosures about fair value of financial instruments (continued)

Loans receivable

For certain homogeneous  categories of loans, such as some residential mortgages
and consumer  loans,  fair value is estimated using the quoted market prices for
securities   backed  by  similar  loans,   adjusted  for   differences  in  loan
characteristics.  The  fair  value of other  types  of  loans  is  estimated  by
discounting the future cash flows using the current rates at which similar loans
would  be made  to  borrowers  with  similar  credit  ratings  and for the  same
remaining maturities.

Deposit liabilities

The fair value of demand deposits,  savings  accounts,  and certain money market
deposits is the amount  payable on demand at the reporting  date. The fair value
of fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.

Long-term debt

Rates  currently  available  to the  Company  for debt  with  similar  terms and
remaining maturities are used to estimate fair value of existing debt.

Commitments  to  extend  credit,   standby  letters  of  credit,  and  financial
guarantees written

The fair value of commitments is estimated  using the fees currently  charged to
enter into similar  agreements,  taking into account the remaining  terms of the
agreements  and  the  present  credit-worthiness  of  the  counter-parties.  For
fixed-rate loan  commitments,  fair value also considers the difference  between
current  levels of interest  rates and the  committed  rates.  The fair value of
guarantees and letters of credit is based on fees currently  charged for similar
agreements or on the estimated  cost to terminate  them or otherwise  settle the
obligations with the counter-parties at the reporting date.

The estimated fair values of the Company's financial instruments are as follows:

<TABLE>
<CAPTION>

                                              December 31, 1995    December 31, 1996
                                             -------------------   ------------------
                                              Carrying    Fair      Carrying   Fair
                                               Amount     Value     Amount     Value
                                             ----------  -------   ---------  -------
      Financial assets
<S>                                          <C>        <C>        <C>       <C>     
         Cash and cash equivalents           $   7,683  $  7,683   $  6,634  $  6,634
         Investment securities                  71,113    71,844     61,210    61,418
         Mortgage-backed securities            114,790   115,315    131,469   131,637
         Loans receivable, net                 291,215   298,056    321,528   326,366

      Financial liabilities
         Deposits                              377,975   381,270    397,435   397,640
         Advances from Federal Home Loan Bank
            and other borrowed funds            29,250    29,383     60,000    60,017

      Unrecognized financial instruments
         Commitments to purchase securities      9,889     9,959          -         -
         Standby letters of credit issued        1,520     1,520        791       791
         Interest rate swaps                         -         -          -       245

</TABLE>
                                       45
<PAGE>






                   Notes to Consolidated Financial Statements


Note 23 - Condensed parent company information

The following shows FFVA Financial  Corporation's  condensed financial condition
as of and for the years ended December 31, 1995 and 1996 and operations and cash
flows for the years 1994, 1995 and 1996:

<TABLE>
<CAPTION>

                                    Balance Sheets

                                                                     1995      1996
                                                                     ----      ----
      Assets
<S>                                                               <C>       <C>      
         Cash                                                     $   1,084 $     443
         Investments                                                     65       490
         Investment in bank subsidiary                               66,411    52,037
         Loan to bank subsidiary's ESOP                               2,339     2,000
         Note receivable from bank subsidiary                        18,000    19,000
         Other assets                                                   160       511
                                                                   --------   -------

                Total assets                                      $  88,059 $  74,481
                                                                   ========   =======

      Liabilities and stockholders' equity
         Liabilities                                              $       - $       -
         Stockholders' equity                                        88,059    74,481
                                                                   --------   -------

                Total liabilities and stockholders' equity        $  88,059 $  74,481
                                                                   ========   =======
</TABLE>


                                 Statements of Income
<TABLE>
<CAPTION>

                                                                 1994       1995      1996
                                                                ------     ------   --------

<S>                                                             <C>        <C>      <C>     
Dividends from bank subsidiary                                  $   --     $   --   $ 20,000
Interest income                                                    519      1,750        803
Other income                                                        --         --          6
                                                                ------     ------   --------

                                                                   519      1,750     20,809
Noninterest expense                                                  5        141        163
                                                                ------     ------   --------

          Income before income tax expense and equity
             in undistributed earnings of subsidiary               514      1,609     20,646

Income tax expense                                                 194        612        246
                                                                ------     ------   --------

          Income before equity in undistributed earnings of
             subsidiary                                            320        997     20,400

Equity in undistributed earnings of subsidiary                   4,383      5,477      5,063
Distribution of subsidiary retained earnings                        --         --    (20,000)
                                                                ------     ------   --------

          Net income                                            $4,703     $6,474   $  5,463
                                                                ======     ======   ========
</TABLE>

                                       46
<PAGE>






                   Notes to Consolidated Financial Statements


Note 23 - Condensed parent company information (continued)


                            Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                         1994        1995        1996
                                                                      --------    --------    --------
Cash flows from operating activities
<S>                                                                   <C>         <C>         <C>     
   Net income                                                         $  4,703    $  6,474    $  5,463
   Adjustments to reconcile net income to net cash provided by
      operating activities
         Equity in undistributed earnings of subsidiary                 (4,383)     (5,477)     (5,063)
         Dividend from subsidiary                                           --          --      20,000
         Increase (decrease) in other liabilities                           73         (73)         --
         Increase in other assets                                           --         (33)        (97)
                                                                      --------    --------    --------

          Net cash provided by operations                                  393         891      20,303
                                                                      --------    --------    --------
Cash flows from investing activities
   Net (increase) decrease in loans receivable                         (26,570)      9,333        (661)
   Purchase of subsidiary stock                                        (30,538)         --          --
   Purchase of investment securities                                        --         (65)       (425)
                                                                      --------    --------    --------
          Net cash provided by (used in) investing activities          (57,108)      9,268      (1,086)
                                                                      --------    --------    --------

Cash flows from financing activities
   Proceeds from exercise of stock options                                  --          --          31
   Proceeds from sale of stock                                          57,926          --          --
   Repurchase of common stock                                               --      (8,520)    (17,986)
   Payment of cash dividends                                                --      (1,766)     (1,903)
                                                                      --------    --------    --------
   Net cash provided by (used in) financing activities                  57,926     (10,286)    (19,858)
                                                                      --------    --------    --------
   Net increase (decrease) in cash and cash equivalents                  1,211        (127)       (641)

Cash and cash equivalents at beginning of year                              --       1,211       1,084
                                                                      --------    --------    --------

Cash and cash equivalents at end of year                              $  1,211    $  1,084    $    443
                                                                      ========    ========    ========
</TABLE>

                                       47
<PAGE>






                   Notes to Consolidated Financial Statements


Note 24 - Quarterly condensed consolidated statements of income - unaudited

<TABLE>
<CAPTION>
                                                                                     1995
                                                                     -----------------------------------
                                                                      First    Second    Third   Fourth
                                                                     Quarter   Quarter  Quarter  Quarter
                                                                     -------   -------  -------  -------

<S>                                                                  <C>      <C>      <C>      <C>    
Interest income                                                      $ 8,608  $ 9,421  $ 9,724  $ 9,930
Interest expense                                                       4,103    4,808    5,085    5,216
                                                                     -------  -------  -------  -------

          Net interest income                                          4,505    4,613    4,639    4,714
Provision for credit losses                                               75       75       75       30
                                                                     -------  -------  -------  -------

          Net interest income after provision for credit losses        4,430    4,538    4,564    4,684
Net gain on sale of investments                                           46       52      100       11
Noninterest income                                                       184      173      240      248
Noninterest expense                                                    2,093    2,220    2,391    2,380
                                                                     -------  -------  -------  -------

          Income before income tax expense                             2,567    2,543    2,513    2,563
Income tax expense                                                       935      940      923      914
                                                                     -------  -------  -------  -------

          Net income                                                 $ 1,632  $ 1,603  $ 1,590    1,649
                                                                     =======  =======  =======    =====

Earnings per share, primary                                             .270*    .270*    .280*   .300*
Earnings per share, fully diluted                                       .270*    .270*    .280*   .300*
Dividends paid per share                                                .075*    .075*    .075*   .075*

</TABLE>

<TABLE>
<CAPTION>
                                                                                    1996
                                                                    -----------------------------------
                                                                     First    Second    Third   Fourth
                                                                    Quarter   Quarter  Quarter  Quarter
                                                                    -------   -------  -------  -------
<S>                                                                 <C>       <C>      <C>      <C>    
Interest income                                                     $ 9,986   $10,155  $10,407  $10,445
Interest expense                                                      5,199     5,215    5,361    5,407
                                                                    -------   -------  -------  -------

          Net interest income                                         4,787     4,940    5,046    5,038
Provision for credit losses                                              60        --       --       --
                                                                    -------   -------  -------  -------

          Net interest income after provision for credit losses       4,727     4,940    5,046    5,038
Net gain on sale of investments                                          91        --        9      151
Noninterest income                                                      242       290      262      276
Noninterest expense                                                   2,569     2,631    4,753    2,616
                                                                    -------   -------  -------  -------

          Income before income tax expense                            2,491     2,599      564    2,849
Income tax expense                                                      882       889      206    1,063
                                                                    -------   -------  -------  -------

          Net income                                                $ 1,609   $ 1,710  $   358  $ 1,786
                                                                    =======   =======  =======  =======

Earnings per share, primary                                            .300*    .320      .070     .370
Earnings per share, fully diluted                                      .300*    .320      .070     .370
Dividends paid per share                                               .075*    .100      .100     .100

</TABLE>


*Restated to reflect two-for-one stock split paid June 5, 1996

                                       48
<PAGE>





                   Notes to Consolidated Financial Statements


Note 25 - Branch acquisition

On August 18, 1995, pursuant to a Branch Sale Agreement between Crestar Bank and
the  Company's  subsidiary,  the Bank acquired  selected  assets and assumed all
deposits of Crestar's  Keysville,  Virginia branch office. The Bank received net
funds of  approximately  $17.8 million in cash,  $1.6 million in selected loans,
and $451,000 in office  premises and equipment in exchange for assuming  deposit
liabilities of $21.7 million.

The  acquisition  was  accounted  for under the  purchase  method of  accounting
whereby the purchase price was allocated to the underlying  assets  acquired and
liabilities assumed based on their value at the date of acquisition.  The excess
purchase price over the value of net assets acquired was recorded as goodwill of
$1.7 million which is being  amortized over 15 years.  The results of operations
of the acquired  branch have been included with those of the Bank, and therefore
of the Company, since the acquisition date.


Note 26 - Capital stock

On April 25, 1996, the Company's Board of Directors approved a two-for-one split
of the Company's  common stock in the form of a 100% stock dividend payable June
5,  1996 to  stockholders  of record as of May 15,  1996.  A total of  2,713,832
shares of common stock was issued in connection  with the split.  The stated par
value per share was not changed from $0.10. A total of $271,383 was reclassified
from the Company's  additional  paid-in capital account to the Company's  common
stock  account.  Appropriate  share and per-share  amounts have been restated to
retroactively reflect the stock split.

                                       49
<PAGE>
     Stock Price  Information - There were  4,642,552  shares of common stock of
FFVA Financial  Corporation  outstanding on March 1, 1997, held by approximately
1,600  stockholders  of record (not  including the number of persons or entities
holding the stock in nominee or street name through  various  brokerage  firms).
The graph and table reflect the stock price as published by the Nasdaq  National
Market and the dividends paid for the respective periods.

<TABLE>
<CAPTION>
            Quarter                                                                                                Div./Share
             Ended                                     High                            Low                            Paid
             -----                                     ----                            ---                            ----

<S>                                                   <C>                              <C>                           <C>   
March 1995(1)                                         $11.50                           $9.32                         $0.075

June 1995(1)                                          $14.13                          $11.25                         $0.075

September 1995(1)                                     $14.63                          $13.38                         $0.075

December 1995(1)                                      $14.63                          $13.38                         $0.075

March 1996(1)                                         $16.13                          $13.50                         $0.075

June 1996                                             $18.50                          $14.63                         $0.100

September 1996                                        $18.50                          $15.75                         $0.100

December 1996                                         $22.00                          $17.75                         $0.100

</TABLE>

-----------------------------
        (1)       Restated to reflect two-for-one stock split paid June 5, 1996.
                  Federal regulations may limit dividend amounts.

                                       53