<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
               -------------------------------------------------
                                        
                                  FORM 10-QSB

               -------------------------------------------------
                                        
(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ending   December 31, 1998
                                ---------------------

                                      or

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934


For the transition period from _________to_________


Commission File Number     0-25814
                      ----------------

                             N S & L Bancorp, Inc.
                             ---------------------
            (Exact name of registrant as specified in its charter)

               Missouri                                     43-1709446
--------------------------------------               -----------------------
(State or other jurisdiction of I.R.S.                  (I.R.S. Employer
Employer Incorporation or organization)                Identification No.)

       P.O. Box 369, Neosho, MO                               64850
----------------------------------------                  -------------
(Address of principal executive offices)                    (Zip Code)

       (417) 451-0429
---------------------------------
(Registrant's telephone number)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the  past 90 days.

                        Yes   X          No
                           -----------     -----------




As of February 10, 1999, there were 615,739 shares of the Registrant's Common
Stock, $.01 par value per share, outstanding.
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
                                  FORM 10-QSB
                               DECEMBER 31, 1998
 
INDEX                                                                     PAGE
-----                                                                     ----

PART I-FINANCIAL INFORMATION
----------------------------
 
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)                1-2
 
CONSOLIDATED STATEMENTS OF INCOME (unaudited)                             3-4
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)                 5
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)                         6-7
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)                   8-10
 
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                            11-16
 

 
PART II - OTHER INFORMATION
---------------------------
 
ITEM 1.  LEGAL PROCEEDINGS                                                 17
 
ITEM 2.  CHANGES IN SECURITIES                                             17
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                   17
 
ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITIES
         HOLDERS                                                           17
 
ITEM 5.  OTHER INFORMATION                                                 17
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                  17
 
SIGNATURES
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
-------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                            (Unaudited)
                                                           DECEMBER 30,   SEPTEMBER 30,
                                                               1998           1998
                                                           -------------  -------------
                                                              (Dollars in thousands)
<S>                                                        <C>            <C>
               ASSETS
               ------
 
Cash and cash equivalents, including
  interest-bearing accounts of $9,459 at                    
  December 31 and $9,698 at September 30                        $ 9,977         $10,383
Certificates of deposit                                             575             674
Investment securities available-for-sale, at fair value             197             204
Investment securities held-to-maturity
  (estimated market value of $10,125 at December 31
  and $9,702 at September 30)                                     9,999           9,401
Investment in Federal Home Loan Bank stock, at cost                 365             365
Mortgage-backed securities held-to-maturity
  (estimated market value of $3,454 at December 31
  and $3,206  at September 30.)                                   3,401           3,122
Loans held for sale                                                 499              86
Loans receivable, net (reserves for loan losses of $54
  at December 31 and $52 at September 30)                        38,066          37,421
Accrued interest receivable                                         390             360
Property and equipment, less accumulated
  depreciation                                                    1,128           1,130
Intangible assets                                                    80              81
Other assets                                                        167             140
                                                                -------         -------

    Total assets                                                $64,844         $63,367
                                                                =======         =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Customer deposits                                               $49,618         $47,945
Advances from FHLB                                                3,954           3,986
Advances from borrowers for taxes
  and insurance                                                      68             305
Income taxes payable - current                                       31              11
Deferred income taxes                                               387             340
Other liabilities                                                   353             375
                                                                -------         -------
  Total liabilities                                              54,411          52,962
                                                                -------         -------

Commitments and contingencies                                      --              --

Preferred stock, $.01 par value; 2,000,000 shares
  authorized, none issued                                          --              --
Common stock, $.01 par value;  8,000,000 shares
  authorized, 886,314 issued and 615,739 outstanding
  at December 31 and 616,839 at September 30                          9                9
Paid-in capital                                                   8,554           8, 514
</TABLE>

          See accompanying notes to Consolidated Financial Statements.

                                       1
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
          CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
 
                                                             (Unaudited)
                                                            DECEMBER 30,   SEPTEMBER 30,
                                                                1998            1998
                                                            -------------  --------------
                                                               (Dollars in thousands)
<S>                                                         <C>            <C>
 
LIABILITIES AND STOCKHOLDERS' EQUITY (Continued)
-----------------------------------------------
 
Retained earnings - substantially restricted                       6,620           6,648
Treasury Stock - at cost; 270,575 shares at December 31,
  and 269,475 at September 30, 1998                               (4,175)         (4,160)
Unearned compensation                                               (601)           (637)
 
Accumulated other comprehensive income                                26              31
                                                                 -------         -------
  Total stockholders' equity                                      10,433          10,405
                                                                 -------         -------
 
    Total liabilities and stockholders' equity                   $64,844         $63,367
                                                                 =======         =======
 
</TABLE>



          See accompanying notes to Consolidated Financial Statements.

                                       2
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
                       CONSOLIDATED STATEMENTS OF INCOME
   -------------------------------------------------------------------------
<TABLE> 
<CAPTION> 

                                     (Unaudited)
                             QUARTER ENDED DECEMBER 31,
                                    1998    1997   
                                   ------  ------
                                (Dollars in thousands)
<S>                                <C>     <C>     
Interest Income:
  Loans receivable                 $  715  $  643
  Investment securities               152     208
  Mortgage-backed and
    related securities                 62      82
  Other interest-earning assets       124      70
                                   ------  ------
       Total interest income        1,053   1,003
                                   ------  ------
 
Interest Expense:
  Customer deposits                   534     496
  Borrowed funds                       58      24
                                   ------  ------
      Total interest expense          592     520
                                   ------  ------
  Net interest income                 461     483
 
Provision for loan losses               3       5
                                   ------  ------
 
  Net interest income after
    provision for loan losses         458     478
                                   ------  ------
 
Noninterest Income:
  Gain on sale of loans                17      --
  Banking service charges
    and fees                           48      39
  Loan late charges                     2       2
  Mortgage banking fees                53      46
  Other                                 3      --
                                   ------  ------
 
    Total noninterest income          123      87
                                   ------  ------
 
Noninterest Expense:
  Compensation and
    employee benefits                 234     221
  Occupancy and equipment              48      43
  Deposit insurance premium             7       7
  Data processing                      29      24
  Printing, postage, stationery
    and supplies                       26      20
  Professional fees                    12      19
  Other                                75      79
                                   ------  ------
    Total noninterest expense         431     413
                                   ------  ------
 
    Income before taxes               150     152
 
Income Taxes                           45      58
                                   ------  ------
 
Net income                         $  105  $   94
                                   ======  ======
</TABLE>


          See accompanying notes to Consolidated Financial Statements.

                                       3
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF INCOME (Continued)
         -------------------------------------------------------------
                                        
<TABLE> 
<CAPTION> 
                                          (Unaudited)
                                    QUARTER ENDED DECEMBER 31,
                                        1998       1997
                                       ------     ------ 
                                      (Dollars in thousands)

<S>                                    <C>        <C> 
Basic earnings per share               $  .18     $  .14
                                       ======     ======


Diluted earnings per share             $  .18     $  .14
                                       ======     ======

Dividends per share                    $  .16     $ .125
                                       ======     ======

</TABLE> 

          See accompanying notes to Consolidated Financial Statements.

                                       4
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
               CONSOLIDATED STATEMENTS OF COMPREHENSIVE  INCOME
     ---------------------------------------------------------------------
                                                    (Unaudited)

<TABLE> 
<CAPTION> 

                                             QUARTER ENDED DECEMBER 31,
                                                  1998        1997
                                                  ----        ----
                                               (Dollars in thousands)
<S>                                               <C>          <C>
Net income                                        $105         $ 94
                                                        
Other comprehensive Income:                             
  Unrealized gains on investment securities             
   available-for-sale, net of tax of $15 in 1998        
   and $18 in 1997                                  26           31
                                                  ----         ----
                                                        
Comprehensive income                              $131         $125
                                                  ====         ====
</TABLE>



         See accompanying notes to Consolidated Financial Statements.

                                       5
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
           --------------------------------------------------------
                 THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
 
                                                                       (Unaudited)
                                                               1998       1997      
                                                             --------  -----------
                                                             (Dollars in thousands)
<S>                                                          <C>        <C>       
 
Cash flows from operating activities:
  Net income                                                  $   105     $  94
  Adjustments to reconcile net income to net
    cash provided by operating activities:
          Depreciation                                             20        21
Premiums and discounts on mortgage-backed
      Securities and investment securities                        (25)      (37)
      Origination of loans held for sale                       (1,456)       --
      Proceeds from sale of loans held for sale                 1,060        --
      Loss on loans, net of recoveries                              3         5
      Release of ESOP shares                                       22        32
      Vesting of MRDP shares                                       19        19
      Gain on call of investments                                  --       (15)
      Gain on sale of loans                                       (17)       --
      Net change in operating accounts:
        Accrued interest receivable                               (30)       62
        Other assets                                              (25)       13
        Other liabilities                                         (43)      (44)
        Income taxes payable - deferred                            47       (14)
        Income taxes payable - current                             20        46
                                                              -------   -------
          Net cash from (used in)operating activities            (300)      182
                                                              -------   -------
 
Cash flows from investing activities:
  Purchase of investment securities held-to-maturity           (3,115)       --
  Proceeds from maturity of investment securities
    held-to-maturity                                            2,535     4,000
  Net change in certificates of deposit                            99      (396)
  Net change in loans receivable                                 (648)   (1,614)
  Proceeds from principal payments and maturities
    of mortgage-backed securities held-to-maturity                283       312
  Purchase of mortgage-backed securities held-to-maturity        (555)       --
  Purchases of property and equipment                             (18)      (34)
                                                              -------   -------
      Net cash from (used in) investing activities            $(1,419)  $ 2,268
                                                              -------   -------
</TABLE>

          See accompanying notes to Consolidated Financial Statements.

                                       6
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
    ----------------------------------------------------------------------
                 THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
 
                                                        (Unaudited)
                                                       1998      1997    
                                                     -------    ------               
                                                  (Dollars in thousands)
<S>                                                  <C>       <C>                     
 
Cash flows from financing activities:
  Net change in demand deposits, savings
    accounts, and certificates of deposit            $ 1,673   $   683
  Net decrease in mortgage escrow funds                 (237)     (254)
  Repayment of cash advances from FHLB                   (32)   (2,000)
  Purchase of treasury stock                             (14)     (481)
  Cash dividends paid                                    (77)      (89)
                                                     -------    ------               
     Net cash from (used in) financing activities      1,313    (2,141)
                                                     -------    ------               
                                                                                     
Net increase(decrease) in cash and                                                   
  cash equivalents                                      (406)      309               
                                                                                     
Cash and cash equivalents -                                                          
  beginning of period                                 10,383     5,521              
                                                     -------    ------              
Cash and cash equivalents -                                                          
  end of period                                      $ 9,977   $ 5,830              
                                                     =======    ======                 
</TABLE>

          See accompanying notes to Consolidated Financial Statements.

                                       7
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                        
NOTE A - Basis of Presentation
------------------------------

The consolidated interim financial statements as of December 31, 1998 included
in this report have been prepared by the Registrant without audit.  In the
opinion of management, all adjustments (consisting only of normal recurring
accruals) necessary for a fair presentation are reflected in the December 31,
1998 interim financial statements.  The results of operations for the periods
ended December 31, 1998 and 1997 are not necessarily indicative of the operating
results for the full year.  The September 30, 1998 Consolidated Statement of
Financial Condition presented with the interim financial statements was audited
and received an unqualified opinion.

NOTE B - Earnings per Share
---------------------------

The following information shows the amounts used in computing earnings per share
and the effect on income and the weighted average number of shares of dilutive
potential common stock.
<TABLE>
<CAPTION>
 
                                                    FOR THE THREE MONTHS ENDED DECEMBER 31,
                                                   1998                                   1997
                                               ------------                           ------------
                                    Income        Shares      Per-Share    Income        Shares      Per-Share
                                  (Numerator)  (Denominator)   Amount    (Numerator)  (Denominator)   Amount
                                  ----------   ------------   ---------  ----------   ------------   ---------
<S>                               <C>          <C>            <C>        <C>          <C>            <C> 
Basic EPS:
Income available to
 Common Stockholders                $105,000        571,022        $.18     $94,000        653,304        $.14
                                                              =========                              =========
 
Effect of dilutive securities:
Stock option                              --            768                      --         18,860
                                  ----------   ------------              ----------   ------------
 
Diluted EPS:
Income available to common
 stockholders plus stock
  options                           $105,000        571,790        $.18     $94,000        672,164        $.14
                                  ==========   ============   =========  ==========   ============   =========
</TABLE>

NOTE C - Employee Stock Ownership Plan
--------------------------------------

The Association (Neosho Savings & Loan Association, F.A.) established an ESOP
for the exclusive benefit of participating employees (all salaried employees who
have completed at least 1000 hours of service in a twelve-month period and have
attained the age of 21).  The ESOP borrowed funds from the Company in an amount
sufficient to purchase 68,516 shares (8% of the Common Stock issued in the
Conversion).  The loan is secured by the shares purchased and will be repaid by
the ESOP with funds from contributions made by the Association, dividends
received by the ESOP and any other earnings on ESOP assets.  The Association
presently expects to contribute approximately $106,762 including interest
annually to the ESOP.  Contributions will be applied to repay interest on the
loan first, then the remainder will be applied to principal.  The loan is
expected to be repaid in approximately six years.

Shares purchased with the loan proceeds are held in a suspense account for
allocation among participants as the loan is repaid.  Contributions to the ESOP
and shares released from the suspense account are allocated among participants
in proportion to their compensation relative to total compensation of all active
participants.  Benefits generally become 25% vested after each year of credited
service beyond one year.  Vesting is accelerated upon retirement, death or

                                       8
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  (CONTINUED)
                                        
disability of the participant.  Forfeitures are returned to the Association or
reallocated to other participants to reduce future funding costs.  Benefits may
be payable upon retirement, death, disability or separation from service.  Since
the Association's annual contributions are discretionary, benefits payable under
the ESOP cannot be estimated.

The Company accounts for its ESOP in accordance with Statement of Position 93-6,
Employers Accounting for Employee Stock Ownership Plans.  Accordingly, the debt
of the ESOP is eliminated in consolidation and the shares pledged as collateral
are reported as a part of unearned ESOP shares in the consolidated balance
sheets.  Contributions to the ESOP shall be sufficient to pay principal and
interest currently due under the loan agreement.  As shares are committed to be
released from collateral, the Company reports compensation expense equal to the
average market price of the shares for the respective period, 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 and accrued
interest.  ESOP compensation expense was $22,022 and $32,092 for the three
months ended December 31, 1998 and 1997 respectively.

A summary of ESOP shares at December 31, 1998 is as follows:
 

Shares allocated                     22,700
 
Shares committed for release          1,713
 
Unreleased shares                    44,103
                                   --------
 
    Total                            68,516
                                   ========
 
Fair value of unreleased shares    $562,313

NOTE D - Management Recognition and Development Plan and Stock Option Plan
--------------------------------------------------------------------------

The 1995 Management Recognition and Development Plan ("MRDP") was approved by
stockholders on January 17, 1996.  The MRDP is administered by the Board of
Directors of the Company.  Collectively, the Board issued 34,258 shares of the
Company's common stock, of which currently there are 28,865 shares awarded to
employees at a cost of $383,370.  The MRDP shares are vesting and being expensed
over a five-year period which began on January 17, 1996.  The value of the
common stock contributed to the MRDP is amortized to compensation expense as the
shares vest.  MRDP expense was $18,519 for both the three months ended December
31, 1998 and 1997.

Also adopted on January 17, 1996 was a Stock Option plan whereby 85,645 shares
of the Company's common stock have been reserved to be awarded to certain
officers, employees and directors.  The Stock Option Plan is administered by a
committee of the Board of Directors.  All options expire no later than ten years
from the date of grant.  At February 5, 1999, 1,000 shares have been exercised
at the exercise price of $12.9375 per share.

                                       9
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  (CONTINUED)

NOTE E - Stock Repurchase Program
---------------------------------

The Company completed its fourth stock repurchase program of the Corporation's
outstanding stock.  At February 10, 1999, 270,575 shares have been repurchased
at a cost of $4,174,612.

NOTE F - Business Acquisition
-----------------------------

During 1997, the Association formed a new subsidiary, Crawford Acquisition
Company for the sole purpose of acquiring Crawford Mortgage and Financial
Services, Inc.  On August 26, 1997, Crawford Acquisition Company acquired all of
the capital stock of Crawford Mortgage and Financial Services, Inc. and became
Crawford Mortgage, Inc.  Crawford Mortgage, Inc. is engaged in originating
mortgage loans primarily in Missouri.  The results of operations of Crawford
Mortgage, Inc. are included in the consolidated financial statements.

NOTE F - New Accounting Pronouncements
--------------------------------------

The Company adopted SFAS 130, "Reporting Comprehensive Income," during the
quarter ending December 31, 1998.  Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income.
Although certain changes in assets and liabilities, such as unrealized gains and
losses on available-for-sale securities, are reported as a separate component of
the equity section of the balance sheet, such items, along with net income, are
components of comprehensive income.  The adoption of SFAS 130 had no effect on
the Company's net income or shareholders' equity.


                                        

                                       10
<PAGE>
 
              N S & L BANCORP,  INC. MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                        
     The discussion and analysis included herein covers those material changes
in liquidity and capital resources that have occurred since September 30, 1998,
as well as certain changes in results of operations during the three month
periods ended December 31, 1998 and 1997.

     The following should be read in conjunction with the Company's 10-KSB for
the year ended September 30, 1998, which contains the latest audited financial
statements and notes thereto, together with Management's Discussion and Analysis
of Financial Condition and Results of Operations as of September 30, 1998, and
for the year then ended.  Therefore, only material changes in financial
condition and results of operations are discussed herein.

CHANGES IN FINANCIAL CONDITION
------------------------------

     Cash and cash equivalents decreased $406,000 during the three months ended
December 31, 1998.  The decrease resulted from the use of cash for the purchase
of investment securities, the funding of loans, mortgage-backed securities, and
the payment of taxes from borrowers deposits. Securities held to maturity
increased by $598,000 to $10 million from 9.4 million.  Net loans increased $1.1
million during the three month period to $38.6 million as of December 31, 1998
from $37.5 million at September 30, 1998.  Loans for 1 to 4 family dwellings
comprised the majority of the increase in loans.  Mortgage-backed securities
increased $279,000 to $3.4 million from $3.1 million at September 30, 1998.
Advances from borrowers for taxes and insurance decreased $237,000 as a result
of the payment of property taxes in December 1998.  These uses of cash were
partially offset by an increase in customer deposits of $1.7 million and the
maturity of $99,000 in certificates of deposits.

     Nonperforming assets were $22,000 or .03% of total assets at December 31,
1998, compared to $21,000, or .03% of total assets at September 30, 1998.  There
were $20,000 in nonaccrual loans at December 31, 1998 and $21,000 at September
30, 1998.

COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 1998 TO THE THREE MONTHS ENDED
--------------------------------------------------------------------------------
DECEMBER 30, 1997
-----------------

     NET INCOME.  Net income was $105,000 for the quarter ended December 31,
1998 compared to $94,000 for the quarter ended December 31, 1997.  Net interest
income after provision for loan losses was $458,000 for the first quarter of
this year compared to $478,000 last year.  Noninterest income increased $36,000
and noninterest expense increased $18,000.  Income tax expense decreased
$13,000.

     NET INTEREST INCOME.  Net interest income of $461,000 for the quarter ended
December 31, 1998 decreased from $483,000 for the quarter ended December 31,
1997. Interest income increased $50,000 while interest expense increased
$72,000.

     INTEREST INCOME.  Interest income increased by $50,000 or 4.8% to $1.05
million for the quarter ended December 31, 1998 from $1.0 million for the
quarter ended December 31, 1997.  Interest income from loans receivable
increased $72,000 to $715,000 for the quarter ended December 31, 1998 from
$643,000 for the quarter ended December 31, 1997.  The increase was primarily
attributable to the increase in average loans outstanding and to a lesser extent
to interest rate increases on existing adjustable rate loans.

                                       11
<PAGE>
 
               N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  (CONTINUED)
                                        
Interest income from investment securities decreased by $56,000 to $152,000 for
the quarter ended December 31, 1998 from $208,000 for the quarter ended December
31, 1997.  This decrease was due to a decrease in the balances in, and average
rates of investment securities.  Interest income from mortgage-backed securities
decreased by $20,000 to $62,000 for the quarter ended December 31, 1998 from
$82,000 for the quarter ended December 31, 1997.  The decrease was due to a
decrease in the average balances in mortgage-backed securities.  Interest income
from other interest-earning assets increased by $54,000 to $124,000 for the
quarter ended December 31, 1998 from $70,000 for the quarter ended December 31,
1997.  This increase was primarily due to an increase in the interest paid on
larger average balances of cash invested at Federal Home Loan Bank of Des
Moines.

     INTEREST EXPENSE.  Interest expense of $592,000 for the quarter ended
December 31, 1998 increased $72,000, or 13.8%, from $520,000 for the quarter
ended December 31, 1997.  The interest expense increase is attributable to an
increase of $38,000 on customer deposit expense and an increase of $34,000 on
borrowed funds as the average balances of customer deposits and borrowed funds
both increased.

     PROVISION FOR LOAN LOSSES.  Loan loss provision were $3,000 for the quarter
ended December 31, 1998 compared to $5,000 for the quarter ended December 31,
1997.  Actual loan losses net of recoveries were zero for both quarters.

     NONINTEREST INCOME.  Noninterest income of $123,000 for the quarter ended
December 31, 1998 increased $36,000 from $87,000 for the quarter ended December
31, 1997.  This increase was primarily due to the gain on the sale of loans by
the Company of $17,000 during the period ending December 31, 1998 and no
comparable sale in the comparative quarter.  There was also an increase in
mortgage banking fees of $7,000 from Crawford Mortgage and $9,000 from banking
service charges and fees compared to the quarter ended December 31, 1997.

     NONINTEREST EXPENSE.  Noninterest expense increased $18,000, or 4.4%, to
$431,000 for the quarter ended December 31, 1998 from $413,000 for the quarter
ended December 31, 1997.  This increase was largely due to a $13,000 increase in
compensation and employee benefits for the period ending December 31, 1998 due
to annual salary increases effective October 1, 1998.   Occupancy and equipment
increased $5,000 and printing, postage, stationery and supplies increased $6,000
compared to the quarter ended December 31, 1997.  These increases were partially
offset by a decrease of $7,000 in professional fees that had been higher in the
comparable quarter when Crawford Mortgage acquisition expenses were incurred.

     NET INTEREST MARGIN.  Net interest margin decreased to 2.92% for the three
months ended December 31, 1998 compared to 3.43% for the three months ended
December 31, 1997.  Income from earning assets increased by $50,000, or 5.0%,
between the two quarters and interest expense increased by $72,000, or 13.9%.
The average earning asset base increased by $6.5 million, or 11.5%.  The average
interest-bearing liability base increased by $6.7 million, or 14.8%.

                                       12
<PAGE>
 
               N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  (CONTINUED)
                                        


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     The Company's primary sources of funds are deposits, proceeds from
principal and interest payments on loans, mortgage-backed securities, investment
securities, net operating income and cash advances from Federal Home Loan Bank
of Des Moines when appropriate.  While maturities and scheduled amortization of
loans and mortgage-backed securities are a somewhat predictable source of funds,
deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition.

     The Association must maintain an adequate level of liquidity to ensure
availability of sufficient funds to support loan growth and deposit withdrawals,
satisfy financial commitments and to take advantage of investment opportunities.
During fiscal years 1997 and 1998, Neosho Savings and Loan began using cash
advances from Federal Home Loan Bank of Des Moines to supplement its funds to
fund loan commitments, pay maturing savings certificates and deposit
withdrawals.  At December 31, 1998, Neosho Savings & Loan had FHLB advances of
$3.9 million that were used to offset fixed rate mortgage loans and had approved
loan commitments totaling $192,000 and undisbursed loans in process of $498,000.

     Liquid funds necessary for normal daily operations of the Association are
maintained in a working checking account and a daily time account with the
Federal Home Loan Bank of Des Moines.  It is the Association's current policy to
maintain adequate collected balances in those deposit accounts to meet daily
operating expense, customer withdrawals, and fund loan demand.  Funds received
from daily operating activities are deposited, on a daily basis, in the checking
account and transferred, when appropriate, to the daily time account to enhance
income.

     Normal daily operating expenses are not expected to significantly change.
Noninterest expense as a percentage of average assets at 2.7% is expected to
remain basically constant.  Interest expense is expected to gradually increase
as the average balance of customer accounts has increased as has the balances of
cash advances.  The cash advance expenses are being offset as the funds have
been invested at rates higher than the expense incurred by them.  Loan interest
income is expected to continue to increase as the average balance of loans
increases and rates on adjustable-rate loans continue to rise as those loans
reprice at the annual adjustment dates.  Although customer deposits have
increased in the past quarter as a result of some special rate offerings and
some influx from other institutions, they are expected to remain stable in the
future.

     At December 31, 1998, certificates of deposit amounted to $31.7 million, or
62.8% of Neosho Savings and Loan's total deposits, including $24.4 million of
fixed rate certificates scheduled to mature within twelve months.  Historically,
Neosho Savings and Loan has been able to retain a significant amount of its
deposits as they mature.  Management believes it has adequate resources to fund
all loan commitments from savings deposits, loan payments and maturities of
investment securities.

                                       13
<PAGE>
 
               N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  (CONTINUED)
                                        
     The Office of Thrift Supervision requires a thrift institution to maintain
an average daily balance of liquid assets (cash and eligible investments) equal
to at least 4% of the average daily balance of its net withdrawable deposits and
short-term borrowings.  Neosho Savings and Loan's liquidity ratio was 38.15% at
December 31, 1998.  Neosho Savings and Loan consistently maintains liquidity
levels in excess of regulatory requirements, and believes this is an appropriate
strategy for proper asset and liability management.

     The Office of Thrift Supervision requires institutions such as the
Association to meet certain tangible, core, and risk-based capital requirements.
Tangible capital generally consists of stockholders' equity minus certain
intangible assets.  Core capital generally consists of stockholders' equity.
The risk-based capital requirements presently address risk related to both
recorded assets and off-balance sheet commitments and obligations.  The
following table summarizes the Association's capital ratios at December 31,
1998.
<TABLE> 
<CAPTION> 

                                              Percent of Adjusted
                                   Amount        Total Assets
                                   ------     -------------------
                                           (Unaudited)
                                     (Dollars in thousands)
 
<S>                               <C>                <C>
Tangible capital                   $8,592            14.98%
Tangible capital requirement          860             1.50
                                   ------            -----
Excess                             $7,732            13.48%
                                   ======            =====
                                          
Core capital                       $8,592            14.98%
Core capital requirement            2,568             4.00
                                   ------            -----
Excess                             $6,024            10.98%
                                   ======            =====
                                          
Risk-based capital                 $8,646            34.78%
Risk-based capital requirement      2,323             8.00
                                   ------            -----
Excess                             $6,323            26.78%
                                   ======            =====
 
</TABLE>

                                       14
<PAGE>
 
               N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  (CONTINUED)
                                        
YEAR 2000 ISSUE
---------------

The Company has researched the "Year 2000" problem and developed a plan to
identify and correct any potential problems that may affect operations in
addition to developing a business resumption plan in the event unexpected major
problems develop at the change to the year 2000.

The Company's primary mission critical system is its data center, FISERV of Des
Moines, Iowa.  FISERV has upgraded their systems for Y2K and proxy testing of
those systems has been completed.  Results of the proxy testing have been
received and are being examined by appropriate Company personnel.  Some problems
were noted in the proxy testing and have been corrected.  During the first or
second quarter of 1999, the Company will be testing connectivity with FISERV.
Total costs for proxy & connectivity testing are estimated to be $6,600. payable
over a twenty month period that began in August 1998.  The Company has paid
$1,500. at December 31, 1998 toward that testing.

A review of loans by appropriate internal personnel determined there are no
major multi-family or commercial borrowers on the Company books.  The Company
primarily makes loans for 1-4 family residences which diversifies the borrowers
and makes it less likely that a Y2K problem will affect repayments to the
Company's loan portfolio.  It is management's decision that an outside analysis
of the Company's Year 2000 exposure is unnecessary since all data processing is
done by an external vendor and there are no major risk factors in the loan
repayment area.

The ISC on-line teller system has been adapted for Y2K by a software supplier in
Washington State at a cost of $2,240.  The Company also has PC Teller on-line
stations at both the main and branch locations and more stations are currently
being added.  A conversion date of March 16 and 17, 1999 has been scheduled to
convert the teller line to the PC Teller system.  PC Teller is being certified
Y2K through testing by FISERV.  In addition, all personal computers have been
upgraded with pentium processors and tested for compliance with Y2K.  If some of
the personal computers should fail in the year 2000 despite the Y2K
certification, management feels a portion of these computers would probably work
and would be utilized.  If all else fails it would be necessary to operate
manually until such time as corrections could be made.

The safe deposit box software program that was not Y2K compliant has been
replaced at a cost of $1,500.  Other noncritical, internal software programs
such as Windows 95 and 98 are being patched and upgraded as needed.

All ATM cards have a maturity date of December 1999 and will be replaced in a
mass reissue planned for the first quarter of 1999.  The replacement cards have
been ordered and are on hand. Total cost of this project, including postage, is
expected to be less than $2,000 of which $650 has been spent.

The Company's three ATMs have had minor upgrades of software, which make them
Y2K compliant.  The expense for these upgrades was $1,400.

Contingency plans include the possible use of another data center or an in-house
system in the event the current data processor (FISERV) system fails.  Two data
centers and two sources for "in-house" systems have been located as a part of
our contingency plan.  In addition, as part of

                                       15
<PAGE>
 
               N S & L BANCORP, INC. MANAGEMENT'S DISCUSSION AND
           ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                  (CONTINUED)
                                        

the business resumption plan under development, we are ordering paper copies of
all accounts at the end of 1999 to enable us to perform manual calculations
until a switch can be made to another processor or FISERV can resume processing.

Contacts have been made with third party vendors, such as the electric company,
and no Y2K problems have been noted.  Expenditures incurred toward Y2K
compliance have been $8,000 to date and $6,000 in additional expenditures are
scheduled to be completed within the next six months.  The Company has spent
$12,700 in upgrading to PC Teller and does plan additional expenditures of
approximately $20,500 in the purchase and installation of new computers in the
upgrade to the PC Teller system which is not required as part of the Y2K update
process.

Although there are no known problems that are material to the Company's
business, operations or financial conditions, in the event that FISERV's system
fails in the switch to the Year 2000 and the Company is not able to change to an
alternative data center or "in-house" system in a timely manner, Year 2000
problems could interrupt the operations of the Company and have a significant
adverse effect on the Company's financial condition and results of operations.

                                       16
<PAGE>
 
                     N S & L BANCORP, INC. AND SUBSIDIARY

                          PART II - OTHER INFORMATION
                                        
ITEM 1, LEGAL PROCEEDINGS


Neither the Registrant nor the Association is a party to any material legal
proceedings at this time.  From time to time the Association is involved in
various claims and legal actions arising in the ordinary course of business.

ITEM 2, CHANGES IN SECURITIES

Not applicable.

ITEM 3, DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

None.

ITEM 5, OTHER INFORMATION

None.

ITEM 6, EXHIBITS AND REPORT ON FORM 8-K

Reports on Form 8-K:  None.

Exhibits

   27  --  Financial Data Schedule


                                        

                                       17
<PAGE>
 
                                   SIGNATURES

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


                                N S & L Bancorp, Inc.


Date  February 10, 1999         By: /s/ C. R. 'Rick' Butler
      ------------------            --------------------------------------
                                    C. R. 'Rick' Butler
                                    President
                                    CEO


                                By: /s/ Carol Guest
                                    --------------------------------------
                                    Carol Guest
                                    Treasurer