================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


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

                  For the quarterly period ended March 31, 1998
                                                 --------------

                                       OR

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

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


                         Commission file number: 0-25854


                               GFSB BANCORP, INC.
            --------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)


Delaware                                                      04-2095007
---------------------------------------------------       --------------------
(State or Other Jurisdiction of Incorporation or            (I.R.S. Employer
Organization)                                             Identification No.)

221 West Aztec Avenue, Gallup, New Mexico                        87301
---------------------------------------------------       ---------------------
(Address of Principal Executive Offices)                       (Zip Code)

Issuer's Telephone Number, Including Area Code:         (505) 722-4361
                                                        ---------------

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


As of May 8, 1998,  there were issued and  outstanding  1,201,037  shares of the
registrant's Common Stock.


<PAGE>

                               GFSB Bancorp, Inc.


                                     Index

                                                                 Page No.
                                                                 --------

                         PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements:

        Consolidated Statements of Financial Condition
          March 31, 1998 and June 30, 1997                               3

        Consolidated Statements of Earnings
          Three months and nine months ended March 31, 1998 and 1997     4

        Consolidated Statements of Cash Flows
          Nine months ended March 31, 1998 and 1997                      6
         
         Notes to Consolidated Financial Statements                      8

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

PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                               17

        Signatures                                                      18





                                        2


<PAGE>


                               GFSB Bancorp, Inc.

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
                                                                                    March 31,          June 30,
                                                                                     1998               1997
                                                                               ----------------   ---------------
                                                                                 (Unaudited)
                                     ASSETS

<S>                                                                            <C>                <C>            
Cash and due from banks                                                        $     2,066,280    $     1,772,937
Interest-bearing deposits with banks                                                   974,838          1,121,191
Federal funds sold                                                                           0            100,000
Available-for-sale investment securities                                             6,639,305          4,342,042
Available-for-sale mortgage-backed securities                                       35,488,275         32,069,501
Stock of Federal Home Loan Bank, at cost, restricted                                 1,936,300          1,060,300
Loans receivable, net, substantially pledged                                        69,384,087         52,021,929
Accrued interest and dividends receivable                                              680,499            551,783
Premises and equipment                                                                 904,674            677,250
Other real estate and repossessed property                                               7,560               --
Prepaid and other assets                                                                72,921             55,290
Deferred tax asset                                                                      20,671             20,671
                                                                               ---------------    ---------------

         TOTAL ASSETS                                                          $   118,175,409         93,792,894
                                                                               ===============    ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Transaction accounts                                                           $     8,772,199    $     4,488,475
Savings and now deposits                                                            11,738,905         10,606,993
Time deposits                                                                       46,661,111         42,777,018
Accrued interest payable                                                               308,601            153,049
Advances from borrowers for taxes and insurance                                        333,553            175,748
Accounts payable and accrued liabilities                                               255,010            181,970
Deferred income taxes                                                                  423,622            287,000
Dividends declared and payable                                                          76,217             75,415
Advances from Federal Home Loan Bank                                                34,960,876         20,930,000
Income taxes payable                                                                    70,661            174,090
                                                                               ---------------    ---------------

         TOTAL LIABILITIES                                                         103,600,755         79,849,758


COMMITMENTS AND CONTINGENCIES                                                             --                 --


STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 1,500,000,000    shares authorized;  
  800,700 issued and outstanding at June 30, 1997 and 800,700 shares
   issued and outstanding at March 31, 1998                                             77,041             76,684
Preferred stock, $.10 par value, 500,000
  shares authorized;  no shares issued or
  outstanding                                                                             --                 --
Additional paid-in-capital                                                           6,296,462          6,260,680
Unearned ESOP stock                                                                   (431,286)          (464,881)
Retained earnings, substantially
  restricted                                                                         7,946,516          7,513,536
Unrealized gain on available for sale
  securities, net of taxes                                                             685,921            557,117
                                                                               ---------------    ---------------

         TOTAL STOCKHOLDERS' EQUITY                                                 14,574,654         13,943,136
                                                                               ---------------    ---------------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $   118,175,409    $    93,792,894
                                                                               ===============    ===============
</TABLE>


See notes to consolidated financial statements.


<PAGE>

GFSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                            Three months ended            Nine months ended
                                                                 March 31,                     March 31,
                                                       --------------------------   -------------------------
                                                           1998            1997          1998         1997
                                                       --------------------------   -------------------------
                                                       (Unaudited)     (Unaudited)   (Unaudited)   (Unaudited)
<S>                                                    <C>           <C>            <C>           <C>        
Interest income
        Loans receivable
                 Mortgage loans                        $ 1,297,923   $    859,176   $ 3,636,241   $ 2,533,572
                 Commercial loans                           82,480         71,407       199,318       165,368
                 Share and consumer loans                   80,561         44,477       220,984       123,682
        Available-for-sale investment securities and
                 mortgage-backed securities                623,415        478,173     1,938,938     1,505,487
        Other interest-earning assets                       39,652         37,304       130,108        99,449
                                                       -----------   ------------   -----------   -----------

                 TOTAL INTEREST EARNINGS                 2,124,030      1,490,537     6,125,589     4,427,558

Interest expense
        Deposits                                           775,293        676,545     2,316,258     1,890,603
        Advances from Federal Home Loan Bank               502,467        160,986     1,435,393       552,649
                                                       -----------   ------------   -----------   -----------

                 TOTAL INTEREST EXPENSE                  1,277,760        837,531     3,751,650     2,443,252
                                                       -----------   ------------   -----------   -----------

                 NET INTEREST EARNINGS                     846,270        653,005     2,373,938     1,984,306

Provision for loan losses                                   15,758         15,506        53,217        20,794
                                                       -----------   ------------   -----------   -----------

                 NET INTEREST EARNINGS AFTER
                   PROVISION FOR LOAN LOSSES               830,512        637,499     2,320,721     1,963,512

Non-interest earnings
        Income from real estate operations
        Miscellaneous income                                 1,210          1,127         7,992         2,848
        Net gains from sales of loans                       (2,503)           272         1,710         5,214
        Service charge income                               24,362          9,850        54,609        26,586
                                                       -----------   ------------   -----------   -----------

                 TOTAL NON-INTEREST EARNINGS                23,070         11,249        64,311        34,648

Non-interest expense
        Compensation and benefits                          243,150        211,088       692,259       635,676
        Insurance                                           13,742          7,097        40,069       317,304
        Other                                               93,001         53,888       244,641       170,195
        Occupancy                                           41,450         38,208       120,963       105,680
        Data processing                                     30,624         19,432        93,367        65,257
        Professional fees                                   12,892         23,657        81,867        78,450
        Advertising                                          7,067         12,481        34,576        35,098
        Stock services                                       5,147          5,652        12,817        11,407
                                                       -----------   ------------   -----------   -----------

                 TOTAL NON-INTEREST EXPENSE                447,072        371,503     1,320,558     1,419,067
</TABLE>



                                        4

<PAGE>

GFSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF EARNINGS - CONTINUED
<TABLE>
<CAPTION>
                                                          Three months ended       Nine months ended
                                                               March 31,               March 31,
                                                       ------------------------ -----------------------
                                                           1998       1997         1998        1997
                                                       ------------------------ -----------------------
                                                        (Unaudited) (Unaudited) (Unaudited) (Unaudited)

<S>                                                    <C>         <C>             <C>         <C>    
                 EARNINGS BEFORE INCOME TAXES            406,509     277,246     1,064,474     579,094
                                                                                 
Income tax expense                                                               
        Currently payable                                155,337     105,775       404,838     226,921
        Deferred provision                                     -           -             -           -                  
                                                       ---------   ---------       -------     -------
                                                         155,337     105,775       404,838     226,921
                                                       ---------   ---------       -------     -------
                 NET EARNINGS                          $ 251,171   $ 171,471       659,636     352,173
                                                       =========   =========       =======     =======
                                                                                 
Earnings per common share                                                        
        Basic                                          $    0.33        0.21          0.87        0.42
                                                       =========   =========       =======     =======
Weighted average number of common shares outstanding                             
        Basic                                            756,957     822,257       755,900     843,590
                                                       =========   =========       =======     =======
                                                                                 
Earnings per common share                                                        
        Diluted                                             0.32        0.21          0.85        0.41
                                                       =========   =========       =======     =======
                                                                                 
Weighted average number of common shares outstanding                             
        Diluted                                          774,301     829,717       771,692     850,690
                                                       =========   =========       =======     =======
</TABLE>










                                        5

<PAGE>

GFSB Bancorp, Inc.                                           

CONSOLIDATED STATEMENTS OF CASH FLOWS

Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
                                                                  Nine months ended
                                                                       March 31,
                                                             ----------------------------
                                                                 1998            1997
                                                             -------------   ------------
                                                               (Unaudited)    (Unaudited)
<S>                                                          <C>             <C>         
Cash flows from operating activities
         Net earnings                                        $    659,636    $    352,173
         Adjustments to reconcile net earnings to
           net cash provided by operations
                  Deferred loan origination fees                 (125,956)        (99,299)
                  Gain on sale of sold loans                       (1,709)         (5,214)
                  Provision for loan losses                        53,217          20,794
                  Depreciation of premises and equipme             58,730          51,152
                  Amortization of investment and mortgage-
                    backed securities premiums (discou            206,436         134,162
                  Stock dividends on FHLB stock                   (77,400)        (23,600)
                  Release of ESOP stock                            69,734         101,696
                  Stock compensation                               37,217         (13,732)
                  Provision (benefit) for deferred inc

         Net changes in operating assets and liabilities
                  Accrued interest and dividends recei           (128,716)        (99,013)
                  Prepaid taxes
                  Prepaid and other assets                        (17,631)        (17,657)
                  Accrued interest payable                        155,551           3,408
                  Accounts payable and accrued liabili             35,823         (21,655)
                  Income taxes payable                           (103,429)         57,921
                  Dividends declared and payable                      802        (322,044)
                                                             ------------    ------------

                           Net cash provided by
                           operating activities                   822,305         119,092

Cash flows from investing activities
         Purchase of premises and equipment                      (286,154)       (205,863)
         Loan originations and principal
           repayment on loans, net                            (17,295,270)     (6,214,554)
         Principal payments on mortgage-backed
           securities                                           7,101,219       4,232,576
         Purchases of mortgage-backed securities              (10,770,665)    (11,793,195)
         Purchases of available-for-sale securities            (1,847,601)        (93,593)
         Maturities and proceeds from sale of
           available-for-sale securities                          500,000         700,000
         Purchases of municipal securities                       (640,000)
         Purchase of FHLB stock                                  (798,600)       (295,000)
                                                             ------------    ------------

                           Net cash used by
                           investing activities               (24,037,071)    (13,669,629)
</TABLE>







                                        6

<PAGE>

GFSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
                                                                   Nine months ended
                                                                        March 31,
                                                             -------------------------------
                                                                  1998             1997
                                                             --------------   --------------
                                                               (Unaudited)      (Unaudited)
<S>                                                          <C>              <C>          
Cash flows from financing activities
         Net increase in transaction accounts, passbook
           savings, money market accounts, and
           certificates of deposit                           $   9,299,731    $   9,295,226
         Net increase (decrease) in mortgage escrow fu             157,805          127,874
         Proceeds from FHLB advances                           378,820,950       75,948,910
         Repayments on FHLB advances                          (364,790,074)     (70,352,910)
         Purchase of GFSB Bancorp stock under the
           stock repurchase plan in cash                             -           (1,664,847)
         Dividends paid or to be paid in cash                     (226,656)        (218,028)
         Price paid for vested MSBP Stock                            -               56,152   
                                                             -------------    -------------

                           Net cash provided by
                           financing activities                 23,261,756       13,192,377
                                                             -------------    -------------

         Increase (decrease) in cash and cash equivale              46,990         (358,160)

         Cash and cash equivalents at beginning of per           2,994,128        3,167,194
                                                             -------------    -------------

         Cash and cash equivalents at end of                 $   3,041,118        2,809,034
                                                             =============        =========


Supplemental disclosures
         Cash paid during the period for
                  Interest on deposits and ad                $   3,596,099    $   2,439,844
                  Income taxes                                     508,267          160,000

         Change in unrealized gain (loss), net of deferred
           taxes on available-for-sale securities                  128,804          175,315

         Dividends declared not yet paid                            76,217              -

</TABLE>


                                        7



<PAGE>



                               GFSB BANCORP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.  The  interim  financial  data  is  unaudited;  however,  in the  opinion  of
management, the interim data includes all adjustments, consisting only of normal
recurring  adjustments  necessary  for a fair  statement  of the results for the
interim periods.  The financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission.  Certain information and footnote  disclosures  normally included in
financial  statements  prepared in accordance with generally accepted accounting
principles   have  been  condensed  or  omitted   pursuant  to  such  rules  and
regulations,  although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading.

The organization and business of the Company,  accounting  policies  followed by
the Company and other  information  is contained  in the notes to the  Company's
financial  statements filed as part of the Company's June 30, 1997, Form 10-KSB.
This quarterly report should be read in conjunction with such annual report.

2.    Dividends
      ---------

During the quarter ended  December 31, 1997,  the Board of Directors  declared a
cash  dividend of $0.10 per share on the  Company's  outstanding  common  stock,
payable to  stockholders  of record as of December 31, 1997.  The dividends were
paid in January 1998.

During the  quarter  ended March 31,  1998,  the Board of  Directors  declared a
quarterly cash dividend of $0.10 per share on the Company's  outstanding  common
stock,  payable to  stockholders  of record as of March 31, 1998.  The dividends
were paid in April 1998. Also, the Board of Directors  declared a stock dividend
of fifty (50%) percent on the Company's  outstanding common stock, payable on or
about April 20, 1998,  to  stockholders  of record as of March 31, 1998 and that
cash be paid in lieu of  fractional  shares  resulting  from the stock  dividend
based on the market value of a share of common stock at the close of business on
the record date as determined with respect to stock prices or the  determination
of the Board of  Directors  in the event the  market  value is not  determinable
based on the lack of recent trading in common stock of the Company in the period
preceding the record date.

As required by SOP 93-6,  the  dividends  on  unallocated  ESOP shares have been
recorded as an additional  $4,000  compensation  cost rather than a reduction of
retained earnings.

3.    Employee Stock Ownership Plan
      -----------------------------

On December  31, 1997 the Company  released  4341.26  shares of its common stock
owned by the  Company's  ESOP.  On March 31, 1998,  the Company was committed to
release 1039.41 shares of this common stock. The commitment  resulted in $23,000
of additional compensation cost.

4.    Management Stock Bonus Plan
      ---------------------------

On January 5, 1996,  the  Company  made  awards  under the Plan in the amount of
20,382  shares.  The shares  were  awarded at a price of $13 7/8 per share.  The
retirement  during the quarter ended September 30, 1997 of an officer to whom an
award had been made under the Plan,  resulted in a reduction  of 2,000 shares in
the total number of shares awarded. At March 31, 1998, 19,568 shares remained to
be  awarded  under the  Plan.  Awards  under the Plan are  earned at the rate of
one-fifth of the award per year as of the one-year  anniversary  of the grant of
the award.  As a result of this vesting and the  dividends  earned on the vested
shares, a liability and corresponding compensation cost in the amount of $12,000
has been  recorded  at March 31,  1998,  under the  provisions  of the Plan.  On
January 5, 1998, 3575 shares under the Plan were earned,  and the  corresponding
liability was paid.

5.    BIF/SAIF Insurance Premium
      --------------------------

The one-time BIF/SAIF  Insurance Premium assessed by Congress in September 1996,
resulted  in a  $250,000  charge to the Bank.  This  assessment  was  charged to
earnings in September 1996, and was paid in November 1996.

                                        8

<PAGE>






6.    Earnings Per Share
      ------------------

The Financial  Accounting  Standards  Board (FASB)  issued  Statement No. 128, "
Earnings Per Share",  which  supersedes  APB Opinion No. 15.  Statement  No. 128
requiring  the  presentation  of earnings  per share by all  entities  that have
common  stock  or  potential  common  stock,  such  as  options,   warrants  and
convertible  securities,  outstanding  that  trade  in a  public  market.  Those
entities that have only common stock  outstanding  are required to present basic
earnings per share amounts. All other entities are required to present basic and
diluted per share  amounts.  Diluted per share  amounts  assume the  conversion,
exercise or issuance of all potential common stock instruments unless the effect
is to reduce a loss or  increase  the income per  common  share from  continuing
operations.  All entities  required to present per share amounts must  initially
apply Statement No. 128 for annual and interim periods ending after December 15,
1997.

Because the Company has potential  common stock  outstanding  (stock  options to
employees and  directors),  the Company is required to present basic and diluted
earnings per share.  The Bank has applied  Statement No. 128 in the accompanying
financial statements.

The weighted  average number of shares of common stock used to compute the basic
earnings per share was increased by 17344 for the three month period ended March
31,  1998,  and  by  7,460 for the three  month  period  ended  March 31,  1997,
in computing the diluted per share data.  The weighted  average number of shares
of common stock used to compute the basic  earnings  per share was  increased by
15,792 for the nine month period ended March 31, 1998, and by 7,100 for the nine
month period ended March 31, 1997, in computing the diluted per share data.








                                        9

<PAGE>




Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

General

GFSB  Bancorp,  Inc.,  is the 100% owner of Gallup  Federal  Savings  Bank ("the
Bank"), and the Bank is currently the only entity with which the holding company
has an  ownership  interest.  The Bank is  primarily  engaged in the business of
accepting  deposit  accounts  from the  general  public  and using such funds to
originate mortgage loans for the purchase and refinancing of  one-to-four-family
homes located in its primary market area. The Bank also originates multi-family,
commercial real estate,  construction,  consumer and commercial  business loans,
and purchases participations in one-to-four family mortgage loans. The Bank also
purchases  mortgage-backed and investment securities.  The largest components of
the Bank's net earnings are net interest income, which is the difference between
interest income and interest expense,  and noninterest  income derived primarily
from fees.  Consequently,  the Bank's  earnings are  dependent on its ability to
originate  loans,  and the  relative  amounts  of  interest-earning  assets  and
interest-bearing  liabilities.  The Bank's net earnings is also  affected by its
provision  for loan  losses  as well as the  amount  of other  expense,  such as
compensation  and benefit expense,  occupancy and equipment  expense and deposit
insurance premium expenses. Earnings of the Bank also are affected significantly
by general economic and competitive  conditions,  particularly changes in market
interest rates, government policies and actions of regulatory authorities.

In  September  1996,  Congress  enacted  a plan to  mitigate  the  effect of the
BIF/SAIF  insurance  premium  disparity.  This  plan  required  all SAIF  member
institutions,  including the Bank, to pay a one-time  assessment to recapitalize
the SAIF.  The effect of this  reduced  the capital of the Bank by the amount of
the fee, and such amount was charged to earnings in the quarter ended  September
30, 1996. The  assessment  amount the Bank paid was $250,000 which is 65.7 basis
points on the amount of deposits held by the Bank at March 31, 1995.

Beginning January 1, 1997,  deposit insurance  assessments for most SAIF members
became  .064% of  deposits  on an  annual  basis.  This rate is  expected  to be
effective  through  the end of  1999.  During  this  same  period,  BIF  members
(predominantly  composed of commercial  banks) are to be assessed  .013% of most
deposits.  Thereafter,  assessments  for BIF and SAIF members should be the same
and BIF and SAIF may be merged. As a result of these changes,  beginning January
1,  1997,  the  rate  of  deposit  insurance   assessed  the  Bank  declined  by
approximately 70% from the rate in effect prior to September 30, 1996.

Management Strategy

Management's  strategy  has been to monitor  interest  rate  risk,  by asset and
liability  management,  and maintain asset quality while enhancing  earnings and
profitability.   The  Bank's   strategy  has  been   primarily  to  make  loans,
secondarily,  to invest in mortgage-backed securities and investment securities,
and thirdly, to purchase  participations in adjustable rate,  one-to-four family
mortgage loans primarily secured by one-to-four  family  residences.  The Bank's
purchase of  mortgage-backed  securities and  investment  securities is designed
primarily for safety of principal and secondarily for rate of return. The Bank's
lending  strategy has  historically  focused on the  origination  of traditional
one-to-four-family  mortgage  loans  primarily  secured by  one-to-four-  family
residences in the Bank's primary market area.  These loans  typically have fixed
rates. The Bank also invests a portion of its assets in construction,  consumer,
commercial  business,  multi-family and commercial real estate loans as a method
of enhancing earnings and profitability  while also reducing interest rate risk.
Since 1994,  the Bank has  actively  originated  commercial  business  loans and
increased  its  origination  of  commercial  real estate loans and  construction
loans. These loans typically have adjustable  interest rates and are for shorter
terms than  residential  first mortgage loans.  The Bank has limited  experience
with these types of loans, and this type of lending generally has more risk than
residential  lending.  The Bank's purchase of participations in adjustable rate,
one-to-four  family  mortgage loans is designed to increase  earnings and reduce
interest  rate risk.  These  loans have more risk than loans  originated  by the
Bank, therefore,  they have adjustable rates that are higher than standard.  The
Bank has recently begun purchasing  automobile  loans from dealers.  These loans
have risk and terms  comparable  to  automobile  loans  originated  in the Bank.
Investment  securities in the Bank's  portfolio  typically have shorter terms to
maturity than residential  first mortgage loans. As part of its  asset/liability
management  strategy,  the Bank sells its fixed rate  mortgage  loans with terms
over 15  years  into  the  secondary  market.  The Bank  has  sought  to  remain
competitive  in its market by offering a variety of products.  Automated  Teller
Machine access and commercial and consumer  credit life insurance are additional
products now offered by the Bank. The Bank attempts to manage the interest rates

                                       10

<PAGE>



it pays on  deposits  while  maintaining  a stable  deposit  base and  providing
quality services to its customers.

During the past few years the competing financial institutions located in Gallup
have all been acquired by statewide and regional  bank holding  companies.  As a
result,  as of 1995, the Bank is the only local  institution  headquartered  and
managed in Gallup, New Mexico.  The Bank believes that its "hometown"  advantage
provides an opportunity  to expand its operations as the only local  independent
financial  institution.  The Bank also believes that it has a unique  ability to
grow as a result of the  relatively  large number of local retail and  wholesale
businesses  specializing in Indian jewelry.  In addition,  the Bank is exploring
methods of  increasing  its business with the large Native  American  population
located in the nearby Navajo and Zuni Pueblo Indian reservations.

Asset and Liability Management

In an effort to reduce  interest  rate  risk and  protect  it from the  negative
effect  of  rapid  increases  and  decreases  in  interest  rates,  the Bank has
instituted  certain asset and liability  management  measures.  (See "Management
Strategy" discussed above).

The Bank, like many other thrift institutions,  is exposed to interest rate risk
as a result of the  difference in the maturity of  interest-bearing  liabilities
and  interest-earning  assets and the volatility of interest rates. Most deposit
accounts  react  more  quickly to market  interest  rate  movements  than do the
existing  mortgage  loans  because of their  shorter  terms to  maturity;  sharp
decreases  in  interest  rates  would  typically  positively  affect  the Bank's
earnings.  Conversely,  this same mismatch will generally  adversely  affect the
Bank's earnings during periods of increasing interest rates.

FINANCIAL CONDITION

The Bank's total assets  increased  $24.4  million or 26% from $93.8  million at
June 30, 1997 to $118.2  million at March 31, 1998.  This  increase is primarily
the result of a $3.4 million  increase in  mortgage-backed  securities,  a $17.4
million  increase in the Bank's net loan portfolio,  a $2.3 million  increase in
investment  securities and a $876,000 increase in stock of the Federal Home Loan
Bank.  The majority of the  increases  are directly  attributable  to efforts of
Management to take advantage of the increased  capital infusion made as a result
of the  conversion  from a mutual to stock form of ownership  through  increased
investment and lending activity. During the same period, deposits increased $9.3
million or 16.1% from $57.9  million at June 30, 1997, to $67.2 million at March
31, 1998.  This increase is primarily due to an increase in the Bank's volume of
NOW  accounts,   business  checking   accounts,   local   (non-brokered)   Jumbo
Certificates  of Deposit and Public (state and city)  Certificates  of Deposits.
Advances from the FHLB increased $14 million from $20.9 million at June 30, 1997
to $34.9 million at March 31, 1998. These additional borrowings funded purchases
of loans, securities and mortgage loan participations. The Bank had $686,000 and
$557,000 in unrealized  gains (net of deferred taxes) at March 31, 1998 and June
30,  1997,   respectively  from  market  gains  on  the  Bank's  investment  and
mortgage-backed portfolios. Unrealized gains and losses do not impact the Bank's
earnings until they are realized.








                                       11

<PAGE>



RESULTS OF OPERATIONS

COMPARISON  OF OPERATING  RESULTS FOR QUARTER  ENDED MARCH 31, 1998  COMPARED TO
QUARTER ENDED MARCH 31, 1997

General

Net  earnings  increased  $80,000 or 46.5% for the quarter  ended March 31, 1998
from the quarter ended March 31, 1997.  This increase is primarily the result of
an increase in net interest  earnings of $193,000,  an increase in  non-interest
earnings of $12,000,  offset by an increase in  non-interest  expense of $76,000
and an increase in income taxes of $50,000.

Interest Earnings

Total  interest  income  increased  $633,000 or 42.2% from $1.5  million for the
quarter  ended  March 31, 1997 to $2.1  million for the quarter  ended March 31,
1998.  This increase was primarily  due to  substantial  increases in the Bank's
mortgage-backed  securities  portfolio,   investment  securities  and  net  loan
portfolio.

Interest Expense

Total interest expense increased $440,000 or 52.5% from $838,000 for the quarter
ended March 31, 1997 to $1,278,000  for the quarter  ended March 31, 1998.  This
increase was due to a substantial increase in FHLB borrowings and an increase in
the deposit base,  including  the increase in volume of NOW  accounts,  business
checking accounts, local (non-brokered) Jumbo Certificates of Deposit and Public
(state and city) Certificates of Deposits.

Provision for Losses on Loans

The Bank maintains an allowance for loan losses based upon management's periodic
evaluation  of  known  and  inherent  risks  in the loan  portfolio,  past  loss
experience,  adverse  situations that may affect the borrower's ability to repay
loans,  estimated  value of the  underlying  collateral and current and expected
market  conditions.  The  allowance for loan losses was $377,000 and $339,000 at
March 31, 1998 and 1997,  respectively.  The provision for loan loss was $16,000
for the  quarter  ended  March  31,  1998  and  1997  respectively.  Based  on a
historical trend of limited losses on residential  loans, the amount of the loan
loss provision allocated to residential loans remained relatively stable for the
two periods.  While the Bank maintains its allowance for losses at a level which
it considers to be adequate,  there can be no assurance  that further  additions
will not be made to the loss allowances and that such losses will not exceed the
estimated  amounts.  Recent  substantial  increases in the loan portfolio of the
Bank  may  result  in  an  increase  of  provision  for  losses  on  loans.  The
establishment of a loan loss provision each period adversely  impacts the Bank's
net earnings.

Non-Interest Income

Total  Non-Interest  income  increased by $12,000 or 109.1% from $11,000 for the
quarter  ended March 31, 1997 to $23,000 for the quarter  ended March 31,  1998.
This increase was primarily due to increased  service and NSF charges on NOW and
checking accounts and increased Automated Teller Machine use fees.

Non-Interest Expense

Total  non-interest  expense  increased  $76,000 or 20.5% from  $371,000 for the
quarter  ended March 31, 1997 to $447,000 for the quarter  ended March 31, 1998.
This  increase was  primarily  due to an increase of other costs of $39,000,  an
increase of  occupancy  expense of $3,000,  an increase  in data  processing  of
$11,000 and an increase in compenstation and benefits of $32,000 and an increase
in insurance  expense of $7,000,  offset by a decrease in  professional  fees of
$11,000 and a decrease in advertising of $5,000.  The increase in other expenses
is primarily  due to  increased  supplies,  automated  teller  machine  expense,
charitable contributions and postage expense. The increase in occupancy costs is
mainly  due to the  depreciation  of  Furniture,  Fixtures  and  Equipment.  The
increase in data processing is due to increased  transaction  volume from growth
in deposits.  The increase in compensation and benefits is due to an increase in
staff,   some  salary   increases  and  curent  year  accrual  for   stock-based
compensation  plans.  The increase in insurance  expense is due to the quarterly
SAIF insurance  premium being higher resulting from the growth in deposits.  The
decrease in professional  services is the result of some  additional  expense in
audit, accounting and legal

                                       12

<PAGE>



fees incurred in the quarter ended March 31, 1997.  The decrease in  advertising
is due to  additonal  advertising  supplies  and  advertising  expense  used for
promoting bank growth in the quarter ended March 31, 1997.


RESULTS OF OPERATIONS

COMPARISON  OF  OPERATING  RESULTS  FOR NINE MONTH  PERIOD  ENDED MARCH 31, 1998
COMPARED TO NINE MONTH PERIOD ENDED MARCH 31, 1997

General

Net earnings  increased  $307,000 or 87.3% for the nine month period ended March
31, 1998 from the nine month  period  ended  March 31,  1997.  This  increase is
primarily  the result of an increase in net interest  earnings of  $390,000,  an
increase in  non-interest  earnings  of $30,000  and a decrease in  non-interest
expense of $98,000,  offset by an increase  in income  taxes of $178,000  and an
increase in the provision for loan loss of $32,000.

Interest Earnings

Total interest income  increased $1.7 million or 38.6% from $4.4 million for the
nine month period ended March 31, 1997 to $6.1 million for the nine month period
ended March 31, 1998.  This increase was primarily due to substantial  increases
in the Bank's  mortgage-backed  securities portfolio,  investment securities and
net loan portfolio.

Interest Expense

Total interest expense increased $1.3 million or 54.2% from $2.4 million for the
nine month period ended March 31, 1997 to $3.7 million for the nine month period
ended March 31, 1998.  This increase was due to a  substantial  increase in FHLB
borrowings and an increase in the deposit base, including the increase in volume
of  NOW  accounts,   business  checking  accounts,  local  (non-brokered)  Jumbo
Certificates of Deposit and Public (state and city) Certificates of Deposits.

Provision for Losses on Loans

The Bank Maintains an allowance for loan losses based upon management's periodic
evaluation  of  known  and  inherent  risks  in the loan  portfolio,  past  loss
experience,  adverse  situations that may affect the borrower's ability to repay
loans,  estimated  value of the  underlying  collateral and current and expected
market  conditions.  The  allowance for loan losses was $377,000 and $339,000 at
March 31, 1998 and 1997,  respectively.  The provision for loans was $53,000 and
$21,000 for the nine month  period  ended  March 31,  1998 and 1997.  Based on a
historical trend of limited losses on residential  loans, the amount of the loan
loss provision allocated to residential loans remained relatively stable for the
two periods.  While the Bank maintains its allowance for losses at a level which
it considers to be adequate,  there can be no assurance  that further  additions
will not be made to the loss allowances and that such losses will not exceed the
estimated  amounts.  The  establishment  of a loan loss  provision  each  period
adversely impacts the Bank's net earnings.

Non-Interest Income

Total  non-interest  income increased $30,000 or 88.2% from $34,000 for the nine
month  period  ended March 31, 1997 to $64,000 for the nine month  period  ended
March 31, 1998.  This increase was  primarily  due to increased  service and NSF
charges on NOW and checking accounts and increased ATM use fees.

Non-Interest Expense

Total  non-interest  expense  decreased  $98,000 or 7% from $1.4 million for the
nine month  period  ended  March 31,  1997 to $1.3  million  for the nine months
period ended March 31, 1998.  This  decrease was  primarily due to a decrease in
insurance  expense  of  $277,000,  offset by an  increase  in  compensation  and
benefits costs of $57,000, an increase in other costs of $74,000, an increase in
occupancy  costs of  $15,000,  an  increase in data  processing  of $28,000,  an
increase in professional  fees of $3,000.The  decrease in insurance  expense was
primarily due to the one-time $250,000  assessment paid during the quarter ended
September 30, 1996. The increase in compensation and benefits costs is due to an
increase in staff, some salary increases and

                                       13

<PAGE>



current year accruals for stock-based  compensation plans. The increase in other
expenses is  primarily  due to  increased  supplies,  automated  teller  machine
expense, charitable contributions and postage expense. The increase in occupancy
costs is mainly due to the  depreciation  of Furniture,  Fixtures and Equipment,
building  repairs  and  small  building  improvements.   The  increase  in  data
processing is due to increased  transaction volume from growth in deposits.  The
increase  in  professional  services is the result of using more services of the
Bank's auditing firm. .

Liquidity and Capital Resources

The Bank is required under applicable federal  regulations to maintain specified
levels of "liquid" investments in qualifying types of U.S.  Government,  federal
agency and other  investments.  Prior OTS  regulations  required  that a savings
institution  maintain  liquid  assets of not less than 5% of its  average  daily
balance of net withdrawable  deposit accounts and borrowings payable in one year
or less, of which short-term liquid assets consist of not less than 1%, with the
qualifying investments limited to those having maturities of five years of less.
Revised OTS regulations  effective  November 13, 1997 lowered the required level
of liquid assets to 4%,  removed the  short-term  liquid asset  requirement  and
deleted  the five year or less  maturity  requirement.  At March 31,  1998,  the
Bank's  liquidity,  as measured for  regulatory  purposes,  was 6.30%.  The Bank
adjusts liquidity as appropriate to meet its asset/liability objectives.

The Bank's primary sources of funds are deposits, amortization and prepayment of
loans and mortgage-backed  securities,  maturities of investment securities, and
funds provided from operations. While scheduled loan repayments are a relatively
predictable source of funds, deposit flows and loan and mortgage-backed security
prepayments are  significantly  influenced by general  interest rates,  economic
conditions  and  competition.  In  addition,  the Bank  invests  excess funds in
overnight deposits which provide liquidity to meet lending requirements.

The Bank's  most  liquid  assets are cash and cash  equivalents,  which  include
investments in highly liquid short-term  investments.  The level of these assets
are  dependent on the Bank's  operating,  financing,  and  investing  activities
during any given period. At March 31, 1998, cash and cash equivalents totaled $3
million.  The Bank has other sources of liquidity if a need for additional funds
arises.  Additional  sources of funds  include  FHLB of Dallas  advances and the
ability to borrow against  mortgage-backed  and other  securities.  At March 31,
1998,  the Bank  had $35  million  in  outstanding  borrowings  from the FHLB of
Dallas.   These  outstanding   borrowings  were  used  to  purchase   additional
mortgage-backed  securities  and  mortgage  loan  participations  as a means  of
enhancing earnings.

The  primary  investment  activity  of the  Bank is the  origination  of  loans,
primarily  mortgage  loans.  During the quarter  ended March 31, 1998,  the Bank
originated  $11.1  million in total loans,  of which $7.2 million were  mortgage
loans. The Bank also purchased $717,000 in mortgage loan participations. Another
investment  activity of the Bank is the  investment of funds in U.S.  Government
Agency  securities,  mortgage-backed  securities,  federal funds and FHLB-Dallas
overnight funds. During periods when the Bank's loan demand is limited, the Bank
may  purchase  short-term  investment  securities  to obtain a higher yield than
otherwise available.

The Bank's cash flows are comprised of three primary classifications: cash flows
from operating activities,  investing activities and financing activities.  Cash
flows provided in operating activities,  consisting principally of net earnings,
provision  for loan losses,  amortization  of  investment  and  mortgage  backed
securities  premiums and discounts,  stock based  compensation  costs and income
taxes less  disbursements  of interest and dividends,  and loan origination fees
were  $475,000  and  $119,000 for the nine month period ended March 31, 1998 and
1997 respectively. Net cash used for investing activities consisted primarily of
loan  originations  and  purchases  of  mortgage-backed  securities,   municipal
securities  and FHLB  Stock,  offset by  principal  collections  on  loans,  and
principal  collections  and  proceeds  from the  maturities  of  mortgage-backed
securities  and  investment  securities.  Such uses were $24  million  and $13.7
million for the nine month periods ended March 31, 1998 and 1997,  respectively.
Net cash provided from financing activities consisting primarily of net activity
in deposit and escrow accounts and new FHLB  borrowings,  were $23.3 million and
$13.2  million  for the nine  month  periods  ended  March  31,  1998 and  1997,
respectively.

The Bank  anticipates  that it will have sufficient  funds available to meet its
current  commitments.  As of March 31, 1998,  the Bank had  commitments  to fund
loans of $1.2 million.  Certificates of deposit  scheduled to mature in one year
or less totaled $30.4 million.  Based on historical withdrawals and outflows, on
internal daily deposit  reports  monitored by management,  and the fact that the
Bank does not accept any brokered deposits,

                                       14

<PAGE>



management  believes that a majority of deposits will remain with the Bank. As a
result, no adverse liquidity effects are expected.

At March 31, 1998, the Bank exceeded each of the three OTS capital  requirements
on a fully-phased-in basis.

The Year 2000 issue
-------------------

By now almost  everyone has heard about the year-2000  computer  problem.  Every
major company has a potential  problem caused by computer  hardware and software
developed to use two digits to identify the year instead of four,  i.e. 1995 is,
in many cases, input,  stored,  sorted, and calculated as "95".  Similarly,  the
year 2000, being read as "00", may be treated as the year 1900,  thereby causing
a variety of  problems  such as the  inability  to compute  payment due dates or
interest  correctly.  Rapid and  accurate  data  processing  is essential to the
operation of the Bank.

The Bank's Board of Directors has adopted an action plan for addressing the Year
2000 issue. An internal committee has been appointed by the Board to manage this
effort.  Management  has been charged with the  responsibility  of assuring Year
2000 compliance  within time frames dictated by sound business  practice and the
Federal Financial Institutions Examination Council.

Work has been  underway for some time to identify all equipment and systems that
may  potentially be impacted.  Contact has been made with all outside  servicers
and major vendors to ascertain their individual  levels of Year 2000 compliance.
This effort will continue and will include substantial testing procedures.

The  Bank is  dependent  on a  service  bureau  for its  major  data  processing
functions.  Management is monitoring the service  bureau's Year 2000  compliance
efforts closely. This monitoring includes membership and active participation in
a user  group  made up of client  institutions  of the  service  bureau and will
include testing beginning in the third quarter of 1998.

Major  borrowers  have been contacted in order to help them be aware of the Year
2000 issue and to determine their state of readiness for the Year 2000.

The Bank has experienced  considerable growth in recent years, which independent
of the Year 2000  issue,  has  created  the need to upgrade  some  hardware  and
software. These upgrades,  primarily to the Bank's local area network,  personal
computers,  and  off-the-shelf  software,  are considered a normal result of the
growth and rapid changes in technology. They are not expected to have a material
effect on the financial performance of the Bank.

Although the Bank is expecting  some charges from various  vendors for equipment
and  systems  upgrades  specifically  related  to the  Year  2000  issue,  it is
currently  estimated  that  the  impact  on  financial  performance  will not be
material. However, it is possible that future Year 2000 compliance efforts could
result in currently unforseen material impact on financial performance.

Subsequent Events
-----------------

During the quarter ending June 30, 1998, the Bank will open a newly  constructed
drive-up  teller and  automated  teller  machine  facility  on a lot  previously
purchased for this purpose adjacent to the present bank building.  The Bank will
incur some additional non-interest expense associated with depreciation for this
new  facility.  It is also hoped that the addition  will provide the Bank growth
potential by improving  its ability to deliver  retail  banking  services to the
community.  The addition is not expected to have a material  impact on financial
performance for the Bank during the final quarter of the fiscal year ending June
30, 1998, and future impact cannot be accurately determined at the present time.

Stock Repurchase Program

On  September  23,  1997,  the Company  issued a press  release  announcing  its
intention to repurchase up to 5% (40,035 shares) of the Company's  common stock.
On October 2, 1997, the Company received regulatory approval to repurchase these
shares of common stock before June 28, 1998. As of March 31, 1998, none of these
shares have been  repurchased.  If any shares are  repurchased,  the Company has
decided to retire these shares as authorized but unissued.  The Company believes
that it has sufficient capital to complete the

                                       15

<PAGE>



repurchase and that the  repurchase  will not cause the Bank to fail to meet its
regulatory capital requirements.

Impact of Inflation and Changing Prices

The  consolidated  financial  statements  of  the  Company  and  notes  thereto,
presented  elsewhere  herein,  have been prepared in accordance  with  Generally
Accepted  Accounting  Principles  ("GAAP"),  which  require the  measurement  of
financial  position  and  operating  results  primarily  in terms of  historical
dollars without considering the change in the relative purchasing power of money
over time and due to  inflation.  The impact of  inflation  is  reflected in the
increased cost of the Company's  operations.  Unlike most industrial  companies,
nearly all the assets and liabilities of the Company are financial. 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 prices of goods and services.

Recapture of Post 1987 Bad Debt Reserves

Thrift  institutions  are no longer  allowed a choice  between the percentage of
taxable  income method and the  experience  method in  determining  additions to
their bad debt reserves. Smaller thrifts with $500 million of assets or less are
only allowed to use the experience method.  Larger thrifts must use the specific
charge off method  regarding its bad debts. Any reserve amounts added after 1987
will be taxed  over a six year  period  beginning  in  1996;  however,  bad debt
reserves set aside through 1987 will  generally not be taxed.  Institutions  can
delay these taxes for two years if they meet a  residential  - lending  test. At
June 30,  1997,  the Bank had  $55,936 of post 1987  bad-debt  reserves of which
1/6th or $9,323 was  recaptured  into taxable income for the year ended June 30,
1997.  Future  recapture  of the Bank's  bad-debt  reserves  may have an adverse
effect on net earnings. Management does not believe such future recapture of the
Bank's bad debt  reserves  will have a material  impact on the Bank's  financial
condition.

Impact of Certain Accounting Standards

Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be Disposed of

In March 1995,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for Long-Lived  Assets to be Disposed of." This Statement
is currently effective for the Company. This statement established standards for
the impairment of long-lived  assets and requires that long-lived assets held by
an entity be reviewed for impairment whenever events or changes in circumstances
indicate  that  the  carrying  value  of an asset  may not be  recoverable.  The
Statement also requires that long-lived  assets to be disposed of be reported at
the lower of  carrying  value or fair value less cost to sell.  Adoption of this
Statement has not had and is not  anticipated  to have a material  impact on the
Company's financial condition.

Accounting for Mortgage Servicing Rights

In May,  1995,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No. 122,  "Accounting  for Mortgage  Servicing
Rights." This Statement  amends FASB No. 65,  "Accounting  for Certain  Mortgage
Banking  Activities." This Statement requires that mortgage banking  enterprises
recognize as separate assets right to service mortgage loans for others, however
those servicing rights are acquired.  Mortgage banking  enterprises that acquire
mortgage servicing rights through either the purchase or origination of mortgage
loans and sells or securitizes those loans with servicing rights retained should
allocate the total cost of the mortgage loans to the mortgage  servicing  rights
and the loans  (without the mortgage  servicing  rights) based on their relative
fair values if it is practicable  to estimate those fair values.  This Statement
is effective  in the current  fiscal year.  The Bank  currently  does not retain
servicing  rights on  purchased or sold loans,  therefore,  the adoption of this
Statement has not had and is not  anticipated  to have a material  impact on the
Bank's financial condition.

Accounting for Stock-Based Compensation

In October,  1995,  the FASB issued SFAS No. 123  "Statement of  Accounting  for
Stock-Based   Compensation"  which  defines  a  "fair  value  based  method"  of
accounting for an employee stock option whereby compensation cost is measured at
the  grant  date  based on the value of the  award  and is  recognized  over the
service  period.  The FASB encouraged all entities to adopt the fair value based
method,  however, it allows entities to continue the use of the "intrinsic value
based method" prescribed by Accounting Principles Board ("APB") Opinion No.

                                       16

<PAGE>



25. Under the intrinsic value based method,  compensation  cost is the excess of
the market price of the stock at the grant date over the amount an employee must
pay to acquire the stock.  However,  most stock  option  plans have no intrinsic
value at the grant date and, as such, no compensation  cost is recognized  under
APB  Opinion  No.  25.  Entities  electing  to  continue  use of the  accounting
treatment  of APB Opinion No. 25 must make certain pro forma  disclosures  as if
the fair value based method had been applied.  The Bank has continued to use the
"intrinsic value based method" as prescribed by APB Opinion No. 25.

Transfer and Servicing of Financial Assets and Extinguishment of Liabilities

The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards No. 125,  "Transfer and Servicing of Financial  Assets and
Extinguishment of Liabilities."  This Statement requires that transferred assets
could be derecognized  only when control is surrendered,  rather than when risks
and rewards  related to the asset are passed to another party. A liability would
be extinguished when the creditor no longer has ultimate  responsibility for the
liability. Adoption of this Statement has not had and is not anticipated to have
a material impact on the Company's financial condition.

Earnings per Share

Recently the Financial  Accounting Standards Board issued Statement of Financial
Accounting  Standards No. 128, "Earnings per Share." It simplifies the standards
for computing earnings per share,  superseding the standards previously found in
Opinion 15. It replaces the  presentation  of primary  earnings per share with a
presentation of basic earnings per share. It also requires dual  presentation of
basic and diluted earnings per share on the face of the income statement for all
entities with complex capital  structures and requires a  reconciliation  of the
numerator and  denominator  of the basic  earnings per share  computation to the
numerator and denominator of the earnings per share computation.  This Statement
will affect the financial  statements  issued by the Company after  December 15,
1997.

Disclosure of Information about an Entity's Capital Structure

The Financial  Accounting Standards Board recently issued Statement of Financial
Accounting  Standards  No. 129,  "Disclosure  of  Information  about an Entity's
Capital Structure." This Statement applies to all entities. Its requirements are
a  consolidation  of those  found in APB  Opinions 10 and 15, and  Statement  of
Financial  Accounting  Standards  No. 47, and it  eliminates  the  exemption  of
nonpublic  entities from certain  disclosure  requirements.  This Statement will
affect the financial statements issued by the Company after December 15, 1997.

Reporting Comprehensive Income

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income".
This Statement  establishes standards for reporting and display of comprehensive
income on its components (revenues,  expenses, gains and losses).  Comprehensive
income is defined as the  change in equity of a  business  enterprise,  during a
period,  from  transactions  and other events and  circumstances  from  nonowner
sources.   The  Statement   requires  that  entities  classify  items  of  other
comprehensive  income by their nature in a financial  statement  and display the
accumulated  balance of other  comprehensive  income  separately  from  retained
earnings and additional  paid-in-capital in the equity section of a statement of
financial position. This Statement is effective for fiscal years beginning after
December 31, 1997.

Disclosure About Segments of an Enterprise and Related Information

Also in June 1997, the FASB issued SFAS No. 131,  "Disclosures About Segments of
an Enterprise and Related Information." This Statement establishes standards for
the way that public entities  report  information  about  operating  segments in
annual  financial  statements  and  requires  that  selected  information  about
operating  segments be reported in interim  financial  reports as well.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas and major  customers.  This  Statement is effective for fiscal
years beginning after December 31, 1997.

PART II.  OTHER INFORMATION
---------------------------

Item 6.  Exhibits and Reports on Form 8-K
None

                                       17

<PAGE>



SIGNATURES

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

                                          GFSB BANCORP, INC.


Date: May 12, 1998                        /s/ Jerry R. Spurlin
                                          ------------------------------------
                                          Jerry R. Spurlin
                                          President






















                                      18