SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997    Commission File Number:   0-19212
                                                                      ----------

                             JEFFERSONVILLE BANCORP
             (Exact name of Registrant as specified in its charter)

              New York                                 22-2385448
    (State or other jurisdiction of      (I.R.S. Employer identification No.)
     incorporation or organization)

                  P. O. Box 398, Jeffersonville, New York 12748
                    (Address of principal executive offices)

Registrant's telephone number, including area code:             (914) 482-4000



           Securities registered pursuant to Section 12(b) of the Act:
    Title of each class                   Name of exchange on which registered
           NONE                                           NONE

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

                          Common Stock, $0.50 Par Value
                                (Title of Class)



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  proceeding 12 months (or for such shorter  period that the  Registrant  was
required  to file  such  report(s),  and (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No

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

Indicate the number of shares  outstanding  in each of the  issuer's  classes of
common stock:

Class of Common Stock          Number of Shares Outstanding as of March 27, 1998
---------------------          -------------------------------------------------
    $0.50 Par Value                                  1,419,295

   The aggregate market value of the Registrant's common stock (based upon the
   average bid and asked prices on March 27, 1998) held by non-affiliates was
                           approximately $29,569,850.



                       DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of the  Registrant's  Annual Report to shareholders  for the fiscal
    year ended December 31, 1997.

(2) Portions of the  Registrant's  Proxy  Statement for its Annual Meeting of
    Stockholders to be held on April 28, 1998




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                             JEFFERSONVILLE BANCORP

                               INDEX TO FORM 10-K

                                     PART I

                                                                         PAGE
Item   1.  Business:
               a)   General development of business........................3
               b)   Financial information about segments...................3
               c)   Narrative description of business...................3-12
               d)   Statistical information............................13-17

Item   2.  Properties..................................................18-19

Item   3.  Legal Proceedings..............................................19

Item   4.  Submission of Matters to a Vote of Security Holders............19

                                               PART II

Item   5.  Market for the Registrant's Common Equity and Related
           Stockholder Matters............................................19

Item   6.  Selected Financial Data.....................................19-20

Item   7A  Quantitative & Qualitative Disclosures about Market Risk....16-17

Item   7.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations..................20

Item   8.  Financial Statements and Supplementary Data....................20

Item   9.  Changes in and Disagreements with Accountants
           Accounting and Financial Disclosure............................20

                                              PART III

Item  10.  Directors and Executive Officers of the Registrant.............20

Item  11.  Executive Compensation.........................................20

Item  12.  Security Ownership of Certain Beneficial
           Owners and Management..........................................20

Item  13.  Certain Relationships and Related Transactions..............20-21

                                               PART IV

Item  14.  Exhibits, Financial Statement Schedules, and Reports on
           Form 8-K.......................................................21

           Signatures.....................................................21




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                                                      Part I

Item 1.       BUSINESS

(a)      General Development of Business

         Jeffersonville  Bancorp  (the  "Company")  was  organized as a New York
         Corporation  on  January  12,  1982,  for the  purpose  of  becoming  a
         registered  bank holding  company under the Bank Holding Company Act of
         1956, as amended (the "BHC" Act"). Effective June 30, 1982, the Company
         became the registered  bank holding company for The First National Bank
         of  Jeffersonville,  a bank  chartered in 1913 and organized  under the
         national banking laws of the United States (the "Bank").

(b)      Financial Information About Segments

         The Company is engaged in the business of managing or  controlling  its
         subsidiary  bank and such other  business  related to banking as may be
         authorized under the BHC Act. See consolidated financial statements and
         notes to the consolidated  financial statements contained in the Annual
         Report to the Stockholders  for 1997, which are incorporated  herein by
         reference.

(c) 1.   Narrative Description of Business

         The First National Bank of Jeffersonville

         The Bank was  organized in 1913 and became a subsidiary  of the Company
         on June 30,  1982.The  Bank is an  independently  owned  bank  based in
         Sullivan  County,  New  York.  In  addition  to  its  main  office  and
         operations  center in  Jeffersonville,  the Bank has  seven  additional
         branch office locations in Eldred, Liberty, Loch Sheldrake, Monticello,
         Livingston Manor, Narrowsburg and Callicoon. The Bank is a full service
         institution  employing  approximately  100  people  and  serves  all of
         Sullivan County, New York as well as some areas of adjacent counties in
         New York and Pennsylvania.

         Throughout  Sullivan County there are 31 branches of commercial  banks,
         savings  banks,  savings  and loan  associations  and  other  financial
         organizations.

         Deposit and Loan Products

         Deposit Products. The bank offers a variety of deposit products typical
         of commercial  banks and has designed product  offerings  responsive to
         the  needs  of both  individuals  and  businesses.  Traditional  demand
         deposit accounts, interest-bearing transaction accounts (NOW accounts )
         and  savings  accounts  are  offered  on a  competitive  basis  to meet
         customers' basic banking needs. Money market accounts, time deposits in
         the form of  certificates  of deposit and  IRA/KEOGH  accounts  provide
         customers with price competitive and flexible investment alternatives.

         The Bank does not have a single  depositor  or a small group of related
         depositors  whose loss would have a material  adverse  effect  upon the
         business of the Bank. The Bank does not have a major loan concentration
         in any individual industry.

         The Bank offers a broad range of commercial  and consumer loan products
         designed to meet the banking needs of individual customers,  businesses
         and municipalities.  Additional information is set forth below relating
         to the Bank's loan products,  including major loan categories,  general
         loan terms, credit underwriting  criteria, and risks particular to each
         category of loans.



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         Commercial  Financial and  Agricultural  Loans;  Commercial Real Estate
         Loans.  The Bank offers a wide range of commercial  credit products and
         services to its  customers.  These include  secured and unsecured  loan
         products  specifically  tailored to the credit needs of the  customers,
         underwritten  with  terms and  conditions  reflective  of risk  profile
         objectives  and corporate  earnings  requirements.  These  products are
         offered at all branch locations. Credit decisions are generally made on
         a  decentralized   All loans are
         governed by a commercial  loan policy which was  developed to provide a
         clear  framework  for  determining  acceptable  levels of credit  risk,
         underwriting  criteria,   monitoring  existing  credits,  and  managing
         problem credit relationships.  Credit risk control mechanisms have been
         established  and are monitored  closely for  compliance by the internal
         auditor and an external loan review company.

         Risks  particular  to  commercial,  financial  and  agricultural  loans
         include borrowers' capacities to perform according to contractual terms
         of loan agreements  during periods of unfavorable  economic  conditions
         and  changing  competitive   environments.   Management  expertise  and
         competency are critical  factors  affecting the customers'  performance
         and ultimate ability to repay their debt  obligations.  Commercial real
         estate  loans  create  exposure to market value risk where the value of
         the underlying collateral decreases primarily as the result of regional
         economic trends.

         Consumer  Loans;  The Bank  offers a range of consumer  loan  products.
         These products include both open-end  (credit cards,  home equity lines
         of credit, unsecured revolving lines of credit) and closed-end (secured
         and unsecured  direct and indirect  installment  loans).  Most of these
         loans are  originated at the branch level.  This delivery  mechanism is
         supported  by  an  automated  loan  platform   delivery  system  and  a
         decentralized  underwriting process. The lending process is designed to
         ensure not only the  efficient  delivery of credit  products,  but also
         compliance with applicable consumer regulations while minimizing credit
         risk exposure.

         Credit  decisions  are made under the  guidance of a standard  consumer
         loan policy,  with the assistance of senior credit  managers.  The loan
         policy was developed to provide definitive guidance encompassing credit
         underwriting,  monitoring and management.  The quality and condition of
         the consumer loan  portfolio,  as well as compliance  with  established
         standards, is also monitored closely.

         A borrower's ability to repay consumer debt is generally dependent upon
         the  stability  of the income  stream  necessary  to service  the debt.
         Adverse  changes in economic  conditions  resulting in higher levels of
         unemployment increase the risk of consumer defaults. Risk of default is
         also impacted by a customer's total debt obligation. While the Bank can
         analyze a borrower's capacity to repay at the time a credit decision is
         made, subsequent  extensions of credit by other financial  institutions
         may cause the customer to become over-extended,  thereby increasing the
         risk of default.

          Residential  Real Estate Loans;  The Company offers  mortgage  lending
          services,  originating an array of mortgage loan products All mortgage
          loans  originated are held in the bank's  portfolio.  Residential real
          estate loans  possess risk  characteristics  much the same as consumer
          loans.  Stability of the borrower's employment is a critical factor in
          determining the likelihood of repayment.  Market value risk, where the
          value  of  the   underlying   collateral   declines  due  to  economic
          conditions, is also a factor.

         Compliance  with federal,  state and local  provisions  which have been
         enacted or adopted  regulating  the  discharge  of  materials  into the
         environment,  is not  expected  to have any  material  effect  upon the
         capital expenditures, earnings and competitive positions of the Bank.


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         Supervision and Regulation

         The company is a bank holding company, registered with Governors of the
         Federal  Reserve System (the "Federal  Reserve")  under the BHC Act. As
         such,  the  Registrant  and  its   subsidiaries   are  subject  to  the
         supervision, examination, and reporting requirements of the BHC Act and
         the regulations of the Federal Reserve.

         The BHC Act further  provides that the Federal  Reserve may not approve
         any  transaction  that  would  result  in a  monopoly  or  would  be in
         furtherance  of any  combination or conspiracy to monopolize or attempt
         to  monopolize  the  business  of banking in any  section of the United
         States,  or  the  effect  of  which  may  be  to  substantially  lessen
         competition in any section of the country,  or that in any other manner
         would be in restraint of trade, unless the  anticompetitive  effects of
         the proposed  transaction are clearly outweighed by the public interest
         in meeting the convenience and needs of the community to be served. The
         Federal  Reserve  is  also  required  to  consider  the  financial  and
         managerial resources and future prospects of the bank holding companies
         and banks  concerned and the  convenience and needs of the community to
         be served.  Consideration of financial  resources  generally focuses on
         capital  adequacy,  and  consideration  of convenience and needs issues
         including the parties' performance under the Community Reinvestment Act
         of 1977 (the "CRA"), both of which are discussed below.

          The BHC Act  prohibits  the  Federal  Reserve  from  approving  a bank
          holding  company's  application  to  acquire  a bank or  bank  holding
          company located outside the state in which the deposits of its banking
          subsidiaries  were  greatest  on the  date the  company  became a bank
          holding  company  (New York in the case of the  company),  unless such
          acquisition  is  specifically  authorized  by  statute of the state in
          which the bank or bank holding company to be acquired is located.  New
          York has adopted national  reciprocal  interstate banking  legislation
          permitting New York based bank holding  companies to acquire banks and
          bank  holding  companies  in other  states and  allowing  bank holding
          companies located in states with reciprocal legislation to acquire New
          York banks and bank holding  companies.  Under the  provisions  of the
          Riegle-Neal  Interstate  Banking and Branching and  Efficiency  Act of
          1994 (the  "Interstate  Banking Act"),  the existing  restrictions  on
          interstate acquisitions of banks by bank holding companies,  including
          the reciprocal  interstate banking legislation adopted by the state of
          New York, have been repealed.  This allows the holding company and any
          other  bank  holding  company  located  in New York to  acquire a bank
          located in any other  state,  and a bank holding  located  outside New
          York is able to  acquire  any New  York-based  bank,  in  either  case
          subject to certain  deposit  percentage  and other  restrictions.  The
          Interstate  Banking Act also generally  provides  that,  after June 1,
          1997, national and state-chartered banks may branch interstate through
          acquisitions of banks in other states.  By adopting  legislation prior
          to that  date,  a state  has the  ability  to  either  "opt  in" or to
          prohibit interstate branching altogether.

         The Company is also subject to the  provisions  of Article III-A of the
         New York State Banking Law. Among other things,  Article III-A requires
         the  approval  of  the  New  York  Banking   Department  prior  to  the
         acquisition by a bank holding  company of direct or indirect  ownership
         or control of 10% or more of the voting stock of a banking institution,
         or the  acquisition  by a bank holding  company  directly or indirectly
         through a  subsidiary  of all or  substantially  all of the assets of a
         banking  institution,  or a merger or  consolidation  with another bank
         holding company.

         The BHC Act generally prohibits the Company from engaging in activities
         other  than  banking  or  managing  or   controlling   banks  or  other
         permissible  subsidiaries  and from  acquiring or  retaining  direct or
         indirect  control of any company  engaged in any activities  other than
         those  activities  determined  by the Federal  Reserve to be so closely
         related to banking or managing or  controlling  banks as to be a proper
         incident  thereto.  In  determining  whether a  particular  activity is
         permissible,  the Federal Reserve must consider whether the performance
         of such an activity  reasonably can be expected to produce  benefits to
         the public,  such as greater  convenience,  increased  competition,  or


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         gains in efficiency,  that outweigh  possible adverse effects,  such as
         undue  concentration  of  resources,  decreased or unfair  competition,
         conflicts  of  interest,  or unsound  banking  practices.  For example,
         factoring accounts  receivable,  acquiring or servicing loans,  leasing
         personal property, conducting discount securities brokerage activities,
         performing certain data processing services,  acting as agent or broker
         in selling  credit life  insurance and certain other types of insurance
         in  connection  with  credit   transactions,   and  performing  certain
         insurance  underwriting  activities  all have  been  determined  by the
         Federal Reserve to be permissible activities of bank holding companies.
         The BHC Act does  not  place  territorial  limitations  on  permissible
         non-banking bank-related activities of bank holding companies.  Despite
         prior  approval,  the Federal  Reserve has the power to order a holding
         company or its  subsidiaries  to terminate any activity or to terminate
         its ownership or control of any subsidiary when it has reasonable cause
         to believe  that  continuation  of such  activity or such  ownership or
         control constitutes a serious risk to the financial safety,  soundness,
         or stability of any bank subsidiary of that bank holding company.

         The Bank, the single subsidiary bank of the Company, is a member of the
         FDIC,  and as such,  its deposits are insured by the FDIC to the extent
         provided by law. The Bank is also subject to numerous state and federal
         statutes and  regulations  that affect its  business,  activities,  and
         operations,  and it is  supervised  and examined by one or more federal
         bank  regulatory  agencies.  Because the Bank is a national bank, it is
         subject to  supervision  and  regulation  by the OCC. The OCC regularly
         examines the  operations  of the  subsidiary  bank and has authority to
         approve or disapprove  mergers,  consolidations,  the  establishment of
         branches,  and similar corporate actions. The OCC also has the power to
         prevent the  continuance or  development  of unsafe or unsound  banking
         practices or other violations of law.

         The Bank is subject to the  provisions  of the CRA.  Under the terms of
         the CRA, the appropriate federal bank regulatory agency is required, in
         connection with its examination of a subsidiary institution,  to assess
         such institution's  record in meeting the credit needs of the community
         served by that institution,  including those of low and moderate-income
         neighborhoods.  The regulatory agency's assessment of the institution's
         record is made  available to the public.  Further,  such  assessment is
         required  of any  institution  which  has  applied  to:  (i)  charter a
         national  bank;  (ii) obtain  deposit  insurance  coverage  for a newly
         chartered  institution;  (iii)  establish a new branch office that will
         accept deposits;  (iv) relocate an office;  or (v) merge or consolidate
         with, or acquire the assets or assume the  liabilities  of, a federally
         regulated financial institution.  In the case of a bank holding company
         applying for approval to acquire a bank or other bank holding  company,
         the  Federal  Reserve  will  assess  the  records  of  each  subsidiary
         institution of the applicant bank holding company, and such records may
         be the basis for denying the application.

         An  institution's  CRA rating will continue to be taken into account by
         its  regulator  in  considering  various  types  of  applications.   In
         addition,   an   institution   receiving   a  rating  of   "substantial
         noncompliance"  is  subject  to civil  money  penalties  or a cease and
         desist order under Section 8 of the Federal Deposit  Insurance Act (the
         "FDIA"). CRA remains a critical component of the regulatory examination
         process.  CRA examination  results and related concerns have been cited
         as a reason to reject and or modify  branching and merger  applications
         by various federal and state banking agencies.

          Payment of  Dividends.  The  Company is a legal  entity  separate  and
          distinct  from the  Bank.  The  principal  source  of cash flow of the
          Company, including cash flow to pay dividends to its stockholders,  is
          dividends from the Bank . The  subsidiary  bank is required by the OCC
          to obtain  prior  approval for the payment of dividends to the holding
          company if the total of all dividends declared by such subsidiary bank
          in any year would  exceed the total of such  bank's  net  profits  (as


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          defined and  interpreted by regulation) for that year and the retained
          net  profits  (as  defined)  for the  preceding  two  years,  less any
          required  transfers  to surplus.  There are also other  statutory  and
          regulatory  limitations on the payment of dividends by the Bank to the
          Registrant  as well as the  Registrant  to its  stockholders.  Without
          receiving  dividends  from the Bank the  Registrant  would not be in a
          position to pay dividends to its
          stockholders.

         If, in the opinion of a federal regulatory agency, an institution under
         its  jurisdiction  is  engaged in or is about to engage in an unsafe or
         unsound  practice (which,  depending on the financial  condition of the
         institution,  could include the payment of dividends),  such agency may
         require,  after notice and a hearing,  that such institution  cease and
         desist from such practice.  The Federal Reserve, the OCC, and the FDIC,
         have  indicated  that paying  dividends  that deplete an  institution's
         capital  base to an  inadequate  level  would be an unsafe and  unsound
         banking  practice.  Under the  Federal  Deposit  Insurance  Corporation
         Improvement Act of 1991 ("FDICIA"),  an insured institution may not pay
         any dividend if it is undercapitalized,  or if such payment would cause
         it  to  become   undercapitalized.   See  "Prompt  Corrective  Action."
         Moreover, the Federal Reserve, the OCC, and the FDIC have issued policy
         statements which provide that bank holding  companies and insured banks
         should generally only pay dividends out of current operating earnings.

         At December 31,1997 under dividend  restrictions  imposed under federal
         and state laws, the Bank,  without  obtaining  governmental  approvals,
         could   declare   aggregate   dividends  to  the  Holding   Company  of
         approximately  $370,000  provided  that  the  Bank  would  then  be  in
         compliance  with one or more minimum  capital  requirements.  Moreover,
         federal bank regulatory  authorities also have the general authority to
         limit the  dividends  paid by  insured  banks if such  payments  may be
         deemed to constitute an unsafe and sound practice.

          Transactions   With   Affiliates;    There-are   various    regulatory
          restrictions on the extent to which the can borrow or otherwise obtain
          credit from the  subsidiary  bank.  The Bank is limited in engaging in
          borrowing and other "covered transactions" with non-bank affiliates to
          the  following  amounts:  (i) in the case of any such  affiliate,  the
          aggregate  amount of covered  transactions  of the subsidiary bank and
          its  subsidiaries  may not exceed 10% of the capital stock and surplus
          of such  subsidiary  bank;  and (ii) in the case of all affiliates the
          aggregate  amount of covered  transactions  of the subsidiary bank and
          its  subsidiaries  may not exceed 20% of the capital stock and surplus
          of such subsidiary bank. "Covered transactions" are defined by statute
          to include a loan or  extension  of credit,  as well as a purchase  of
          securities  issued by an  affiliate,  a  purchase  of  assets  (unless
          otherwise  exempted  by  the  Federal  Reserve),   the  acceptance  of
          securities  issued by the affiliate as  collateral  for a loan and the
          issuance of a guarantee,  acceptance, or letter of credit on behalf of
          an  affiliate.  Covered  transactions  are  also  subject  to  certain
          collateralization  requirements.  Further,  a bank holding company and
          its  subsidiaries  are  prohibited  from  engaging  in  certain  tiein
          arrangements  in connection  with any extension of credit,  lease,  or
          sale of property or furnishing of services.

          Capital  Adequacy;  The Registrant and the Bank are required to comply
          with the capital adequacy standards established by the Federal Reserve
          in the  case of the  holding  company  and the OCC in the  case of the
          subsidiary  bank. There are two basic measures of capital adequacy for
          bank  holding  companies  that have been  promulgated  by the  Federal
          Reserve: a risk-based  measure and a leverage measure.  All applicable
          capital  standards must be satisfied for a bank holding  company to be
          considered in compliance.

         The  risk-based  capital  standards  are  designed  to make  regulatory
         capital  requirements  more  sensitive to  differences  in risk profile
         among banks and bank  holding  companies,  to account  for  off-balance
         sheet  exposure,  and to  minimize  disincentives  for  holding  liquid
         assets.  Assets and off-balance  sheet items are assigned to broad risk
         categories, each with appropriate weights. The resulting capital ratios
         represent  capital as a percentage  of total  risk-weighted  assets and
         off-balance sheet items.


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          As to the  holding  company,  the minimum  guideline  for the ratio of
          total capital ("Total  Capital") to  risk-weighted  assets  (including
          certain off-balance-sheet items, such as standby letters of credit) is
          8.0%.  At least half of the Total  Capital  must be composed of common
          stock,  minority  interests  in the equity  accounts  of  consolidated
          subsidiaries,  noncumulative  perpetual preferred stock, and a limited
          amount of  cumulative  perpetual  preferred  stock,  less goodwill and
          certain other intangible assets ("Tier 1 Capital").  The remainder may
          be subordinated  debt,  other preferred stock, and a limited amount of
          loss reserves. At December 31, 1997, the Company's consolidated Tier 1
          Capital and Total Capital ratios were a17.7% and 19.0% respectively.

         In addition, the Federal Reserve has established minimum leverage ratio
         guidelines for bank holding  companies.  These guidelines provide for a
         minimum  ratio of Tier 1 Capital to average  assets,  less goodwill and
         certain other  intangible  assets (the "leverage  ratio"),  of 3.0% for
         bank holding companies that meet certain specified criteria,  including
         having the highest  regulatory rating. All other bank holding companies
         generally  are required to maintain a leverage  ratio of at  least-3.0%
         plus an additional  cushion of 100 to 200 basis  points.  The Company's
         leverage  ratio at December  31, 1997 was 10.0%.  The  guidelines  also
         provide that bank holding  companies  experiencing  internal  growth or
         making  acquisitions  will  be  expected  to  maintain  strong  capital
         positions  substantially  above the minimum  supervisory levels without
         significant  reliance on intangible  assets.  Furthermore,  the Federal
         Reserve  has  indicated  that it will  consider a banking  institutions
         "tangible Tier 1 Capital  leverage ratio"  (deducting all  intangibles)
         and other  indications of capital strength in evaluating  proposals for
         expansion or new activities.

         The Bank is subject to  risk-based  and leverage  capital  requirements
         adopted by the OCC which  substantially  mirror the requirements of the
         holding company. The Bank's capital ratios are substantially similar to
         those  of the  Registrant  and as such is also in  compliance  with all
         applicable ratios.

         Failure to meet capital guidelines could subject a bank to a variety of
         enforcement remedies, including the termination of deposit insurance by
         the FDIC, and to certain restrictions on its business. See "Prompt
         Corrective Action."

          The Federal Reserve and the OCC have,  pursuant to FDICIA,  adopted an
          amendment to the risk-based  capital  standards  which would calculate
          the change in an  institution's  net economic  value  attributable  to
          increases  and  decreases in market  interest  rates and would require
          banks with  excessive  interest rate risk exposure to hold  additional
          amounts of capital against such exposures.

         Support of Subsidiary Bank;  Under Federal Reserve policy,  the Company
         is expected to act as a source of financial  strength to, and to commit
         resources to support, the subsidiary bank. This support may be required
         at times when,  absent such Federal Reserve policy,  the Registrant may
         not be inclined to provide it. In addition, any capital loans by a bank
         holding  company to the  subsidiary  bank are  subordinate  in right of
         payment  to  deposits  and  to  certain  other   indebtedness  of  such
         subsidiary bank. In the event of a bank holding  company's  bankruptcy,
         any commitment by the bank holding company to a federal bank regulatory
         agency to maintain the capital of a subsidiary  bank will be assumed by
         the bankruptcy trustee and entitled to a priority of payment.

         Under the FDIA,  a  depository  institution  insured by the FDIC can be
         held  liable for any loss  incurred  by, or  reasonably  expected to be
         incurred by, the FDIC after August 9, 1989 in connection  with: (i) the
         default of a commonly controlled  FDIC-insured  depository institution;
         or (ii) any assistance  provided by the FDIC to any commonly controlled
         FDIC insured depository  institution "in danger of default." The FDIC's
         claim for damages is superior to claims of  stockholders of the insured
         depository  institution or its holding  company,  but is subordinate to
         claims of depositors,  secured  creditors,  and holders of subordinated
         debt  (other  than  affiliates)  of  the  commonly  controlled  insured
         depository  institution.  The Bank is subject to these  cross-guarantee


                                       8
<PAGE>



         provisions.  As a result,  any loss  suffered by the FDIC in respect of
         the Bank  would  likely  result  in  assertion  of the  cross-guarantee
         provisions superior to the claims of the parent holding company.

         Prompt  Corrective  Action;  FDICIA  establishes  a  system  of  prompt
         corrective   action  to  resolve  the   problems  of   undercapitalized
         institutions. Under this system, which became effective on December 19,
         1992,  the federal  banking  regulators  are required to establish five
         capital  categories  ("well  capitalized,"   "adequately  capitalized,"
         "undercapitalized,"  "significantly  undercapitalized," and "critically
         undercapitalized")  and to take certain mandatory  supervisory actions,
         and are authorized to take other discretionary actions, with respect to
         institutions in the three undercapitalized  categories, the severity of
         which will depend upon the capital category in which the institution is
         placed.  Generally,  subject to a narrow exception, the FDICIA requires
         the  banking  regulator  to appoint a receiver  or  conservator  for an
         institution  that is critically  undercapitalized.  The federal banking
         agencies have  specified by regulation  the relevant  capital level for
         each category.

         An institution that is categorized as  undercapitalized,  significantly
         undercapitalized, or critically undercapitalized, is required to submit
         an  acceptable  capital  restoration  plan to its  appropriate  federal
         banking  agency.  Under FDICIA,  a bank holding  company must guarantee
         that a subsidiary  depository  institution meet its capital restoration
         plan, subject to certain  limitations.  The obligation of a controlling
         bank holding company under FDICIA to fund a capital restoration plan is
         limited  to the  lesser  of  5.0% of an  undercapitalized  subsidiary's
         assets or the amount required to meet regulatory capital requirements.

         The  severity  of the actions  required to be taken by the  appropriate
         federal  banking  authorities  increases  as an  institution's  capital
         position deteriorates. Among other actions, the mandates could include,
         under certain circumstances, requiring recapitalization of or a capital
         restoration  plan by a depository  institution,  such as requiring  the
         sale of new shares, a merger with (or sale to) another  institution (or
         holding  company),   restricting  certain   transactions  with  banking
         affiliates,  otherwise  restricting  transactions with bank or non-bank
         affiliates,  restricting  interest rates that the  institution  pays on
         deposits,  restricting asset growth or reducing total assets, altering,
         reducing,  or  terminating  activities,   holding  a  new  election  of
         directors, dismissing any director or senior executive officer who held
         office for more than 180 days immediately before the institution became
         undercapitalized,  employing  qualified senior executive  officers,  or
         ceasing to accept deposits from correspondent depository institutions.

         Not  later  than  90  days  after  an  institution  becomes  critically
         undercapitalized,  the  appropriate  federal  banking  agency  for  the
         institution  must  appoint a receiver or, with the  concurrence  of the
         FDIC, a  conservator,  unless the agency,  with the  concurrence of the
         FDIC,  determines  that the  purpose  of the prompt  corrective  action
         provisions  would  be  better  served  by  another  course  of  action.
         Thereafter,  an institution's  regulator must periodically reassess its
         determination  to  permit  a  particular  critically   undercapitalized
         institution  to continue to operate and must appoint a  conservator  or
         receiver for the  institution at the end of an  approximately  one year
         period following the institution's initial classification as critically
         undercapitalized  unless  a number  of  stringent  conditions  are met,
         including  a  determination  by the  regulator  and the  FDIC  that the
         institution has positive net worth and a certification by such agencies
         that the  institution  is viable and not expected to fail.  At December
         31, 1997, the Bank had the requisite  capital levels to qualify as well
         capitalized.

         Brokered  Deposits;  The FDIC has  adopted  regulations  governing  the
         receipt of  brokered  deposits.  Under the  regulations,  a  depository
         institution cannot accept,  rollover, or renew brokered deposits unless
         (i) it is well  capitalized  or (ii) it is adequately  capitalized  and
         receives a waiver from the FDIC. A depository  institution  that cannot
         receive brokered deposits also cannot offer "pass-through" insurance on
         certain employee benefit accounts.  Whether or not it has obtained such


                                       9
<PAGE>



         a waiver an adequately  capitalized  depository institution may not pay
         an  interest  rate on any  deposits  in excess of 75 basis  points over
         certain  prevailing market rates specified by regulation.  There are no
         such restrictions on a depository institution that is well capitalized.
         Since the Bank had the  requisite  capital  levels to  qualify  as well
         capitalized  as of December 31, 1997 the company  believes the brokered
         deposits  regulation  has had no  material  effect  on the  funding  or
         liquidity of the bank.

         FDIC  Insurance;  Under the FDIC's risk  related  insurance  assessment
         system,  insured  depository  institutions maybe required to pay annual
         assessments to the FDIC. An institution's risk  classification is based
         on  assignment of the  institution  by the FDIC to one of three capital
         groups and to one of three supervisory subgroups. The three supervisory
         subgroups are group "A", financially solid institutions with only a few
         minor  weaknesses,  Group "B",  institutions  with weaknesses which, if
         uncorrected,  could cause substantial  deterioration of the institution
         and increased  risk to the insurance  fund and Group "C",  institutions
         with a  substantial  probability  of loss to the fund absent  effective
         corrective  action.  The three capital categories are well capitalized;
         adequately  capitalized;  and undercapitalized.  These three categories
         are  substantially  the  as the  prompt  corrective  action  categories
         previously  described,  with the  undercapitalized  category  including
         institutions that are undercapitalized, significantly undercapitalized,
         and critically undercapitalized for prompt corrective action purposes.

          As of May 31,  1995  the  FDIC  was  able to  determine  that the Bank
          Insurance Fund ("BIF) obtained the desired reserve ratio (i.e.,  ratio
          of reserves to insured deposits) of 1.25%. As a result, FDIC Insurance
          premiums  were  reduced in early 1996 to the point  where the Bank was
          required to pay only the minimum of $500 per quarter.  On September 30
          1996,  legislation was passed  recapitalizing the Savings  Association
          Insurance Fund. Included in that legislation were provisions requiring
          members of the BIF to assist in the repayment of FICO bonds.  The cost
          to  mandated  by this  legislation  is  anticipated  to be at least in
          $24,000 in 1998

         Under the FDIA,  insurance  of deposits may be  terminated  by the FDIC
         upon a finding that the  institution  has engaged in unsafe and unsound
         practices, is in an unsafe or unsound condition to continue operations,
         or has  violated  any  applicable  law,  regulation,  rule,  order,  or
         condition imposed by the FDIC.

         Safety and Soundness  Standards;  Federal banking  agencies  promulgate
         safety  and  soundness   standards   relating  to  internal   controls,
         information  systems and internal  audit systems,  loan  documentation,
         credit   underwriting,    interest   rate   exposure,   asset   growth,
         compensation,  fees, and benefits.  With respect to internal  controls,
         information systems, and internal audit systems, the standards describe
         the functions that adequate internal  controls and information  systems
         must  be  able to  perform,  including:  (i)  monitoring  adherence  to
         prescribed policies;  (ii) effective risk management;  (iii) timely and
         accurate  financial,   operational,   and  regulatory  reporting;  (iv)
         safeguarding  and managing  assets;  and (v) compliance with applicable
         laws and regulations. The standards also include requirements that: (i)
         those  performing  internal audits be qualified and  independent;  (ii)
         internal controls and information systems be tested and reviewed; (iii)
         corrective actions be adequately  documented;  and (iv) that results of
         an audit be made available for review of management actions.

         Depositor  Preference;  The Omnibus Budget  Reconciliation  Act of 1993
         provides that deposits and certain claims for  administrative  expenses
         and employee  compensation  against an insured  depository  institution
         would be  afforded  a  priority  over other  general  unsecured  claims
         against such an institution in the "liquidation or other resolution" of
         such an institution by any receiver.

         Legislative   Proposals;   Because   of   concerns   relating   to  the
         competitiveness and the safety and soundness of the industry,  Congress
         continues to consider a number of  wide-ranging  proposals for altering
         the  structure,   regulation,  and  competitive  relationships  of  the
         nation's  financial  institutions.  Among such bills are  proposals  to


                                       10
<PAGE>



         prohibit  depository  institutions  and  bank  holding  companies  from
         conducting   certain  types  of  activities,   to  subject   depository
         institutions  to increased  disclosure and reporting  requirements,  to
         alter the statutory  separation of commercial and  investment  banking,
         and to  further  expand  the powers of  depository  institutions,  bank
         holding  companies,  and  competitors  of depository  institutions.  It
         cannot be predicted whether or in what form any of these proposals will
         be adopted or the extent to which the  business  of the  company may be
         affected thereby.

         The BHC Act  requires  every bank  holding  company to obtain the prior
         approval of the Federal  Reserve  before:  (i) it may acquire direct or
         indirect  ownership  or control  of any  voting  shares of any bank if,
         after such  acquisition,  the bank  holding  company  will  directly or
         indirectly  own or control  more than 5.0% of the voting  shares of the
         bank;  (ii)  it or any of its  subsidiaries,  other  than a  bank,  may
         acquire all or substantially all of the assets of the bank; or (iii) it
         may merge or consolidate with any other bank holding company.

         Monetary Policy and Economic Conditions

         The  earnings  of the Company and its  subsidiary  are  affected by the
         policies of  regulatory  authorities,  including  the  Federal  Reserve
         System. Federal Reserve System monetary policies have had a significant
         effect on the operating results of commercial banks in the past and are
         expected to continue  to do so in the future.  Because of the  changing
         conditions  in the  national  economy  and in the money  markets,  as a
         result of actions by monetary and fiscal  authorities,  interest rates,
         credit  availability and deposit levels may change due to circumstances
         beyond the control of the Company or its subsidiary.

(c)(1)(I)     Principal products and services rendered by segments.

                  Banking.

(c)(1)(II)    Description of new products or segments.

                  Not applicable.

(c)(1)(III)   Source and availability of raw materials

                  Not applicable.

(c)(1)(IV)    Importance of patents, trademarks, licenses, etc.
                  Not applicable.

(c)(1)(V)     Seasonality of business.

                  Not applicable.

(c)(1)(VI)    Working capital requirements related to inventory.

                  Not applicable.

(c)(1)(VII)   Concentration of customers.

                  The  business  of  the  Company  and  its  subsidiary  is  not
              dependent on a single customer,  nor on a small group of customers
              in a specialized industry.

(c)(1)(VIII)  Backlog of customers.

                  Not applicable.


                                       11
<PAGE>



(c)(1)(IX)    Government contracts.

                  Not applicable.

(c)(1)(X)     Competition

                  The Bank faces strong  competition  for local  business in the
                  communities it serves from other financial institutions.

                  For most of the  services  which the Bank  performs,  there is
                  increasing  competition from financial institutions other than
                  commercial   banks  due  to  the   relaxation   of  regulatory
                  restrictions.  Money market funds actively  compete with banks
                  for deposits. Savings banks, savings and loan associations and
                  credit  institutions,  as well as consumer finance  companies,
                  insurance   companies   and  pension   trusts  are   important
                  competitors.  Competition  for loans is also a factor the Bank
                  faces in maintaining profitability.


(c)(1)(XI)    Research and development.

                  Not applicable.

(c)(1)(XII)   Cost of compliance with environmental regulations.

                  Not applicable.

(c)(1)(XIII)  Number of persons employed.

               At December  31,  1997,  there were 109  persons  employed by the
Company and its subsidiary.

(d)           Statistical Information.

                  The  following  tables set  forth,  on a  consolidated  basis,
                  certain statistical information concerning the Company and its
                  subsidiary.  The tables should be read in conjunction with the
                  consolidated financial statements and notes thereto, contained
                  in the 1996 Annual  Report to  Stockholders  and  incorporated
                  herein by reference.






                                       12
<PAGE>








                                                  LOAN PORTFOLIO

                                                 DECEMBER 31, 1997




Maturities and Sensitivities of Loans to Changes in Interest Rates

<TABLE>
<CAPTION>

                                                           After One Year
                                       One Year or Less Through Five Years  After Five Years    Total
                                       ---------------  ------------------  ----------------    -----
<S>                                         <C>              <C>              <C>              <C>
Commercial, financial and agricultural      $ 6,962,000      $ 4,788,000      $ 1,010,000      $12,760,000
Real estate - construction ...........        1,240,000          108,000             --          1,348,000
                                              ---------          -------                         ---------

       Total .........................      $ 8,202,000      $ 4,896,000      $ 1,010,000      $14,108,000
                                            ===========      ===========      ===========      ===========

Interest sensitivity of loans:
   Predetermined rate ................      $ 4,144,000      $ 4,896,000      $ 1,010,000      $10,050,000
   Variable rate .....................        4,058,000             --               --            458,000
                                              ---------                                            -------

       Total .........................      $ 8,202,000      $ 4,896,000      $ 1,010,000      $14,108,000
                                            ===========      ===========      ===========      ===========
</TABLE>






                                       13
<PAGE>




                         SUMMARY OF LOAN LOSS EXPERIENCE

Analysis of the Allowance for Loan Losses, 1997 and 1996

                                                1997          1996
                                                ----          ----

Balance at beginning of period ............  $1,711,000  $1,629,000

Charge-offs:
     Commercial, financial and agriculture      371,000      58,000
     Real estate - construction ...........        --          --
     Real estate - mortgage ...............     580,000      71,000
     Installment loans to individuals .....     304,000     217,000
                                                -------     -------

          Total charge-offs ...............   1,255,000     346,000
                                              =========     =======

Recoveries:
     Commercial, financial and agricultural      91,000      23,000
     Real estate - construction ...........        --          --
     Real estate - mortgage ...............      84,000      32,000
     Installment loans to individuals .....      81,000      83,000
                                                 ------      ------

          Total recoveries ................     256,000     138,000
                                                -------     -------

Net charge offs ...........................     999,000     208,000
                                                -------     -------

Additions charged to operations ...........   1,150,000     290,000
                                              ---------     -------

Balance at end of period ..................  $1,862,000  $1,711,000
                                             ==========  ==========

Ratio of net charge-offs  during the period
to average loans outstanding  during the period    .82%          .18%
                                                   ===           ===

                                                     DEPOSITS

     Maturity Schedule of Time Deposits $100,000 or More, December 31, 1997


     Due three months or less                               $    3,352,000
     Over three months through six months                        2,291,000
     Over six months through twelve months                       1,418,000
     Over twelve months                                          2,048,000
                                                        ------------------
                                                            $    9,109,000
                                                            ==============


                                       14
<PAGE>






          SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES ANALYSIS*
                    ANALYSIS BY TYPE AND BY PERIOD TO MATURITY


                                                 DECEMBER 31, 1997
<TABLE>
<CAPTION>



                                    UNDER 1 YEAR          1-5 YEARS         5-10 YEARS          AFTER 10 YEARS
                                 BALANCE      RATE   BALANCE      RATE    BALANCE    RATE      BALANCE    RATE       TOTAL
                                  -------      ----   -------      ----    -------    ----      -------    ----      -------

<S>                            <C>             <C> <C>             <C> <C>             <C>  <C>             <C>   <C>
U.S. Goverment Agency ........ $20,100,000     6.5 $18,965,000     6.5 $ 2,738,000     6.6  $ 6,036,000     6.9   $47,839,000

Municipal Securities - Tax ...   2,689,000     5.6  11,134,000     5.7   7,413,000     5.4      815,000     5.4    22,050,000
Exempt (1)

Municipal Securities - Taxable      82,000     6.72      --         --       --         --       --          --        82,000

Mortgage Backed Securities and
     Collateralized Mortgage .     594,000     8.0   1,097,000     7.15      --          --      --          --     1,692,000

     Obligations other than US
     Government Agencies

Other Securities .............   1,733,000     8.0    200,000     6.63       --          --      --          --      1,933,000
                                 ---------     ---    -------     ----                                               ---------



                               $25,198,000     6.6 $31,396,000    6.2  $10,151,000     5.7  $ 6,851,000     6.7     $73,596,000
                               ===========     === ===========    ===  ===========     ===  ===========     ===     ===========
</TABLE>




(*) The analysis  shown above  combines the Company's  Securities  Available for
Sale  portfolio and the  Investment  Securities  portfolio.  All  securities are
included above at their historical amortized cost.

(1)  Yields on tax  exempt  securities  have not been  stated on tax  equivalent
basis.



                                       15
<PAGE>






INTEREST RATE RISK

   Management  of  interest  rate  risk  involves  continual  monitoring  of the
relative sensitivity of asset and liability portfolios to changes in rate due to
maturities  or  repricing.  Interest  rate  sensitivity  is a  function  of  the
repricing of assets and liabilities  through maturity and interest rate changes.
The objective is to maintain an  appropriate  balance  between income growth and
the risks  associated with maximizing  income through the mismatch of the timing
of interest rate changes between assets and liabilities. Perfectly matching this
funding can eliminate  interest rate risk, but net interest income is not always
enhanced. One measure of interest rate risk, the so-called "gap", is illustrated
in the report below as of December 31, 1997. This table measures the incremental
and cumulative  gap, or difference,  between assets and  liabilities  subject to
repricing during the periods indicated.  The figures presented are stated on the
basis of "contractual  gap" which measures the stated  repricing and maturity of
assets and liabilities.  The data presented indicates that rate sensitive assets
are  generally  subject to  repricing  sooner than rate  sensitive  liabilities.
Management  retains the  ability to change,  or not  change,  interest  rates on
certain  deposit  products as general market rates change in the future,  and is
also in the position to liquidate a portion of its securities available for sale
should conditions warrant such action.



                                       16
<PAGE>






<TABLE>
<CAPTION>



MATURITY                              0-3 MONTHS    3-12 MONTHS      1-5 YEARS  OVER 5 YEARS         TOTAL

<S>                               <C>            <C>           <C>            <C>           <C>
Loans, Net (3) ................... $  16,902,000  $  19,778,000 $  76,329 ,000 $  12,784,000 $ 125,793,000

Federal Funds Sold ...............     1,600,000           --             --            --       1,600,000

Taxable  Securities (1) ..........     5,829,000     15,358,000     20,262,000    10,015,000    51,464,000

Non Taxable Securities (1) .......       782,000      1,906,000     11,134,000     8,310,000    22,132,000
                       --                -------      ---------     ----------     ---------    ----------

Total Interest Earning Assets .... $  25,113,000  $  37,042,000  $ 107,725,000 $  31,109,000 $ 200,989,000
                                   =============  =============  ============= ============= =============

NOW and Super Now Accounts .......    27,973,000           --             --            --      27,973,000

Savings and Insured Money Markets     54,513,000           --             --            --      54,513,000
Time Deposits (2) ................    18,232,000     32,734,000     22,163,000          --      73,129,000
Long Term Debt ...................     5,000,000      5,000,000           --            --      10,000,000
Short Term Debt (1) ..............       404,000        404,000
                --                       -------        -------


Total Interest Bearing Liabilities   106,122,000     37,734,000     22,163,000   166,019,000
                                     ===========     ==========     ==========   ===========   ===========


Gap ..............................   (81,009,000)      (692,000)    85,562,000    31,109,000    34,970,000
Cumulative Gap ...................   (81,009,000)   (81,701,000)     3,861,000    34,970,000

Cumulative Gap as a Percentage of
    Total Interest Earning Assets       (40.31%)       (40.65%)         1.92%        17.40%
</TABLE>

(1) Based on anticipated  maturity.  Includes Securities  Available for Sale and
Investment Securities, both shown at their historical amortized cost.

(2) Fixed rate deposits and deposits  with fixed pricing  intervals are included
in the period of contractual maturity.

(3) Based on contractual maturity.




                                       17
<PAGE>





Item 2.       PROPERTIES

         In  addition  to the  main  office  of the  Company  and  the  Bank  in
         Jeffersonville,  New York,  the Bank has seven branch  locations and an
         operations  center.  Set forth is a  description  of the offices of the
         Company and the Bank.

Main Office

         The main office of the Bank is located at Main Street,  Jeffersonville,
         New  York,  12748.  The  premises  occupied  by the  Bank  consists  of
         approximately  6,700 total  square feet of office  space in a two-story
         office building, and parking is provided for approximately 30 cars. The
         Bank owns the building and underlying land.

Eldred Branch

         The Eldred Branch of the Bank is located at 561 Route 55,  Eldred,  New
         York. The premises consists of approximately 2,016 total square feet of
         office space in a 1-story office building,  and parking is provided for
         approximately 17 cars. The Bank owns the building and underlying land.

Liberty Branch

         The  Liberty  Branch of the Bank is located at Church  Street and Darby
         Lane,  Liberty,  New York. The premises consists of approximately 4,320
         total square feet of office space in a two-story office  building,  and
         parking is  provided  for  approximately  30 cars.  The Bank leases the
         space from the Company.  The lease  commenced  on January 1, 1989,  and
         terminates  on  December  1, 2003.  The lease  payments  are $9,500 per
         month.

Loch Sheldrake Branch

         The Loch  Sheldrake  Branch of the Bank is  located  on Route 52,  Loch
         Sheldrake, New York. The premises consists of approximately 1,440 total
         square feet of office space, and parking is provided for  approximately
         11  cars.  The Bank  leases  the  space  from the  Company.  The  lease
         commenced on September 7, 1994 and  terminates  on August 7, 2009.  The
         lease payments are $9,600 per month.

Monticello Branch

         The Monticello  Branch of the Bank is located at 15  Forestburgh  Road,
         Monticello,  New York.  The premises  consists of  approximately  2,500
         square feet of office space and parking is provided  for  approximately
         25  cars.  The Bank  leases  the  space  from the  Company.  The  lease
         commenced  on October 1, 1992 and  terminates  September  1, 2007.  The
         lease payments are $2,550 per month.

Operations Center

         The Operations  Center is located on Main Street,  Jeffersonville,  New
         York. The premises  consists of  approximately  10,788 square feet in a
         two-story office building, and parking is provided for approximately 30
         cars. The Bank leases the space from the Company.  The lease  commenced
         on May 1, 1984 and terminates on April 30, 1999. The lease payments are
         $4,950 per month.



                                       18
<PAGE>





Supermarket Branches

              The Bank leases space in Pecks  Supermarkets in Livingston  Manor,
              Narrowsburg and Callicoon,  New York. The branch facilities occupy
              between 650 and 800 square feet each and the leases  payments from
              approximately $7,500 to $10,500 per year.

Item 3.       LEGAL PROCEEDINGS

              The Company  and its  subsidiary  are not parties to any  material
              legal  proceedings which may have a material adverse effect on its
              results of operations or financial condition.

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

         Not applicable

                                                      Part II

     Item 5. MARKET FOR THE REGISTRANT'S  COMMON EQUITY AND RELATED  STOCKHOLDER
             MATTERS

               The  Company's  common  stock  was  inactively  traded on a local
               basis,  during  1996 and  1995.  In  January  1997,  the  Company
               announced  that  trading in its  common  stock  commenced  on the
               Over-The -Counter market.  The following table shows the range of
               sales prices known to management  for each quarter during the two
               most recent years and dividends declared per share:

                                       1997
                             High*           Low*    Dividends Per Share*
First Quarter           $   19.17       $   17.71       $   .00
Second Quarter          $   20.00       $   17.91       $   .27
Third Quarter           $   20.21       $   17.08       $   .00
Fourth Quarter          $   21.98       $   19.17       $   .29

                                      1996
                             High*           Low*    Dividends Per Share*
First Quarter           $   17.50       $   17.50       $   .00
Second Quarter          $   17.50       $   17.50       $   .27
Third Quarter           $   17.50       $   17.50       $   .00
Fourth Quarter          $   17.71       $   17.50       $   .27


The approximate  number of  stockholders of the Company's  common stock at March
28, 1998 is 674.

* Per share  information  adjusted for twenty percent stock dividend declared in
January 1998.

Item 6.       SELECTED FINANCIAL DATA

               This  item  is  omitted  pursuant  to  paragraph  (2) of  General
               Instruction  "G" - Information to be  Incorporated  by Reference.


                                       19
<PAGE>



               See  "Selected  Financial  Information"  included  in the  Annual
               Report to Stockholders for 1997, which is incorporated  herein by
               reference.

Item 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
              RESULTS OF OPERATIONS
               This  item  is  omitted  pursuant  to  paragraph  (2) of  General
               Instruction  "G" - Information to be  Incorporated  by Reference.
               See "Management's  Discussion and Analysis of Financial Condition
               and Results of  Operations"  included in the Annual Report to the
               Stockholders for 1997, which is incorporated herein by reference.

Item 7A  THE REQUIRED  INFORMATION IS PROVIDED IN SCHEDULE  TITLED  INTEREST
         RATE RISK

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

               This  item  is  omitted  pursuant  to  paragraph  (2) of  General
               Instruction  "G" - Information to be  Incorporated  by Reference.
               See   consolidated   financial   statements   and  notes  to  the
               consolidated financial statements,  included in the Annual Report
               to  Stockholders  for  1997,  which  are  incorporated  herein by
               reference.

Item  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

               There  has been no  change in  accountants  within  the 24 months
               prior to December 31,  1997,  and there has not been any reported
               disagreements   on  any  matter  of  accounting   principles  and
               practices or financial statement  disclosure which would have led
               to a change in accountants.


                                                     Part III


Item 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

               This  item  is  omitted  pursuant  to  paragraph  (3) of  General
               Instruction  "G" - Information to be  Incorporated  by Reference.
               See  Nomination of Directors and Election of Directors on pages 1
               and 2 of the proxy statement,  which are  incorporated  herein by
               reference.

Item 11.      EXECUTIVE COMPENSATION

         This item is omitted  pursuant to paragraph (3) of General  Instruction
         "G" - Information to be Incorporated by Reference.  See Remuneration of
         Management  and  Others  on page 6-7 of the proxy  statement,  which is
         incorporated herein by reference.

Item 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF MANAGEMENT

               This  item  is  omitted  pursuant  to  paragraph  (3) of  General
               Instruction  "G" - Information to be  Incorporated  by Reference.
               See  Security  Ownership  of  Certain  Beneficial  Owners  and of
               Management  on  page  3-4  of  the  proxy  statement,   which  is
               incorporated herein by reference.

Item 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

               This  item  is  omitted  pursuant  to  paragraph  (3) of  General
               Instruction  "G" - Information to be  Incorporated  by Reference.


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               See Director and Executive Officer information, transactions with
               Management,  and  Remuneration  of Management and Others on pages
               8-9 of the  proxy  statement,  which are  incorporated  herein by
               reference.

                                                      Part IV

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

(a) 1.  Consolidated  financial  statements  and  schedules  of the  Company and
        Subsidiary

         The following  consolidated  financial statements of the Registrant and
         its  subsidiary  are  incorporated  herein by  reference  from the 1997
         Annual Report to  Stockholders of the Company;  page number  references
         are to the Annual Report.



Consolidated Balance Sheets - December 31, 1997 and 1996......................17

Consolidated Statements of Income
Years Ended December 31, 1997, 1996 and 1995..................................18

Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1997, 1996 and 1995..................................19

Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995..................................20

Notes to Consolidated Financial Statements.................................21-44

Independent Auditors' Report..................................................45

(a)      2. All schedules are omitted since the required  information  is either
         not   applicable,   not  required  or   contained  in  the   respective
         consolidated financial statements or in the notes thereto.

(a) 3.   Exhibits (numbered in accordance with Item 601 of Regulation S-K)

         Exhibits not indicated below are omitted because the information is not
         applicable or is contained elsewhere within this report.


              3.1     Certificate of Incorporation of the Company
                      (Incorporation  by Reference to Exhibit 3.1,  3.2, 3.3 and
                      3.4 to Form 8 Registration  Statement,  effective June 29,
                      1991)

              3.2     The Bylaws of the Company
                      (Incorporated  by Reference to Exhibit 3.5 and 3.6 to Form
                      8 Registration Statement, effective June 29, 1991)

              4.1     Instruments  defining  the  Rights  of  Security  Holders.
                      (Incorporated   by  Reference  to  Exhibit  4  to  Form  8
                      Registration Statement, effective June 29, 1991)


                                       21
<PAGE>



              11.1    Computation of Income Per Share  (Reference is made to the
                      Annual  Report of the Company  included  elsewhere in this
                      report.)

              13.1 The Annual Report of the Company is filed herewith.

              21.1    Subsidiaries  of the  Registrant - as Discussed in Section
                      I, Item I, Description of Business;  The Company owns 100%
                      of the Equity Securities of the Bank.


b)       Reports on Form 8-K

         No  reports  on Form 8-K have  been  filed by the  Company  during  the
quarter ended December 31, 1997.





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<PAGE>






                                                    SIGNATURES


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


Dated:             3-27-98                           By:
                                         Chairman of the Board and President


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


                 Signatures                      Title           Date

                        /s/
                 -----------------     Chairman of the
                 Arthur E. Keesler     Board and                 3-27-98
                                       President-Director

                        /s/
                 -----------------      Principal Accounting
                 K. Dwayne Rhodes       Officer and Principal    3-27-98
                                        Financial Officer

                       /s/
                 -----------------      Director                 3-27-98
                  John K. Gempler

                       /s/
                 -----------------      Director                 3-27-98
                  Edward T. Sykes

                       /s/
                 -----------------      Director                 3-27-98
                  Raymond Walter

                      /s/
                 -----------------      Director                 3-28-98
                  Earle A. Wilde

                      /s/
                 -----------------       Director                 3-28-98
                  James F. Roche

                      /s/
                 -----------------       Director                 3-28-98
               Frederick W.V. Schadt

                      /s/
                 -----------------       Director                 3-28-98
                 John W. Galligan




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