FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20552

(Mark One)

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

For the quarterly period ended          June 30, 1998
                               -----------------------------------

                                       OR

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

For the transition period from ____________ to _______________

Commission File No.  0-26248

                          LONDON FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

Ohio                                                        31-1452807
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                        Identification Number)

2 East High Street
London, Ohio                                                    43140
(Address of principal                                        (Zip Code)
executive office)

Registrant's telephone number, including area code: (614)   852-0787

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

Yes   X                                                  No

As of August 10, 1998, the latest  practicable date, 479,450 of the registrant's
common shares, without par value, were issued and outstanding.









                               Page 1 of 15 pages

<PAGE>


                          London Financial Corporation

                                      INDEX

                                                                       Page

PART I  -  FINANCIAL INFORMATION

             Consolidated Statements of Financial Condition               3

             Consolidated Statements of Earnings                          4

             Consolidated Statements of Cash Flows                        5

             Notes to Consolidated Financial Statements                   6

             Management's Discussion and Analysis of
             Financial Condition and Results of
             Operations                                                   9


PART II - OTHER INFORMATION                                              14

SIGNATURES                                                               15



<PAGE>

<TABLE>

                          London Financial Corporation
<CAPTION>

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                        (In thousands, except share data)


                                                                                         June 30,         September 30,
         ASSETS                                                                              1998                  1997
<S>                                                                                           <C>                <C>
Cash and due from banks                                                                   $   435               $   322
Interest-bearing deposits in other financial institutions                                   2,028                 3,342
                                                                                           ------                ------
         Cash and cash equivalents                                                          2,463                 3,664

Investment securities designated as available for sale - at market                            141                   155
Investment securities - at amortized cost, approximate market
  value of $502 at September 30, 1997                                                          -                    500
Mortgage-backed securities - at cost, approximate market
  value of $2,928 and $3,613 at June 30, 1998 and
  September 30, 1997, respectively                                                          2,894                 3,586
Loans receivable - net                                                                     30,097                29,465
Office premises and equipment - at depreciated cost                                           369                   360
Stock in Federal Home Loan Bank - at cost                                                     283                   280
Accrued interest receivable                                                                   173                   169
Prepaid expenses and other assets                                                              82                    31
                                                                                           ------                ------

         Total assets                                                                     $36,502               $38,210
                                                                                           ======                ======

         LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                                                  $31,213               $29,951
Advances from the Federal Home Loan Bank                                                      300                   300
Other liabilities                                                                             128                   162
Accrued federal income taxes                                                                    1                   141
Deferred federal income taxes                                                                  33                    52
                                                                                           ------                ------
         Total liabilities                                                                 31,675                30,606

Shareholders' equity
  Common shares - authorized 5,000,000 shares without par value;
    529,000 shares issued                                                                      -                     -
  Additional paid-in capital                                                                2,391                 4,910
  Shares acquired by Employee Stock Ownership Plan                                           (381)                 (423)
  Shares acquired by Management Recognition Plan                                             (262)                 (315)
  Retained earnings - substantially restricted                                              3,895                 3,683
  Unrealized gains (losses) on securities designated as available for
    sale, net of related tax effects                                                          (13)                   31
  Less 49,550 and 18,840 treasury shares - at cost                                           (803)                 (282)
                                                                                           ------                ------
         Total shareholders' equity                                                         4,827                 7,604
                                                                                           ------                ------

         Total liabilities and shareholders' equity                                       $36,502               $38,210
                                                                                           ======                ======
</TABLE>




                                        3



<PAGE>


<TABLE>
                          London Financial Corporation
<CAPTION>

                       CONSOLIDATED STATEMENTS OF EARNINGS

                        (In thousands, except share data)


                                                                         Nine months ended            Three months ended
                                                                               June 30,                     June 30,
                                                                         1998         1997            1998         1997
<S>                                                                       <C>         <C>              <C>          <C>
Interest income
  Loans                                                                $1,916       $1,773            $626         $608
  Mortgage-backed securities                                              155          175              46           59
  Investment securities                                                     7           50               4            7
  Interest-bearing deposits and other                                     125          115              45           46
                                                                        -----        -----             ---          ---
         Total interest income                                          2,203        2,113             721          720

Interest expense
  Deposits                                                              1,115        1,047             376          356
  Borrowings                                                               40           31               6           14
                                                                        -----        -----             ---          ---
         Total interest expense                                         1,155        1,078             382          370
                                                                        -----        -----             ---          ---

         Net interest income before provision
           for losses on loans                                          1,048        1,035             339          350

Provision for losses on loans                                              14           -                6           -
                                                                        -----        -----             ---          --- 

         Net interest income after provision
           for losses on loans                                          1,034        1,035             333          350

Other income
  Gain on investment securities transactions                               75           -               -            -
  Other operating                                                          44           45              13           14
                                                                        -----        -----             ---          ---
         Total other income                                               119           45              13           14

General, administrative and other expense
  Employee compensation and benefits                                      345          332             123          127
  Occupancy and equipment                                                  57           50              22           17
  Federal deposit insurance premiums                                       14           28               4            5
  Franchise taxes                                                          60           60              28           28
  Data processing                                                          43           42              13           14
  Other                                                                   173          183              52           56
                                                                        -----        -----             ---          ---
         Total general, administrative and other expense                  692          695             242          247
                                                                        -----        -----             ---          ---

         Earnings before income taxes                                     461          385             104          117

Federal income taxes
  Current                                                                 154           36              16           12
  Deferred                                                                  3           92              23           24
                                                                        -----        -----             ---          ---
         Total federal income taxes                                       157          128              39           36
                                                                        -----        -----             ---          ---

         NET EARNINGS                                                  $  304       $  257            $ 65         $ 81
                                                                        =====        =====             ===          ===

         EARNINGS PER SHARE
           Basic                                                         $.64         $.54            $.14         $.17
                                                                          ===          ===             ===          ===

           Diluted                                                       $.62         $.53            $.13         $.17
                                                                          ===          ===             ===          ===
</TABLE>



                                        4


<PAGE>

<TABLE>

                          London Financial Corporation
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       For the nine months ended June 30,
                                 (In thousands)

                                                                                                 1998              1997
<S>                                                                                               <C>               <C>
Cash flows provided by (used in) operating activities:
  Net earnings for the period                                                                  $  304             $ 257
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Gain on investment securities transactions                                                    (75)               -
    Amortization of deferred loan origination fees                                                (96)              (64)
    Provision for losses on loans                                                                  14                -
    Depreciation and amortization                                                                  16                21
    Federal Home Loan Bank stock dividends                                                        (15)              (14)
    Amortization expense of stock benefit plans                                                   109                -
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable                                                                  (4)               (1)
      Prepaid expenses and other assets                                                           (51)              (44)
      Other liabilities                                                                           (34)             (130)
      Federal income taxes
        Current                                                                                  (140)               13
        Deferred                                                                                    3                92
                                                                                                -----              ----
         Net cash provided by operating activities                                                 31               130

Cash flows provided by (used in) investing activities:
  Proceeds from maturity of investment securities                                                 506              1,500
  Principal repayments on mortgage-backed securities                                              692                347
  Proceeds from sale of investment securities                                                     177                 -
  Purchase of investment securities                                                              (160)                -
  Principal repayments on loans                                                                 7,180              4,107
  Loan disbursements                                                                           (7,730)            (6,482)
  Purchase of office equipment                                                                    (25)               (24)
  Proceeds from redemption of Federal Home Loan Bank stock                                         12                 -
                                                                                                -----              -----
         Net cash used in investing activities                                                    652               (552)

Cash flows provided by (used in) financing activities:
  Net increase in deposit accounts                                                              1,262              1,392
  Proceeds from Federal Home Loan Bank advances                                                    -                 500
  Purchase of shares for Management Recognition Plan                                               -                (315)
  Purchase of treasury shares                                                                    (521)              (282)
  Distributions paid on common shares                                                          (2,625)               (88)
                                                                                                -----              -----
         Net cash provided by (used in) financing activities                                   (1,884)             1,207
                                                                                                -----              -----

Net increase in cash and cash equivalents                                                      (1,201)               785

Cash and cash equivalents at beginning of period                                                3,664              2,643
                                                                                                -----              -----

Cash and cash equivalents at end of period                                                     $2,463             $3,428
                                                                                                =====              =====

Supplemental disclosure of cash flow information: Cash paid during the year for:
    Federal income taxes                                                                       $  180             $   23
                                                                                                =====              =====

    Interest on deposits and borrowings                                                        $1,155             $1,076
                                                                                                =====              =====

Supplemental disclosure of noncash investing activities:
  Unrealized gains (losses) on securities designated as available
    for sale, net                                                                              $  (44)            $  40
                                                                                                =====             =====
</TABLE>


                                        5


<PAGE>


                          London Financial Corporation

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For the nine month periods ended June 30, 1998 and 1997


1.  Basis of Presentation

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance  with  instructions  for Form 10-QSB and,  therefore,  do not include
information or footnotes  necessary for a complete  presentation of consolidated
financial  position,  results of operations  and cash flows in  conformity  with
generally  accepted   accounting   principles.   Accordingly,   these  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and notes  thereto  of London  Financial  Corporation  ("LFC" or the
"Corporation")  included in the Annual  Report on Form 10-KSB for the year ended
September  30, 1997.  However,  in the opinion of  management,  all  adjustments
(consisting of only normal  recurring  accruals)  which are necessary for a fair
presentation of the consolidated  financial  statements have been included.  The
results of operations  for the nine and three month periods ended June 30, 1998,
are not  necessarily  indicative  of the results  which may be  expected  for an
entire fiscal year.

2.  Principles of Consolidation

The accompanying  consolidated  financial statements include the accounts of LFC
and The  Citizens  Loan &  Savings  Company,  a  savings  and  loan  association
wholly-owned by LFC, ("Citizens").  All significant intercompany items have been
eliminated.

3.  Earnings Per Share

Basic  earnings  per share is computed  based upon the  weighted-average  shares
outstanding  during  the  period,  less  shares in the  London  Financial  Corp.
Employee  Stock  Ownership  Plan  (the  "ESOP")  that  are  unallocated  and not
committed to be released.  Weighted-average  common  shares  outstanding,  which
gives effect to 33,856 unallocated ESOP shares,  totaled 475,080 and 472,631 for
the nine and three month  periods ended June 30, 1998.  Weighted-average  common
shares deemed outstanding, which gives effect to 42,320 unallocated ESOP shares,
totaled  479,201 and 472,455 for the nine and three month periods ended June 30,
1997.

Diluted earnings per share is computed taking into  consideration  common shares
outstanding and dilutive  potential common shares to be issued under LFC's stock
option plan.  Weighted-average  common shares deemed outstanding for purposes of
computing  diluted  earnings per share totaled  493,434 and 492,977 for the nine
and three month periods ended June 30, 1998,  respectively,  480,703 and 473,048
for each of the nine and three month periods ended June 30, 1997.

4.  Effects of Recent Accounting Pronouncements

In June 1997,  the FASB issued  SFAS No.  125,  "Accounting  for  Transfers  and
Servicing of Financial Assets and Extinguishments of Liabilities", that provides
accounting  guidance on transfers of  financial  assets,  servicing of financial
assets, and  extinguishment of liabilities.  SFAS No. 125 introduces an approach
to accounting for transfers of financial assets that provides a means of dealing
with more complex  transactions  in which the seller  disposes of only a partial
interest  in the assets,  retains  rights or  obligations,  makes use of special
purpose




                                        6


<PAGE>


                          London Financial Corporation

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

             For the nine month periods ended June 30, 1998 and 1997


4.  Effects of Recent Accounting Pronouncements (continued)

entities in the  transaction,  or otherwise has continuing  involvement with the
transferred  assets.  The  new  accounting  method,  the  financial   components
approach,  provides that the carrying amount of the financial assets transferred
be allocated to  components  of the  transaction  based on their  relative  fair
values. SFAS No. 125 provides criteria for determining whether control of assets
has been relinquished and whether a sale has occurred.  If the transfer does not
qualify as a sale,  it is  accounted  for as a secured  borrowing.  Transactions
subject to the  provisions  of SFAS No. 125  include,  among  others,  transfers
involving  repurchase  agreements,  securitizations  of financial  assets,  loan
participations,  factoring  arrangements,  and  transfers  of  receivables  with
recourse.

An entity that undertakes an obligation to service  financial assets  recognizes
either a servicing asset or liability for the servicing contract (unless related
to a securitization of assets,  and all the securitized  assets are retained and
classified  as  held-to-maturity).  A  servicing  asset  or  liability  that  is
purchased or assumed is initially recognized at its fair value. Servicing assets
and  liabilities are amortized in proportion to and over the period of estimated
net  servicing  income  or net  servicing  loss and are  subject  to  subsequent
assessments for impairment based on fair value.

SFAS No. 125 provides that a liability is removed from the balance sheet only if
the debtor  either pays the creditor and is relieved of its  obligation  for the
liability or is legally released from being the primary obligor.

SFAS No. 125 is effective for  transfers  and servicing of financial  assets and
extinguishment  of liabilities  occurring  after December 31, 1997, and is to be
applied  prospectively.  Earlier or  retroactive  application  is not permitted.
Management adopted SFAS No. 125 effective January 1, 1998, as required,  without
material  effect  on  LFC's  consolidated   financial  position  or  results  of
operations.

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income."
SFAS No. 130  establishes  standards for reporting and display of  comprehensive
income and its components (revenues,  expenses,  gains and losses) in a full set
of general-purpose  financial  statements.  SFAS No. 130 requires that all items
that are required to be recognized under  accounting  standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same  prominence  as other  financial  statements.  It does  not  require  a
specific  format for that  financial  statement  but requires that an enterprise
display an amount representing total comprehensive income for the period in that
financial statement.

SFAS  No.  130  requires  that  an  enterprise   (a)  classify  items  of  other
comprehensive  income by their nature in a financial  statement  and (b) 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.  SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997.  Reclassification of financial statements for earlier periods
provided for comparative  purposes is required.  SFAS No. 130 is not expected to
have a material impact on LFC's financial statements.


                                        7


<PAGE>


                          London Financial Corporation

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

             For the nine month periods ended June 30, 1998 and 1997


4.  Effects of Recent Accounting Pronouncements (continued)

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related  Information." SFAS No. 131 significantly changes the way
that public business  enterprises report information about operating segments in
annual financial  statements and requires that those enterprises report selected
information  about reportable  segments in interim  financial  reports issued to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management  approach" to disclose  financial and descriptive  information about
the way that management  organizes the segments within the enterprise for making
operating  decisions  and  assessing  performance.  For  many  enterprises,  the
management  approach  will likely  result in more segments  being  reported.  In
addition,  SFAS No. 131 requires  significantly more information to be disclosed
for each reportable segment than is presently being reported in annual financial
statements  and also requires that selected  information  be reported in interim
financial statements. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. SFAS No.
131 is not expected to have a material impact on LFC's financial statements.































                                        8


<PAGE>


                          London Financial Corporation

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


Forward-Looking Statements

In addition to historical information contained herein, the following discussion
contains  forward-looking  statements  that  involve  risks  and  uncertainties.
Economic  circumstances,  the  Corporation's  operations  and the  Corporation's
actual  results  could  differ   significantly   from  those  discussed  in  the
forward-looking  statements.  Some of the factors that could cause or contribute
to such differences are discussed herein but also include changes in the economy
and interest rates in the nation and the Corporation's market area generally.

Some of the  forward-looking  statements  included  herein  are  the  statements
regarding management's determination of the amount and adequacy of the allowance
for  losses on  loans,  the  effects  of the year  2000 on  certain  information
technology systems and the effect of certain recent accounting pronouncements.


Discussion  of Financial  Condition  Changes from September 30, 1997 to June 30,
1998

At June 30,  1998,  LFC had total  assets of $36.5  million,  a decrease of $1.7
million,  or 4.5%,  from  September  30, 1997.  The decrease in assets  resulted
primarily from the $5.00 per share return of capital distribution, totaling $2.5
million,  which was paid to LFC's  shareholders  in  November,  1997,  which was
partially offset by a $1.3 million increase in deposits.

Investment securities and mortgage-backed  securities decreased by $1.2 million,
to a total  of $3.0  million  at June  30,  1998,  reflecting  the  maturity  of
investment securities totaling  approximately  $500,000 and principal repayments
on mortgage-backed securities of $692,000.

Loans receivable  increased by $632,000,  or 2.1%, as loan disbursements of $7.7
million exceeded principal repayments of $7.2 million. Loan disbursements during
the nine month period ended June 30, 1998,  exceeded the volume of disbursements
for the same period in 1997 by $1.2 million, or 19.3%.

At June 30, 1998,  Citizens'  allowance  for loan losses  totaled  $193,000,  as
compared to the $187,000 level  maintained at September 30, 1997.  Nonperforming
loans totaled $199,000,  or .7% of the total loan portfolio at June 30, 1998, as
compared to nonperforming loans of $268,000,  or .9% of the total loan portfolio
at September 30, 1997. At June 30, 1998, Citizens' allowance for loan losses was
comprised  solely of a general  loan loss  allowance  which is  includible  as a
component of regulatory risk-based capital.  Although management of LFC believes
that its allowance  for loan losses was adequate at June 30, 1998,  based on the
available facts and circumstances,  there can be no assurance that the allowance
will be adequate to absorb actual loan losses during the current  period or that
additions to such allowance will not be necessary in future periods, which could
adversely affect LFC's results of operations.

Deposits totaled $31.2 million at June 30, 1998, an increase of $1.3 million, or
4.2%, over the $30.0 million of deposits outstanding at September 30, 1997. Such
increase  resulted  primarily  from  management's  efforts to increase  deposits
through marketing strategies.



                                        9



<PAGE>


                          London Financial Corporation

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


Discussion of Financial  Condition  Changes from  September 30, 1997 to June 30,
1998 (continued)

Shareholders'  equity  totaled $4.8 million at June 30, 1998, a decrease of $2.8
million,  or 36.5%,  from  September  30, 1997,  levels.  The decrease  resulted
primarily  from  the $2.5  million,  or  $5.00  per  share,  return  of  capital
distribution paid to LFC's shareholders in November,  1997, coupled with regular
dividends  totaling $92,000,  or $.18 per share,  which were partially offset by
net earnings of $304,000.

Citizens is required to maintain  regulatory  capital sufficient to meet certain
minimum capital standards promulgated by the Office of Thrift Supervision. As of
June 30, 1998,  Citizens'  regulatory capital was well in excess of such minimum
capital requirements.


Comparison of  Operating  Results For the Nine Month Periods Ended June 30, 1998
and 1997

General

Net earnings for the nine month period ended June 30, 1998, totaled $304,000, an
increase of $47,000,  or 18.3%, over the comparable 1997 period. The increase in
earnings resulted primarily from a $13,000 increase in net interest income and a
$74,000  increase  in other  income,  which were  partially  offset by a $14,000
increase  in the  provision  for losses on loans and a $29,000  increase  in the
federal income tax provision.

Net Interest Income

Interest income on loans and mortgage-backed  securities  increased by $123,000,
or 6.3%, for the nine months ended June 30, 1998, as compared to the nine months
ended June 30, 1997. The increase was primarily due to an  approximate  $500,000
increase in the weighted  average  portfolio  balance  outstanding year to year,
coupled with an increase in yield.  Interest income on investment securities and
other  interest-earning  assets decreased by $34,000, or 20.6%, due primarily to
decreases  in  balances  outstanding  year  to  year  and  yields  available  on
short-term deposits.

Interest  expense on deposits  increased  by $68,000,  or 6.5%,  during the nine
months ended June 30, 1998. This increase resulted primarily from a $1.7 million
increase  in the  weighted  average  balance of deposits  outstanding.  Interest
expense on  borrowings  increased  by $9,000,  or 29.0%,  due to an  increase in
borrowings  outstanding  during the  period,  as LFC  borrowed  $1.4  million to
partially fund the special $5.00 per share distribution paid in November 1997.









                                       10


<PAGE>


                          London Financial Corporation

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


Comparison of  Operating  Results For the Nine Month Periods Ended June 30, 1998
and 1997 (continued)

Net Interest Income (continued)

As a result of the foregoing  changes in interest  income and interest  expense,
net interest income increased by $13,000,  or 1.3%, during the nine months ended
June 30, 1998, as compared to the nine months ended June 30, 1997.  The interest
rate spread totaled approximately 3.11% for the nine months ended June 30, 1998,
compared to 2.96% for the same  period in 1997,  while the net  interest  margin
increased  to  approximately  3.84% in the 1998  period  from  3.83% in the 1997
period.

Provision for Losses on Loans

A  provision  for  losses on loans is  charged  to  earnings  to bring the total
allowance for loan losses to a level considered  appropriate by management based
on historical experience,  the volume and type of lending conducted by Citizens,
the  status  of past due  principal  and  interest  payments,  general  economic
conditions, particularly as such conditions relate to Citizens' market area, and
other factors related to the  collectibility  of Citizen's loan  portfolio.  The
provision for losses on loans totaled $14,000 for the nine months ended June 30,
1998. There can be no assurance that the loan loss allowance of Citizens will be
adequate to cover losses on nonperforming assets in the future.

Other Income

Other income  totaled  $119,000  during the nine months ended June 30, 1998,  an
increase  of  $74,000,  or 164.4%  over the same  period in 1997.  The  increase
resulted  primarily from a $6,000 gain realized upon the call of a $500,000 U.S.
Government  agency  bond and a $69,000  gain on the sale of  equity  securities.
Other  operating  income is  comprised  primarily  of  service  fees on  deposit
accounts, late charges on loan accounts and rental income on leased office space
and safety deposit boxes.

General, Administrative and Other Expense

General,  administrative and other expense decreased by approximately $3,000, or
 .4%, during the nine months ended June 30, 1998, as compared to 1997, reflecting
the $14,000,  or 50.0%,  decline in federal deposit insurance  premiums,  due to
lower premium rates during the period, while employee  compensation and benefits
increased  by  $13,000,  or 3.9%.  The  increase in  employee  compensation  and
benefits  resulted  from the  employment  of a loan officer and staff related to
Citizens initiative to pursue growth in the loan portfolio,  which was partially
offset by an increase in deferred loan origination costs related to the increase
in lending volume.

Federal Income Taxes

The provision for federal income taxes  increased by $29,000,  or 22.7%,  during
the nine months  ended June 30, 1998,  due  primarily to an increase in earnings
before taxes of $76,000,  or 19.7%.  LFC's effective tax rates amounted to 34.1%
and 33.2% during the nine months ended June 30, 1998 and 1997, respectively.


                                       11


<PAGE>


                          London Financial Corporation

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


Comparison of Operating  Results For the Three Month Periods Ended June 30, 1998
and 1997

General

Net earnings for the three month period ended June 30, 1998,  totaled $65,000, a
decrease of $16,000,  or 19.8%, from the comparable 1997 period. The decrease in
earnings resulted  primarily from an $11,000 decrease in net interest income and
a $6,000  increase in the  provision  for losses on loans,  which was  partially
offset by a $5,000 decrease in general, administrative and other expense.

Net Interest Income

Interest income on loans for the three months ended June 30, 1998,  increased by
$18,000,  or 3.0%,  as compared to the three  months  ended June 30,  1997.  The
increase  was  primarily  due  to  an  approximate   $450,000  increase  in  the
weighted-average   balance  outstanding.   Interest  income  on  mortgage-backed
securities  decreased by $13,000,  or 22.0%,  due primarily to a decrease in the
weighted-average  portfolio balance outstanding year to year. Interest income on
investment securities and other interest-earning  assets decreased by $4,000, or
7.5%.

Interest  expense on deposits  increased by $20,000,  or 5.6%,  during the three
months ended June 30, 1998. This increase resulted primarily from an increase in
the  weighted  average  balance of deposits  outstanding,  which was offset by a
decrease in the cost of deposits.

Interest expense on borrowings  decreased by $8,000, or 57.1%,  during the three
months ended June 30, 1998.  The decrease is primarily  due to a decrease in the
weighted-average balance of advances outstanding.

As a result of the foregoing  changes in interest  income and interest  expense,
net interest income decreased by $11,000, or 3.1%, during the three months ended
June 30, 1998, as compared to the three months ended June 30, 1997.

Other Income

Other  income  totaled  $13,000  during the three  months ended June 30, 1998, a
decrease  of $1,000  from the three  month  period  ended June 30,  1997.  Other
operating  income is comprised  primarily  of service fees on deposit  accounts,
late  charges on loan  accounts  and rental  income on leased  office  space and
safety deposit boxes.

General, Administrative and Other Expense

General,  administrative and other expense decreased by approximately $5,000, or
2.0%,  during the three  months ended June 30,  1998,  as compared to 1997,  due
primarily to  management's'  overall  efforts to control  operating  costs.  The
decrease  was  primarily  comprised of a $4,000,  or 3.1%,  decrease in employee
compensation and benefits.



                                       12


<PAGE>


                          London Financial Corporation

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


Comparison of Operating Results For the Three Month  Periods Ended June 30, 1998
and 1997 (continued)

Federal Income Taxes

The provision for federal  income taxes  increased by $3,000,  or 8.3%,  for the
three month  period  ended June 30, 1998 as compared to the same period in 1997.
LFC's  effective  tax rates  amounted to 37.5% and 30.8% during the three months
ended June 30, 1998 and 1997, respectively.


Other Matters

Citizens' lending and deposit  activities are almost  completely  dependent upon
computer systems which process and record  transactions,  although  Citizens can
effectively  operate  with manual  systems for brief  periods  when such systems
malfunction  or  cannot  be  accessed.  Citizens  utilizes  the  services  of  a
nationally-recognized  data processing  service bureau which specializes in data
processing  for  financial  institutions.  In  addition  to its basic  operating
activities,  Citizens'  facilities and infrastructure,  such as security systems
and  communications  equipment,  are dependent to varying  degrees upon computer
systems.

Citizens is aware of the potential problems associated with the possibility that
the computers which control or operate Citizens'  operating systems,  facilities
and  infrastructure  may not be set up to read  four-digit  date codes and, upon
arrival of the year 2000,  may  recognize  the  two-digit  code "00" as the year
1900,  causing  systems to fail to function or to generate  erroneous  data.  In
fiscal 1997,  Citizens  began the process of  identifying  any year 2000 related
problems that may be experienced by its computer-operated or -dependent systems.
Citizens  has  contacted  the   companies   that  supply  or  service   Citizens
computer-operated  or -dependent  systems to obtain  confirmation that each such
system that is material to the  operations of Citizens is either  currently year
2000 compliant or is expected to be year 2000 compliant. With respect to systems
that  cannot  presently  be  confirmed  as year 2000  compliant,  Citizens  will
continue  to work with the  appropriate  supplier  or service to ensure that all
such systems will be rendered compliant in a timely manner, with minimal expense
to Citizens and minimal disruption of Citizens' operations. If compliance is not
certified  by the end of 1998 with respect to systems the failure of which would
have a material adverse effect on Citizens'  operations,  financial condition or
results,  Citizens expects to have a sufficient time to establish a relationship
with another supplier that is year 2000 compliant.  The expense of such a change
in suppliers is not expected to be material to Citizens.

In addition to possible expense related to its own systems, Citizens could incur
losses if loan payments are delayed due to year 2000  problems  affecting any of
Citizens'  significant  borrowers  or  impairing  the  payroll  systems of large
employers in Citizens' primary market area.  Because Citizens' loan portfolio is
highly  diversified with regard to individual  borrowers and types of businesses
and  Citizens'  primary  market  area is not  significantly  dependent  upon one
employer or  industry,  Citizens  does not expect any  significant  or prolonged
difficulties that will affect net earnings or cash flow.


                                       13



<PAGE>


                          London Financial Corporation

                                     PART II


ITEM 1.  Legal Proceedings

         Not applicable


ITEM 2.  Changes in Securities and Use of Proceeds

         Not applicable


ITEM 3.  Defaults Upon Senior Securities

         Not applicable


ITEM 4.  Submission of Matters to a Vote of Security Holders

         None

ITEM 5.  Other Information

          Any proposals of shareholders intended to be included in the Company's
          proxy  statement  and  proxy  card  for the  1999  Annual  Meeting  of
          Shareholders  should be sent to the Company by certified mail and must
          be  received  by the  Company  not later  than  August  14,  1998.  In
          addition,  if a shareholder  intends to present a proposal at the 1999
          Annual Meeting  without  including the proposal in the proxy materials
          related  to that  meeting,  and if the  proposal  is not  received  by
          October  27,  1998,  then  the  proxies  designated  by the  Board  of
          Directors of the Company for the 1999 Annual  Meeting of  Shareholders
          of the Company may vote in their  discretion  on any such proposal any
          shares for which they have been appointed  proxies  without mention of
          such  matter in the  proxy  statement  or on the  proxy  card for such
          meeting.

ITEM 6.  Exhibits and Reports on Form 8-K

         Reports on Form 8-K:         None.

         Exhibits:
             27.1                    Financial Data Schedule for the nine months
                                     ended June 30, 1998.

             27.2                    Restated Financial  Data  Schedule for  the
                                     nine months ended June 30, 1997.





                                       14



<PAGE>



                                   SIGNATURES

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





Date:    August 12, 1998                        By: /s/John J. Bodle
      ------------------------                      ----------------
                                                    John J. Bodle
                                                    President and
                                                    Chief Executive Officer



Date:    August 12, 1998                        By: /s/Joyce E. Bauerle
      ------------------------                      -------------------
                                                    Joyce E. Bauerle
                                                    Treasurer and
                                                    Principal Accounting Officer

































                                       15