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            March 31, 1998
                               ------------------------------------

                                       OR

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

For the transition period from ____________ to _______________

Commission File 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)

Issuer'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 May 11, 1998, the latest  practicable  date,  510,160 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>


                          London Financial Corporation

<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                        (In thousands, except share data)


                                                                                        March 31,         September 30,
         ASSETS                                                                              1998                  1997
<S>                                                                                          <C>                <C>
Cash and due from banks                                                                 $     470             $     322
Interest-bearing deposits in other financial institutions                                   3,169                 3,342
                                                                                          -------               -------
         Cash and cash equivalents                                                          3,639                 3,664

Investment securities designated as available for sale - at market                            162                   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 $3,138 and $3,613 at March 31, 1998 and
  September 30, 1997, respectively                                                          3,105                 3,586
Loans receivable - net                                                                     29,225                29,465
Office premises and equipment - at depreciated cost                                           353                   360
Stock in Federal Home Loan Bank - at cost                                                     290                   280
Accrued interest receivable                                                                   166                   169
Prepaid expenses and other assets                                                              67                    31
                                                                                          -------               -------

         Total assets                                                                     $37,007               $38,210
                                                                                           ======                ======

         LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                                                  $31,175               $29,951
Advances from the Federal Home Loan Bank                                                      300                   300
Other liabilities                                                                              84                   162
Accrued federal income taxes                                                                  103                   141
Deferred federal income taxes                                                                  17                    52
                                                                                          -------               -------
         Total liabilities                                                                 31,679                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                                              3,861                 3,683
  Unrealized gains on securities designated as available for
    sale, net of related tax effects                                                            1                    31
  Less 18,840 treasury shares - at cost                                                      (282)                 (282)
                                                                                          -------               -------
         Total shareholders' equity                                                         5,328                 7,604
                                                                                          -------               -------

         Total liabilities and shareholders' equity                                       $37,007               $38,210
                                                                                           ======                ======

</TABLE>



                                        3



<PAGE>


                          London Financial Corporation

<TABLE>
<CAPTION>
                       CONSOLIDATED STATEMENTS OF EARNINGS

                        (In thousands, except share data)

                                                                       Six months ended               Three months ended
                                                                            March 31,                      March 31,
                                                                       1998         1997              1998         1997
<S>                                                                    <C>           <C>               <C>          <C>
Interest income
  Loans                                                              $1,290       $1,165              $625         $589
  Mortgage-backed securities                                            109          116                52           60
  Investment securities                                                   3           43                -            14
  Interest-bearing deposits and other                                    80           69                33           37
                                                                     ------       ------              ----         ----
         Total interest income                                        1,482        1,393               710          700

Interest expense
  Deposits                                                              739          691               368          342
  Borrowings                                                             34           17                 8           10
                                                                     ------       ------               ---          ---
         Total interest expense                                         773          708               376          352
                                                                     ------       ------               ---          ---

         Net interest income                                            709          685               334          348

Provision for losses on loans                                             8           -                  6           -
                                                                   --------        -----             -----          -----  

         Net interest income after provision
           for losses on loans                                          701          685               328          348

Other income
  Gain on investment securities transactions                             75           -                 69           -
  Other operating                                                        31           31                15           16
                                                                    -------      -------              ----         ----
         Total other income                                             106           31                84           16

General, administrative and other expense
  Employee compensation and benefits                                    222          205               110           98
  Occupancy and equipment                                                35           33                18           16
  Federal deposit insurance premiums                                     10           23                 5            5
  Franchise taxes                                                        32           32                28           27
  Data processing                                                        30           28                16           14
  Other operating                                                       121          127                61           80
                                                                     ------       ------              ----         ----
         Total general, administrative and other expense                450          448               238          240
                                                                     ------       ------               ---          ---

         Earnings before income taxes                                   357          268               174          124

Federal income taxes
  Current                                                               138           24                16           35
  Deferred                                                              (20)          68                40            8
                                                                    -------      -------              ----          ---
         Total federal income taxes                                     118           92                56           43
                                                                     ------      -------              ----         ----

         NET EARNINGS                                               $   239      $   176              $118        $  81
                                                                     ======       ======               ===         ====

         EARNINGS PER SHARE
           Basic                                                       $.50         $.37              $.25         $.17
                                                                        ===          ===               ===          ===

           Diluted                                                     $.48         $.36              $.24         $.17
                                                                        ===          ===               ===          ===

</TABLE>

                                        4


<PAGE>


                          London Financial Corporation

<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                       For the six months ended March 31,
                                 (In thousands)


                                                                              1998              1997
<S>                                                                            <C>               <C>
Cash flows from operating activities:
  Net earnings for the period                                              $   239           $   176
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Gain on investment securities transactions                                 (75)               -
    Provision for losses on loans                                                8                -
    Amortization of deferred loan origination fees                             (59)              (40)
    Depreciation and amortization                                               10                14
    Federal Home Loan Bank stock dividends                                     (10)               (9)
    Amortization expense of stock benefit plans                                109                -
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable                                                3                24
      Prepaid expenses and other assets                                        (36)              (39)
      Other liabilities                                                        (78)             (132)
      Federal income taxes
        Current                                                                (38)               -
        Deferred                                                               (20)               68
                                                                           -------           -------
         Net cash provided by operating activities                              53                62

Cash flows provided by (used in) investing activities:
  Proceeds from maturity of investment securities                              506              1,500
  Purchase of investment securities designated as available
    for sale                                                                  (160)                -
  Proceeds from sale of investment securities designated
    as available for sale                                                      177                 -
  Principal repayments on mortgage-backed securities                           481                268
  Principal repayments on loans                                              4,395              2,582
  Loan disbursements                                                        (4,104)            (4,469)
  Purchase of office equipment                                                  (3)                (6)
                                                                          --------           --------
         Net cash provided by (used in) investing activities                 1,292               (125)

Cash flows provided by (used in) financing activities:
  Net increase in deposit accounts                                           1,224              1,114
  Proceeds from Federal Home Loan Bank advances                                 -                 500
  Purchase of common shares for Management Recognition Plan                     -                (315)
  Purchase of treasury shares                                                   -                (206)
  Distributions paid on common shares                                       (2,594)               (58)
                                                                             -----            -------
         Net cash provided by (used in) financing activities                (1,370)             1,035
                                                                             -----              -----

Net increase (decrease) in cash and cash equivalents                           (25)               972

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

Cash and cash equivalents at end of period                                  $3,639             $3,615
                                                                             =====              =====

Supplemental  disclosure of cash flow  information:
  Cash paid during the period for:
    Federal income taxes                                                   $   100          $     23
                                                                            ======           =======

    Interest on deposits and borrowings                                    $   774           $   705
                                                                            ======            ======
</TABLE>

                                        5


<PAGE>


                          London Financial Corporation

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

             For the six month periods ended March 31, 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 six and three month periods ended March 31, 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   ("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 476,304 for each of the
six and three month periods ended March 31, 1998. Weighted-average common shares
deemed  outstanding,  which  gives  effect to 42,320  unallocated  ESOP  shares,
totaled  482,573  for each of the six and three  month  periods  ended March 31,
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 495,350 and 495,359 for the six and
three month periods ended March 31, 1998, respectively,  and 484,964 for each of
the six and three month periods ended March 31, 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 six month periods ended March 31, 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 six month periods ended March 31, 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 March 31, 
1998

At March 31,  1998,  LFC had total assets of $37.0  million,  a decrease of $1.2
million,  or 3.1%,  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 $1.2 million increase in deposits.

Investment securities and mortgage-backed securities decreased by $974,000, to a
total of $3.3 million at March 31, 1998,  reflecting  the maturity of investment
securities  totaling   approximately   $500,000  and  principal   repayments  on
mortgage-backed securities of $481,000.

Loans receivable  decreased by $240,000,  or .8%, as loan  disbursements of $4.1
million were exceeded by principal repayments of $4.4 million.

At March 31, 1998,  Citizens' allowance for loan losses totaled $187,000,  which
equaled the level maintained at September 30, 1997.  Nonperforming loans totaled
$9,000,  or .1% of the total loan  portfolio at March 31,  1998,  as compared to
nonperforming loans of $268,000, or .9% of the total loan portfolio at September
30, 1997. At March 31, 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 March 31, 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 March 31, 1998, an increase of $1.2 million,
or 4.1%,  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 March 31,
1998 (continued)

Shareholders'  equity totaled $5.3 million at March 31, 1998, a decrease of $2.3
million,  or 29.9%,  from  September  30, 1997,  levels.  The decrease  resulted
primarily  from  the $2.6  million,  or  $5.00  per  share,  return  of  capital
distribution paid to LFC's shareholders in November,  1997, coupled with regular
dividends  totaling $61,000,  or $.12 per share,  which were partially offset by
net earnings of $239,000.

Citizens is required to maintain  regulatory  capital sufficient to meet certain
minimum capital standards promulgated by the Office of Thrift Supervision. As of
March 31, 1998,  Citizens' regulatory capital was well in excess of such minimum
capital requirements.


Comparison of Operating Results For the Six Month Periods Ended March 31, 1998
and 1997

General

Net earnings for the six month period ended March 31, 1998, totaled $239,000, an
increase of $63,000,  or 35.8%, over the comparable 1997 period. The increase in
earnings resulted primarily from a $24,000 increase in net interest income and a
$75,000  increase  in other  income,  which were  partially  offset by an $8,000
increase  in the  provision  for losses on loans and a $26,000  increase  in the
federal income tax provision.

Net Interest Income

Interest income on loans and mortgage-backed  securities  increased by $118,000,
or 9.2%,  for the six months ended March 31, 1998, as compared to the six months
ended March 31, 1997.  The increase was primarily due to a $737,000  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 $29,000,  or 25.9%,  due  primarily to a
decrease in yields available on short-term deposits.

Interest  expense on  deposits  increased  by $48,000,  or 6.9%,  during the six
months  ended March 31,  1998.  This  increase  resulted  primarily  from a $1.8
million  increase  in the  weighted  average  balance of  deposits  outstanding.
Interest  expense on  borrowings  increased  by  $17,000,  or 100.0%,  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 Six Month Periods Ended March 31, 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 $24,000,  or 3.5%,  during the six months ended
March 31, 1998, as compared to the six months ended March 31, 1997. The interest
rate spread totaled approximately 3.21% for the six months ended March 31, 1998,
compared to 2.96% for the same  period in 1997,  while the net  interest  margin
increased  to  approximately  4.29% in the 1998  period  from  3.84% 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  $8,000 for the six months ended March 31,
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  $106,000  during the six months ended March 31, 1998,  an
increase  of  $75,000,  or 241.9%  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 increased by approximately $2,000, or
 .4%, during the six months ended March 31, 1998, as compared to 1997, reflecting
the $13,000,  or 56.5%,  decline in federal deposit insurance  premiums,  due to
lower premium rates during the period and a decrease in other expenses  totaling
$6,000, or 4.7%, while employee  compensation and benefits increased by $17,000,
or 8.3%.

Federal Income Taxes

The provision for federal income taxes  increased by $26,000,  or 28.3%,  during
the six months  ended March 31, 1998,  due  primarily to an increase in earnings
before taxes of $89,000,  or 33.2%.  LFC's effective tax rates amounted to 33.1%
and 34.3% during the six months ended March 31, 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 March 31, 1998
and 1997

General

Net earnings for the three month period ended March 31, 1998,  totaled $118,000,
an increase of $37,000,  or 45.7%, over the comparable 1997 period. The increase
in earnings  resulted  primarily from a $68,000 increase in other income,  which
was partially  offset by a $6,000  increase in the provision for losses on loans
and a $14,000 decrease in net interest income.

Net Interest Income

Interest income on loans for the three months ended March 31, 1998, increased by
$36,000,  or 6.1%,  as compared to the three months  ended March 31,  1997.  The
increase  was  primarily  due to a  $670,000  increase  in the  weighted-average
balance outstanding.  Interest income on mortgage-backed securities decreased by
$8,000, or 13.3%, due primarily to a $558,000  decrease in the  weighted-average
portfolio  balance  outstanding  year to year.  Interest  income  on  investment
securities and other interest-earning assets decreased by $18,000, or 35.3%, due
primarily to the sale of investment securities during the current period.

Interest  expense on deposits  increased by $26,000,  or 7.6%,  during the three
months  ended March 31,  1998.  This  increase  resulted  primarily  from a $1.9
million 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 $2,000, or 20.0%,  during the three
months ended March 31, 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 $14,000, or 4.0%, during the three months ended
March 31,  1998,  as compared to the three  months  ended  March 31,  1997.  The
interest  rate spread  totaled  approximately  3.12% for the three  months ended
March 31,  1998,  compared to 3.15% for the same  period in 1997,  while the net
interest margin decreased to  approximately  3.72% in the 1998 period from 3.93%
in the 1997 period.

Other Income

Other income  totaled  $84,000  during the three months ended March 31, 1998, an
increase  of $68,000  over the three month  period  ended  March 31,  1997,  due
primarily  to a  $69,000  gain on sale of  equity  securities  during  the  1998
quarter.  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.






                                       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 March 31, 1998
and 1997 (continued)

General, Administrative and Other Expense

General,  administrative and other expense decreased by approximately $2,000, or
 .8%,  during the three  months ended March 31,  1998,  as compared to 1997.  The
decrease  was  primarily  comprised  of a $19,000,  or 23.8%,  decrease in other
operating  expense  relating to professional  fees during 1998 compared to 1997,
which  was  partially  offset  by a  $12,000,  or 12.2%,  increase  in  employee
compensation and benefits.

Federal Income Taxes

The provision for federal income taxes increased by $13,000,  or 30.2%,  for the
three month  period ended March 31, 1998 as compared to the same period in 1997.
LFC's  effective  tax rates  amounted to 32.2% and 34.7% during the three months
ended March 31, 1998 and 1997, respectively.

Other Matters

As with all providers of financial  services,  Citizens'  operations are heavily
dependent  on  information  technology  systems.   Citizens  is  addressing  the
potential  problems  associated  with the  possibility  that the computers  that
control or operate Citizens'  information  technology system and  infrastructure
may not be  programmed  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.  Citizens is working
with the companies that supply or service its information  technology systems to
identify and remedy any year 2000 related problems.

As of the date of this Form  10-QSB,  Citizens has not  identified  any specific
expenses  that are  reasonably  likely to be incurred by Citizens in  connection
with this issue and does not expect to incur  significant  expense to  implement
the necessary  corrective  measures.  No assurance can be given,  however,  that
significant  expense will not be incurred in future  periods.  In the event that
Citizens  is  ultimately  required  to purchase  replacement  computer  systems,
programs and equipment,  or incur substantial  expense to make Citizens' current
systems,  programs and  equipment  year 2000  compliant,  LFC's net earnings and
financial condition could be adversely affected.

In addition  to possible  expense  related to its own  systems,  LFC could incur
losses if loan  payments  are delayed due to year 2000  problems  affecting  any
major  borrowers  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

         None


ITEM 6.  Exhibits and Reports on Form 8-K

         Reports on Form 8-K:          None.

         Exhibits:
             27.1                      Financial  Data  Schedule  for  the  six
                                       months ended March 31, 1998.

             27.2                      Restated Financial Data  Schedule for the
                                       six months ended March 31, 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:        May 11, 1998                       By: /s/John J. Bodle
      ---------------------------                   ----------------
                                                    John J. Bodle
                                                    President and
                                                    Chief Executive Officer



Date:        May 11, 1998                       By: /s/Joyce E. Bauerle
      ---------------------------                   -------------------
                                                    Joyce E. Bauerle
                                                    Treasurer and
                                                    Principal Accounting Officer

































                                       15