SECURITIES AND EXCHANGE COMMISSION
                 Washington, D.C.  20549

                         FORM 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
    EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal 
    Year Ended December 31, 1996
                                  OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
     For the transaction period from             to                  
                                    --------------  ----------------



                   Commission File Number:  0-29040

                       FIDELITY BANKSHARES, INC.
                  ------------------------------------
           (Exact Name of Registrant as Specified in its Charter)

                    Delaware                65-0717085
           --------------------------   ------------------
     (State or Other Jurisdiction of Incorporation or Organization) 
                   (I.R.S. Employer Identification Number)

 218 Datura Street, West Palm Beach, Florida               33401
-----------------------------------------------         -------------
  (Address of Principal Executive Offices)                (Zip Code)

                             (561) 659-9900
          ------------------------------------------------------
          (Registrant's Telephone Number including area code)

        Securities Registered Pursuant to Section 12(b) of the Act:

                                   None
                                  -------

        Securities Registered Pursuant to Section 12(g) of the Act:

                   Common Stock, par value $.10 per share
                 --------------------------------------------
                              (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 preceding twelve months (or for such 
shorter period that the Registrant was required to file reports) and (2) 
has been subject to such requirements for the past 90 days.
YES      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 amendments to this Form 10-K.   [ ]
                                                  -

   As of February 28, 1997, there were issued and outstanding 
6,755,491 shares of the Registrant's Common Stock.  The aggregate value 
of the voting stock held by non-affiliates of the Registrant, computed 
by reference to the average bid and asked prices of the Common Stock as 
of February 28, 1997 ($18.56) was $48,702,925.

                 DOCUMENTS INCORPORATED BY REFERENCE

1. Sections of Annual Report to Stockholders for the fiscal year 
ended December 31, 1996 (Parts II and IV).
2. Proxy Statement for the 1997 Annual Meeting of Stockholders 
(Parts I and III).



                              PART I

ITEM 1. BUSINESS

General

   Fidelity Bankshares, Inc.

   Fidelity Bankshares, Inc. (the "Company") is a Delaware corporation 
which was organized in May 1996.  The only significant asset of the 
Company is its investment in Fidelity Federal Savings Bank of Florida 
(the "Bank").  The Company is majority owned by Fidelity Bankshares, 
M.H.C., a federally-chartered mutual holding company (the "MHC").  On 
January 29, 1997 the Company acquired all of the issued and outstanding 
common stock of the Bank in connection with the Bank's reorganization 
into the two-tier form of mutual holding company ownership.  At that 
time, each share of Bank common stock was automatically converted into 
one share of Company common stock, par value $.l0 per share (the "Common  
Stock").   3,542,000 shares of Common Stock were issued to the MHC and 
3,206,625 shares of Common Stock were issued to the Bank's public 
stockholders.

   Fidelity Federal Savings Bank of Florida

   The Bank is a federally chartered savings bank headquartered in 
West Palm Beach, Florida.  The Bank's deposits are insured by the 
Federal Deposit Insurance Corporation ("FDIC").  The Bank was chartered 
originally as a federal mutual savings and loan association in 1952, and 
in 1983, amended its charter to become a federally chartered mutual 
savings bank.  On January 7, 1994, the Bank completed a reorganization 
into a federally chartered mutual holding company.  As part of the 
reorganization, the Bank organized a new federally chartered stock 
savings bank and transferred substantially all of its assets and 
liabilities  to the stock savings bank in exchange for a majority of the 
common stock of the stock savings bank.  The Bank is a member of the 
Federal Home Loan Bank ("FHLB") System.  At December 31, 1996, the Bank 
had total assets of $873.6 million, total deposits of $694.7 million, 
and stockholders' equity of $81.7 million.

   The Bank is primarily engaged in the business of attracting 
deposits from the general public in the Bank's market area, and 
investing such deposits, together with other sources of funds, in loans 
secured by one- to four-family residential real estate.  To a lesser 
extent, the Bank also originates construction loans and land loans for 
single-family properties and invests in mortgage-backed securities 
issued or guaranteed by the United States Government or agencies 
thereof.  In addition, the Bank invests a portion of its assets in 
securities issued by the United States Government, cash and cash 
equivalents including deposits in other financial institutions, and FHLB 
stock.  The Bank's principal sources of funds are deposits and principal 
and interest payments on loans.  Principal sources of income are 
interest received from loans and investment securities.  The Bank's 
principal expense is interest paid on deposits and employee compensation 
and benefits.

   The Company's and the Bank's principal executive office is located 
at 218 Datura Street, West Palm Beach, Florida, and its telephone number 
at that address is (561) 659-9900.

Market Area

   The Bank is headquartered in West Palm Beach, Florida, and operates 
in Palm Beach and Martin  Counties in Florida.  The Bank has 20 offices 
in its market area, three of which are located in Martin County, and 17 
of which are located in Palm Beach County. Palm Beach and Martin 
Counties, located in Southeastern Florida, have experienced considerable 
growth and development since the 1960s, and had a total population of 
approximately one million as of 1990 and 1.1 million as of 1995. Due to 
significant growth controls established at the state and local 
governmental levels, as well as a moderation of economic 
growth and migration in the Bank's market area, management believes 
growth of the local market area may be more moderate in the future.

   The Bank's business and operating results are significantly 
affected by the general economic conditions prevalent in its market 
areas.  The southeast Florida economy is significantly dependent upon 
government, foreign trade, tourism, and its attraction as a retirement 
area.  Unemployment in Palm Beach County is higher than the national and 
State of Florida averages.  Major employers in the Bank's market area 
include Pratt & Whitney,  Motorola, St. Mary's Medical Center, Florida 
Power and Light, Bell South and the Palm Beach County School Board.  

Lending Activities

   General.  Historically, the principal lending activity of the Bank 
has been the origination of fixed and adjustable rate mortgage loans 
collateralized by one- to four-family residential properties located in 
its market area.  The Bank currently originates adjustable rate mortgage 
(ARM) loans for retention in its portfolio, and fixed rate loans, the 
majority of which are eligible for sale in the secondary mortgage 
market.  To a lesser extent, the Bank also originates loans secured by 
commercial real estate and multi-family residential real estate, 
construction loans, commercial business loans and consumer loans.

   In an effort to manage interest rate risk, the Bank has sought to 
make its interest-earning assets more interest rate sensitive by 
originating adjustable rate loans, such as ARM loans, home equity loans, 
and short- and medium-term consumer loans.  The Bank also purchases 
mortgage-backed securities which generally are secured by ARM loans.  At 
December 31, 1996, approximately $365.7 million, or 52.2%, of the Bank's 
total gross loan portfolio, and $47.4 million, or 38.4%, of the Bank's 
mortgage-backed securities portfolio, consisted of loans or securities 
with adjustable interest rates.  The Bank originates fixed rate mortgage 
loans generally with 15- to 30-year terms to maturity, collateralized by 
one- to four-family residential properties.  One- to four-family fixed 
rate residential mortgage loans generally are originated and 
underwritten according to standards that allow the Bank to resell such 
loans in the secondary mortgage market for purposes of managing interest 
rate risk and liquidity.  The Bank periodically sells a portion of its 
fixed-rate loans which have terms to maturity exceeding fifteen years.  
The Bank retains in its portfolio all consumer, commercial real estate 
and multi-family residential real estate loans.


   Analysis of Loan Portfolio.  Set forth below are selected data 
relating to the composition of the Bank's loan portfolio by type of loan 
as of the dates indicated.  Also set forth below is the aggregate amount 
of the Bank's investment in mortgage-backed securities at the dates 
indicated.


<TABLE>
<CAPTION>
                                                                        At December 31,
                                   ------------------------------------------------------------------------------------------------
                                         1992               1993                 1994                1995                1996
                                   ----------------    ----------------     ---------------     ---------------    -----------------
                                   Amount   Percent    Amount   Percent     Amount  Percent     Amount  Percent    Amount    Percent
                                   ------   -------    ------   -------     ------  -------     ------  -------    ------    -------
                                                                   (Dollars in Thousands)

<S>                               <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>      <C>         <C>
Real estate loans:
  One- to four-family (1)         $364,741    83.4%   $363,229    83.5%   $373,407    81.8%   $432,387    81.2%  $528,689     79.9%
  Construction loans                13,272     3.0      14,678     3.4      24,086     5.3      40,522     7.6     58,493      8.8
  Land loans                        10,295     2.4       8,202     1.9      10,865     2.4      10,769     2.0     11,875      1.8
  Commercial                        34,292     7.8      34,091     7.8      32,773     7.2      31,359     5.9     29,030      4.4
  Multi-family                      11,579     2.6      12,300     2.8      13,081     2.8      13,748     2.6     13,781      2.1
                                  --------   -----    --------   -----    --------   -----    --------   -----   --------    -----

    Total real estate loans        434,179    99.2     432,500    99.4     454,212    99.5     528,785    99.3    641,868     97.0
                                  --------   -----    --------   -----    --------   -----    --------   -----   --------    -----

Non-real estate loans:
  Consumer (2)                      12,448     2.8      13,085     3.0      18,343     4.0      26,855     5.0     39,478      6.0
  Commercial business                2,531     0.6       2,621     0.6       2,776     0.6       5,834     1.1     18,585      2.8
                                  --------   -----    --------   -----    --------   -----    --------   -----   --------    -----

    Total non-real estate loans     14,979     3.4      15,706     3.6      21,119     4.6      32,689     6.1     58,063      8.8
                                  --------   -----    --------   -----    --------   -----    --------   -----    --------   -----

    Total loans receivable         449,158   102.6     448,206   103.0     475,331   104.1     561,474   105.4    699,931    105.8

Less:
  Undisbursed loan proceeds          8,399     1.9       9,314     2.1      15,463     3.4      27,261     5.1     37,575      5.7
  Unearned discount and 
    net deferred fees                1,371     0.3       1,060     0.2         759     0.2        (385)   (0.1)    (1,607)    (0.2)
  Allowance for loan losses          1,824     0.4       2,865     0.7       2,566     0.5       2,265     0.4      2,263      0.3
                                  --------    ----    --------   -----    --------   -----    --------   -----    --------   -----

    Total loans receivable-net    $437,564   100.0%   $434,967   100.0%   $456,543   100.0%   $532,333   100.0%  $661,700    100.0%
                                  ========   =====    ========   =====    ========   =====    ========   =====   ========    =====

Mortgage-backed securities        $ 64,558            $ 75,199            $126,807            $159,761           $123,599
                                  ========            ========            ========            ========           ========
</TABLE>


-----------------------
(1) Includes participations of $13.4 million, $8.9 million, $6.6 
million, $5.6 million, and $4.3 million at December 31, 1992, 1993, 
1994, 1995, and 1996, respectively.

(2) Includes primarily home equity lines of credit, automobile 
loans, boat loans and passbook loans.  At December 31, 1996, the 
disbursed portion of equity lines of credit totalled $13.7 million.


   Loan and Mortgage-Backed Securities Maturity Schedule.  The 
following table sets forth certain information as of December 31, 1996, 
regarding the dollar amount of loans and mortgage-backed securities 
maturing in the Bank's  portfolio based on their contractual terms to 
maturity.  The amounts shown represent outstanding principal balances 
less loans in process and are not adjusted for premiums, discounts, 
reserves, and unearned fees.  Demand loans, loans having no stated 
schedule of repayments and no stated maturity, and overdrafts are 
reported as due in one year or less.  Adjustable and floating rate loans 
are included in the period in which interest rates are next scheduled to 
adjust rather than in which they contractually mature, and fixed rate 
loans and mortgage-backed securities are included in the period in which 
the final contractual repayment is due.  Fixed rate mortgage-backed 
securities are assumed to mature in the period in which the final 
contractual payment is due on the underlying mortgage.

<TABLE>
<CAPTION>
                                                      Over 1      Over 3      Over 5      Over 10      Beyond
                                           Within    Year to 3  Years to 5  Years to 10 Years to 20     20
                                           1 Year      Years       Years       Years       Years       Years       Total
                                          --------    -------     -------     -------     --------    --------   --------
                                                                        (In Thousands)

<S>                                       <C>         <C>        <C>         <C>          <C>         <C>        <C>
Real estate loans:
  One- to four-family residential (1)     $145,662    $74,152     $36,511     $55,645     $129,101    $109,151   $550,222
  Commercial, multi-family and land         31,298     13,580       4,976       2,033        1,173       1,676     54,736
Consumer loans (2)                          23,338      7,362      24,239       1,900          551           8     57,398
                                          --------    -------     -------     -------     --------    --------   --------
  Total loans receivable                  $200,298    $95,094     $65,726     $59,578     $130,825    $110,835   $662,356
                                          ========    =======     =======     =======     ========    ========   ========
  Mortgage-backed securities              $ 46,808    $ 2,783     $     -     $    18     $ 42,485    $ 30,012   $122,106
                                          ========    =======     =======     =======     ========    ========   ========

(1) Includes construction loans.
(2) Includes commercial business loans of $18.5 million.
</TABLE>


The following table sets forth at December 31, 1996, the 
dollar amount of all fixed rate and adjustable rate loans due
or repricing after December 31, 1997.
<TABLE>
<CAPTION>
                                                    Fixed            Adjustable              Total
                                                  ---------         ------------            -------
                                                                   (In Thousands)
<S>                                                <C>                 <C>                 <C>
Real estate loans:
  One- to four-family residential                  $271,809            $132,751            $404,560
  Commercial, multi-family and land                   6,046              17,392              23,438
Consumer loans (1)                                   26,441               7,619              34,060
                                                   --------            --------            --------
    Total                                          $304,296            $157,762            $462,058
                                                   ========            ========            ========
Mortgage-backed securities                         $ 75,298            $      -            $ 75,298
                                                   ========            ========            ========

(1) Includes commercial business loans of $11.0 million.
</TABLE>

   One- to Four-Family Residential Real Estate Loans.  The Bank's 
primary lending activity consists of the origination of one- to four-
family, owner-occupied, residential mortgage loans secured by properties 
located in the Bank's market area.  During 1995, the Bank began to 
originate one- to four-family residential loans on properties outside of 
its market area.  These loans which were originated through a network of 
brokers throughout Florida, are subject to internal controls established 
by the Bank, as well as the Bank's customary underwriting standards.  At 
December 31, 1996, $587.2 million, or 83.9%, of the Bank's total gross 
loan portfolio consisted of one- to four-family residential mortgage 
loans, including residential construction loans of which $26.0 million 
were originated outside the Bank's market area.

   The Bank currently offers one- to four-family residential mortgage 
loans with terms typically ranging from 15 to 30 years, and with 
adjustable or fixed interest rates.  Originations of fixed rate mortgage 
loans versus ARM loans are monitored on an ongoing basis and are 
affected significantly by the level of market interest rates, customer 
preference, the Bank's interest rate gap position, and loan products 
offered by the Bank's competitors.  ARM loan originations totalled 
$107.5 million during the year ended December 31, 1996.  Therefore, even 
if management's strategy is to emphasize ARM loans, market conditions 
may be such that there is greater demand for fixed rate mortgage loans.

   The Bank's fixed rate loans generally are originated and 
underwritten according to standards that permit sale in the secondary 
mortgage market.  Whether the Bank can or will sell fixed rate loans 
into the secondary market, however, depends on a number of factors 
including the yield and the term of the loan, market conditions, and the 
Bank's current gap position.  The Bank's fixed rate mortgage loans are 
amortized on a monthly basis with principal and interest due each month.  
One- to four-family residential real estate loans often remain 
outstanding for significantly shorter periods than their contractual 
terms because borrowers may refinance or prepay loans at their option.

   The Bank currently offers ARM loans with initial interest rate 
adjustment periods of one, five and seven years, based on changes in a 
designated market index.  After the initial interest rate adjustment, 
each one year ARM loan adjusts annually with an annual interest rate 
adjustment limitation of 200 basis points and with a maximum interest 
rate of 11.5%, or 600 basis points above the initial rate, whichever is 
greater.  Interest rates on the Bank's ARM loans originated prior to 
December 31, 1993 currently adjust with changes in the FHLB's Fourth 
District Cost of Funds Index.  ARM loans, through December 31, 1993, 
were priced at 275 basis points above the Fourth District Cost of Funds 
Index for owner-occupied one- to four-family mortgage loans.  Higher 
interest margins may be required on loans in excess of $500,000.  The 
interest rate on all non-owner-occupied one- to four-family mortgage 
loans is 300 basis points above the Fourth District Cost of Funds Index.  
Subsequent to December 31, 1993, the Bank began to use U.S. Treasury 
securities for indices on newly originated ARMs.  The Bank originates 
ARM loans with initially discounted rates, which vary depending upon 
whether the initial interest rate adjustment period is one, three, five 
or seven years.  The Bank determines whether a borrower qualifies for an 
ARM loan based on the fully indexed rate of the ARM loan at the time the 
loan is originated.  One- to four-family residential ARM loans totalled 
$281.9 million, or 40.2%, of the Bank's total gross loan portfolio at 
December 31, 1996.

   The primary purpose of offering ARM loans is to make the Bank's 
loan portfolio more interest rate sensitive.  However, as the interest 
income earned on ARM loans varies with prevailing interest rates, such 
loans may not offer the Bank as predictable cash flows as long-term, 
fixed rate loans.  See "Management's Discussion and Analysis of 
Financial Condition and Results of Operations-Asset and Liability 
Management-Interest Rate Sensitivity Analysis" contained in the Bank's 
1996 Annual Report to Stockholders (the "Annual Report").  ARM loans 
carry increased credit risk associated with potentially higher monthly 
payments by borrowers as general market interest rates increase.  It is 
possible, therefore, that during periods of rising interest rates, the 
risk of default on ARM loans may increase due to the upward adjustment 
of interest costs to the borrower.

   The Bank's one- to four-family residential first mortgage loans 
customarily include due-on-sale clauses, which are provisions giving the 
Bank the right to declare a loan immediately due and payable in the 
event, among other things, that the borrower sells or otherwise disposes 
of the underlying real property serving as security for the loan.  Due-
on-sale clauses are an important means of adjusting the rates on the 
Bank's fixed rate mortgage loan portfolio, and the Bank has generally 
exercised its rights under these clauses.

   Regulations limit the amount that a savings association may lend 
relative to the appraised value of the real estate securing the loan, as 
determined by an appraisal at the time of loan origination.  Appraisals 
are generally performed by the Bank's service corporation subsidiary.  
Such regulations permit a maximum loan-to-value ratio of 97% for 
residential property and 85% for all other real estate loans.  The 
Bank's lending policies generally limit the maximum loan-to-value ratio 
on both fixed rate and ARM loans without private mortgage insurance to 
80% of the lesser of the appraised value or the purchase price of the 
property to serve as collateral for the loan.

   The Bank makes one- to four-family real estate loans with loan-to-
value ratios in excess of 80%.  For one- to four-family real estate 
loans with loan-to-value ratios of between 80% and 90%, the Bank 
generally requires the borrower to obtain private mortgage insurance.  
For loans in excess of 90% the Bank requires the borrower to obtain 
private mortgage insurance.  The Bank requires fire and casualty 
insurance, as well as a title guaranty regarding good title, on all 
properties securing real estate loans made by the Bank.

   In the past, the Bank has entered into loan participations secured 
by one- to four-family residences.  At December 31, 1996, the Bank's 
loan portfolio included $4.3 million of loan participations.

   Construction and Land Loans.  The Bank currently offers fixed rate 
and adjustable rate residential construction loans primarily for the 
construction of owner-occupied single-family residences to builders who 
have a contract for sale of the property or owners who have a contract 
for construction.  In addition, the Bank makes construction loans to 
builders for homes held for sale which totalled $17.2 million at 
December 31, 1996.  Construction loans are generally structured to 
become permanent loans, and are originated with terms of up to 30 years 
with an allowance of up to one year for construction.  During the 
construction phase the loans made prior to December 31, 1996 
predominately had an adjustable interest rate that adjusted annually and 
converted into either a fixed rate or remained an adjustable rate 
mortgage loan at the end of the construction period.  Subsequent to 
December 31, 1996, the Bank began making construction loans with fixed 
rates of interest.  Such loans become permanent one- to four-family 
loans upon completion of construction.  Advances are made as 
construction is completed.

   In addition, the Bank originates loans which are secured by 
individual unimproved or improved lots.  At December 31, 1996, $58.5 
million, or 8.4%, and $11.9 million, or 1.7%, of the Bank's total loan 
portfolio consisted of construction loans and land loans, respectively.  
Land loans are currently offered with one-year adjustable rates for 
terms of up to 15 years.  The maximum loan-to-value ratio for the Bank's 
land loans is 75%.  Through December 31, 1993, land loans were offered 
at 300 to 350 basis points over the Fourth District Cost of Funds Index 
with an annual interest rate cap of 200 basis points and a lifetime 
interest rate cap of the greater of 600 basis points over the initial 
interest rate, or 6%.  Subsequent to December 31, 1993 the Bank began 
using the applicable U.S. Treasury securities as its index on newly 
originated loans.  Initial interest rates may be below the fully indexed 
rate.

   Construction lending generally involves a greater degree of credit 
risk than one- to four-family residential mortgage lending.  The 
repayment of the construction loan is often dependent upon the 
successful completion of the construction project.  Construction delays 
or the inability of the borrower to sell the property once construction 
is completed may impair the borrower's ability to repay the loan.

   Multi-Family Residential Real Estate Loans.   Loans securing multi-
family real estate constituted approximately $13.8 million, or 2.0%, of 
the Bank's total loan portfolio at December 31, 1996.  At December 31, 
1996, the Bank had a total of 77 loans secured by multi-family 
properties.  The Bank's multi-family real estate loans are secured by 
multi-family residences, such as rental properties.  At December 31, 
1996, substantially all of the Bank's multi-family loans were secured by 
properties located within the Bank's market area.  At December 31, 1996, 
the Bank's multi-family real estate loans had an average principal 
balance of $179,000 and the largest multi-family real estate loan had a 
principal balance of $1.5 million.  Multi-family real estate loans 
currently are offered with adjustable interest rates, although in the 
past the Bank originated fixed rate multi-family real estate loans.  The 
terms of each multi-family loan are negotiated on a case-by- case basis.  
Such loans typically have adjustable interest rates tied to a market 
index with a 600 basis point lifetime interest rate cap and an interest 
rate floor equal the initial rate, and amortize over 15 to 25 years.  An 
origination fee of 1 to 2% is usually charged on multi-family loans.  
The Bank generally makes multi-family mortgage loans up to 80% of the 
appraised value of the property securing the loan.  The Bank may choose 
to offer initial discount rates depending on market conditions, but 
generally the initial interest rate on multi-family real estate loans 
has been priced at the applicable U.S. Treasury securities as its index 
on newly originated loans.  The Bank's originations of multi-family 
loans have been limited in recent years.

   Loans secured by multi-family real estate generally involve a 
greater degree of credit risk than one- to four-family residential 
mortgage loans and carry larger loan balances.  This increased credit 
risk is a result of several factors, including the concentration of 
principal in a limited number of loans and borrowers, the effects of 
general economic conditions on income producing properties, and the 
increased difficulty of evaluating and monitoring these types of loans.  
Furthermore, the repayment of loans secured by multi-family and 
commercial real estate is typically dependent upon the successful 
operation of the related real estate property.  If the cash flow from 
the project is reduced, the borrower's ability to repay the loan may be 
impaired.

   Commercial Real Estate Loans.  Loans secured by commercial real 
estate constituted approximately $29.0 million, or 4.1%, of the Bank's 
total loan portfolio at December 31, 1996.  The Bank's commercial real 
estate loans are secured by improved property such as offices, small 
business facilities, strip shopping centers, warehouses and other non-
residential buildings.  At December 31, 1996, substantially all of the 
Bank's commercial real estate loans were secured by properties located 
within the Bank's market area.  At December 31, 1996, the Bank's 
commercial real estate loans had an average principal balance of 
$196,000.  At that date, the largest commercial real estate loan had a 
principal balance of $2.5 million, secured by an office and retail 
building located in Palm Beach, Florida and was currently performing.  
This was the largest commercial real estate lending relationship at the 
Bank and was within the current loans-to-one borrower limits.  
Commercial real estate loans currently are offered with adjustable 
rates, although in the past the Bank has originated fixed rate 
commercial real estate loans.  The terms of each commercial real estate 
loan are negotiated on a case-by-case basis, although such loans 
typically have adjustable interest rates tied to a market index, with a 
600 basis point lifetime interest rate cap, and a 200 basis point 
interest rate floor below the initial interest rate.  The Bank may 
choose to offer initial discount rates depending on market conditions.  
Through December 31, 1993, commercial real estate loans generally have 
been priced at the Fourth District Cost of Funds Index plus 325 basis 
points.  Subsequent to December 31, 1993, the Bank began using the 
applicable U.S. Treasuries as its index on newly originated loans.  An 
origination fee of up to 1 to 2% of the principal balance of the loan is 
typically charged on commercial real estate loans.  Commercial real 
estate loans originated by the Bank generally amortize over 15 to 25 
years.

   The Bank's policy is generally to limit commercial real estate 
loans to principal balances not exceeding $5.0 million, subject to 
limited exceptions.

   Loans secured by commercial real estate generally involve a greater 
degree of risk than one- to four-family residential mortgage loans and 
carry larger loan balances.  This increased credit risk is a result of 
several factors, including the concentration of principal in a limited 
number of loans and borrowers, the effects of general economic 
conditions on income producing properties, and the increased difficulty 
of evaluating and monitoring these types of loans.  Furthermore, the 
repayment of loans secured by commercial real estate is typically 
dependent upon the successful operation of the related real estate 
project.  If the cash flow from the project is reduced, the borrower's 
ability to repay the loan may be impaired.

   Consumer Loans.  As of December 31, 1996, consumer loans totalled 
$39.5 million, or 5.6%, of the Bank's total gross loan portfolio.  The 
principal types of consumer loans offered by the Bank are home equity 
lines of credit, adjustable and fixed rate second mortgage loans, 
automobile loans, unsecured personal loans, and loans secured by deposit 
accounts.  Consumer loans are offered on a fixed rate and adjustable 
rate basis with maturities generally of less than ten years.  The Bank's 
home equity lines of credit are secured by the borrower's principal 
residence with a maximum loan-to-value ratio, including the principal 
balances of both the first and second mortgage loans, of 80% or less (up 
to 90% if the Bank has a first mortgage on the property).  Such loans 
are offered on an adjustable rate basis with terms of up to ten years.  
At December 31, 1996, the disbursed portion of home equity lines of 
credit totalled $13.7 million, or 34.7% of consumer loans.  During 1996 
the Bank sought to increase its consumer loan portfolio primarily by 
emphasizing the origination of automobile loans.

   The underwriting standards employed by the Bank for consumer loans 
include a determination of the applicant's credit history and an 
assessment of ability to meet existing obligations and payments on the 
proposed loan.  The stability of the applicant's monthly income may be 
determined by verification of gross monthly income from primary 
employment, and additionally from any verifiable secondary income.  
Creditworthiness of the applicant is of primary consideration; however, 
the underwriting process also includes a comparison of the value of the 
collateral in relation to the proposed loan amount, and in the case of 
home equity lines of credit, the Bank obtains a title guarantee or an 
opinion as to the validity of title.

   Consumer loans entail greater credit risk than do residential 
mortgage loans, particularly in the case of consumer loans that are 
unsecured or secured by assets that depreciate rapidly, such as 
automobiles, mobile homes, boats, and recreational vehicles.  In such 
cases, repossessed collateral for a defaulted consumer loan may not 
provide an adequate source of repayment for the outstanding loan and the 
remaining deficiency often does not warrant further substantial 
collection efforts against the borrower.  In particular, amounts 
realizable on the sale of repossessed automobiles may be significantly 
reduced based upon the condition of the automobiles and the lack of 
demand for used automobiles.  The Bank adds a general provision on a 
regular basis to its consumer loan loss allowance, based on general 
economic conditions and prior loss experience.  See "-Delinquencies and 
Classified Assets-Non-Performing Assets," and "Delinquent Loans and Non-
Performing Assets-Classification of Assets" for information regarding 
the Bank's loan loss experience and reserve policy.

   Commercial Business Loans.  The Bank currently offers commercial 
business loans to finance small businesses in its market area.  
Historically, the Bank offered commercial business loans as a customer 
service to business account holders.  At December 31, 1996, the Bank had 
293 commercial business loans outstanding with an aggregate balance of 
$18.5 million.  The average commercial business loan balance was 
approximately $63,000.  Commercial business loans are generally offered 
with adjustable interest rates only, which are tied to The Wall Street 
Journal prime rate, plus up to 300 basis points.  The loans are offered 
with prevailing terms of five years but which may range up to 15 years.  
In addition, the Bank offers Small Business Administration loans.

   Underwriting standards employed by the Bank for commercial business 
loans include a determination of the applicant's ability to meet 
existing obligations and payments on the proposed loan for normal cash 
flows generated by the applicant's business.  The financial strength of 
each applicant also is assessed through a review of financial statements 
provided by the applicant.

   Commercial business loans generally bear higher interest rates than 
residential loans, but they also may involve a higher risk of default 
since their repayment is generally dependent on the successful operation 
of the borrower's business.  The Bank generally obtains personal 
guarantees from the borrower or a third party as a condition to 
originating its commercial business loans.

   Loan Originations, Solicitation, Processing, and Commitments.  Loan 
originations are derived from a number of sources such as real estate 
broker referrals, existing customers, borrowers, builders, attorneys, 
and walk-in customers.  Upon receiving a loan application, the Bank 
obtains a credit report and employment verification to verify specific 
information relating to the applicant's employment, income, and credit 
standing.  In the case of a real estate loan, an appraiser approved by 
the Bank appraises the real estate intended to secure the proposed loan.  
A loan processor in the Bank's loan department checks the loan 
application file for accuracy and completeness, and verifies the 
information provided.  All loans of up to $214,600 may be approved by 
any one of the Bank's senior lending officers; loans between $214,600 
and $400,000 must be approved by any one of the Bank's designated senior 
officers; loans between $400,000 and $650,000 must be approved by at 
least two of the Bank's designated senior officers which includes the 
Chief Executive Officer; and loans in excess of $650,000 must be 
approved by at least three members of the Board of Directors acting as a 
loan committee.  The loan committee meets as needed to review and verify 
that management's approvals of loans are made within the scope of 
management's authority.  Fire and casualty insurance is required at the 
time the loan  is made and throughout the term of the loan, and upon 
request of the Bank, flood insurance may be required.  After the loan is 
approved, a loan commitment letter is promptly issued to the borrower.  
At December 31, 1996, the Bank had commitments to originate $21.8 
million of loans.

   If the loan is approved, the commitment letter specifies the terms 
and conditions of the proposed loan including the amount of the loan, 
interest rate, amortization term, a brief description of the required 
collateral, and required insurance coverage.  The borrower must provide 
proof of fire and casualty insurance on the property (and, as required, 
flood insurance) serving as collateral, which insurance must be 
maintained during the full term of the loan.  Title insurance or an 
opinion of title, based on a title search of the property, is required 
on all loans secured by real property.

   Borrowers who refinance must satisfy the Bank's underwriting 
criteria at the time they apply to refinance their loan and have been 
current in their loan payments for a minimum of one year.  Approximately 
20% of the Bank's loan originations during the year ended December 31, 
1996 represented the refinancing of the Bank's existing loans.  
Refinancings have resulted in a decrease in the Bank's interest rate 
spread.  See "Management's Discussion and Analysis of Financial 
Condition and Results of Operations" in the 1996 Annual Report to 
Stockholders. 

   During 1996, the Bank in connection with local mortgage brokers 
began a mortgage loan broker solicitation program to supplement the 
Bank's internal originations of one- to four-family residential loans.  
Under this program, which is limited to the origination of one- to four-
family residential loans, prospective borrowers complete loan 
applications which are provided by mortgage brokers.  The completed 
applications are forwarded to the Bank.  All loans obtained in this 
manner are reviewed in accordance with the Bank's customary underwriting 
standards.  Total originations from all sources under the mortgage loan 
broker solicitation program during 1996 were $87.0 million.  The Bank 
may expand this program in the future.

   During 1994, the Bank entered into an agreement with the wholly-
owned mortgage subsidiary of a major South Florida builder-developer, 
who has substantial operations in the Bank's local service area.  Under 
the terms of this agreement, the mortgage company originates, processes 
and closes home mortgages resulting from the sale of the developer's 
inventory of homes.  The mortgage files are sent to the Bank by the 
mortgage company for review and, if approved by the Bank, it issues a 
commitment to purchase the loan from the mortgage company.  Purchases 
are accomplished by assignment of the mortgage from the mortgage company 
to the Bank.  The Bank purchased $20.8 million loans from this provider 
in 1996.

   The Bank's recently purchased loans are collateralized by 
properties located primarily in Florida, although the Bank has in the 
past purchased loans collateralized by properties located outside the 
State of Florida.  At December 31, 1996, $36.8 million, or 5.3%, of all 
loans in the Bank's portfolio, were purchased from others.  Of this 
amount, $4.3 million represented the Bank's interest in purchased 
participations.  The Bank's largest loan participation was a $635,000 
interest in a loan secured by one- to four-family residences.  The 
remaining loan participations consisted of loans secured by one- to 
four-family residential properties with an average balance of $14,000.



<TABLE>
<CAPTION>

   Origination, Purchase and Sale of Loans.  The table below shows the 
Bank's loan origination, purchase and sales activity for the periods 
indicated.

                                                                            Year Ended December 31, 
                                                               --------------------------------------------
                                                                 1994              1995              1996 
                                                               --------          --------          --------
                                                                              (In Thousands)
<S>                                                           <C>               <C>               <C>
Loan receivable-gross, beginning of period                     $448,206          $475,331          $561,474  

Originations:
  Real estate:
    One- to four-family residential (1)                          81,935           121,457           187,851  
    Land loans                                                    2,896             3,096             3,207  
    Commercial                                                    5,992             1,082               390  
    Multi-family                                                  1,339             1,611             1,869 
  Non-real estate loans:
    Consumer                                                     12,674            19,185            23,761  
   Commercial Business                                            2,791             6,838            33,276 
                                                               --------          --------          --------
  Total originations                                            107,627           153,269           250,354
Transfer of mortgage loans to foreclosed real estate
  and in-substance foreclosure                                   (2,190)           (1,318)             (593)
Loan purchases                                                    4,045            12,398            21,153
Repayments                                                      (79,545)          (75,275)         (115,440)
Loan sales                                                       (2,812)           (2,931)          (17,017)
                                                               --------          --------          --------
Net loan activity                                                27,125            86,143           138,457
                                                               --------          --------          --------
Total loans receivable-gross, end of period                    $475,331          $561,474          $699,931
                                                               ========          ========          ========

--------------------------------------
(1) Includes loans to finance the construction of one- to four-
family residential properties, and loans originated for sale in the 
secondary market.

(2) This table is being presented on a gross loan receivable basis.

</TABLE>

   Loan Origination Fees and Other Income.  In addition to interest 
earned on loans, the Bank generally receives loan origination fees.  To 
the extent that loans are originated or acquired for the Bank's 
portfolio, SFAS 91 requires that the Bank defer loan origination fees 
and costs and amortize such amounts as an adjustment of yield over the 
life of the loan by use of the level yield method.  Fees and costs 
deferred under SFAS 91 are recognized into income immediately upon 
prepayment or the sale of the related loan.  At December 31, 1996, the 
Bank had $1.1 million of deferred loan origination fees and $2.7 million 
of deferred loan origination costs.  Such fees vary with the volume and 
type of loans and commitments made and purchased, principal repayments, 
and competitive conditions in the mortgage markets, which in turn 
respond to the demand and availability of money.

   The Bank also receives other fees, service charges, and other 
income that consist primarily of deposit transaction account service 
charges, late charges, credit card fees, and income from REO operations.  
The Bank recognized fees and service charges of $2.2 million, $2.7 
million and $3.2 million for the fiscal years ended December 31, 1994, 
1995, and 1996, respectively.

   Loans-to-One Borrower.  Savings associations are subject to the 
same loans-to-one borrower limits as those applicable to national banks, 
which under current regulations restrict loans to one borrower to an 
amount equal to 15% of unimpaired capital and unimpaired surplus on an 
unsecured basis, and an additional amount equal to 10% of unimpaired 
capital and unimpaired surplus if the loan is secured by readily 
marketable collateral (generally, financial instruments and bullion, but 
not real estate).  At December 31, 1996, the Bank's largest outstanding 
loan balance to one borrower totalled $4.3 million which was secured by 
various residential properties located primarily in Broward County, 
Florida.  At that date, the Bank's second largest lending relationship 
totalled $4.0 million and was secured by various residential properties.  
The Bank's third largest lending relationship totalled $3.2 million and 
was secured by various residential properties.  The Bank's fourth 
largest lending relationship totalled $3.0 million and was secured by 
various residential properties.  The Bank's fifth largest lending 
relationship totalled $2.8 million and was secured by various commercial 
properties.  The Bank's regulatory limit on loans-to-one borrower was 
$12.3 million at December 31, 1996.

Mortgage-Backed Securities

   The Bank also invests in mortgage-backed securities issued or 
guaranteed by the United States Government or agencies thereof.  These 
securities consist primarily of fixed-rate mortgage-backed securities 
issued or guaranteed by the Federal National Mortgage Association 
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC").  
Mortgage-backed securities totaled $122.3 million at December 31, 1996 
and had a market value of $123.6 million.  Effective December 31, 1993, 
the Bank implemented SFAS 115, "Accounting for Certain Investments in 
Debt and Equity Securities."  As a result of the adoption of this 
accounting principle, the Bank declared its investment in adjustable 
rate, mortgage-backed securities as available for sale.  In November 
1995, FASB issued "A Guide to Implementation of SFAS 115 on Accounting 
for Certain Investments in Debt and Equity Securities - Questions and 
Answers" ("SFAS 115 Q & A Guide").  SFAS 115 Q & A Guide permits an 
entity to conduct a one time reassessment of the classifications of all 
securities held at that time.  On November 28, 1995, in conformity with 
the SFAS 115 Q & A Guide, management of the Bank classified all 
securities as "Available for Sale".  As a result, all such securities 
are now presented at fair value, as determined by market quotations.  
Since the SFAS 115 Q & A Guide cannot be retroactively applied, these 
fixed-rate securities are presented at amortized cost for the year ended 
1994.

   The Bank's objectives in investing in mortgage-backed securities 
varies from time to time depending upon market interest rates, local 
mortgage loan demand, and the Bank's level of liquidity.  The Bank's 
mortgage-backed securities are more liquid than whole loans and can be 
readily sold in response to market conditions and interest rates.  
Mortgage-backed securities purchased by the Bank also have lower credit 
risk than mortgage loans because principal and interest are either 
insured or guaranteed by the United States Government or agencies 
thereof.

<TABLE>
<CAPTION>

                                                                            Year Ended December 31, 
                                                              ------------------------------------------------
                                                                1994               1995                 1996  
                                                              --------           --------             --------
                                                                              (In Thousands)
<S>                                                          <C>                <C>                  <C>
Mortgage-backed securities at beginning of period             $ 75,199           $126,807             $159,761
Purchases                                                       68,133             45,625                9,962
Sales                                                               --                 --              (19,641)
Repayments                                                     (14,510)           (17,796)             (23,608)
Discount (premium) amortization                                   (579)               (79)                   3
Increase (decrease) in market value of securities held for
    sale in accordance with SFAS 115                            (1,436)             5,204               (2,878)
                                                              --------           --------             --------
Mortgage-backed securities at end of period                   $126,807           $159,761             $123,599  
                                                              ========           ========             ========

</TABLE>




<TABLE>
<CAPTION>

   The following table sets forth the allocation of fixed and 
adjustable rate mortgage-backed securities for the periods indicated.

                                                                                    At December 31, 
                                                             -----------------------------------------------------------
                                                                   1994                   1995                 1996  
                                                             ----------------       ----------------    ----------------
                                                              $            %         $            %      $            %   
                                                             ---          ---       ---          ---    ---          ---
                                                                                 (Dollars In Thousands)
<S>                                                       <C>         <C>         <C>         <C>       <C>         <C>
Mortgage-backed securities, net:
  Adjustable:
    FHLMC                                                  $ 15,799     12.38%    $ 13,244      8.24%    $ 15,900     12.78%
    FNMA                                                     35,533     27.84       31,250     19.43       29,576     23.76
    GNMA                                                         --        --           --        --        1,963      1.58
                                                           --------  --------     --------  --------     --------  --------
      Total adjustable                                       51,332     40.22       44,494     27.67       47,439     38.12
                                                           --------  --------     --------  --------     --------  --------
  Fixed:
    FHLMC                                                    32,546     25.50       74,052     46.04       56,245     45.20
    FNMA                                                     15,674     12.28       14,019      8.72       11,771      9.46
    GNMA                                                     27,255     21.35       27,196     16.91        8,144      6.54
                                                           --------  --------     --------  --------     --------  --------
      Total fixed                                            75,475     59.13      115,267     71.67       76,160     61.20
                                                           --------  --------     --------  --------     --------  --------
Accrued interest                                                834      0.65        1,067      0.66          842      0.68
                                                           --------   -------      -------   -------      -------   -------
  Total mortgage-backed securities, net                    $127,641     100.0%    $160,828    100.00%    $124,441    100.00%
                                                           ========  ========     ========  ========     ========  ========


</TABLE>

Delinquencies and Classified Assets

   Delinquencies.  The Bank's collection procedures provide that when 
a loan is 15 days past due, a computer-generated late charge notice is 
sent to the borrower requesting payment, plus a late charge.  If 
delinquency continues, at 30 days a delinquent notice is sent and 
personal contact efforts are attempted, either in person or by 
telephone, to strengthen the collection process and obtain reasons for 
the delinquency.  Also, plans to arrange a repayment plan are made.  If 
a loan becomes 60 days past due, a collection letter is sent, personal 
contact is attempted, and the loan becomes subject to possible legal 
action if suitable arrangements to repay have not been made.  In 
addition, the borrower is given information which provides access to 
consumer counseling services, to the extent required by regulations of 
the Department of Housing and Urban Development ("HUD").  When a loan 
continues in a delinquent status for 90 days or more, and a repayment 
schedule has not been made or kept by the borrower, generally a notice 
of intent to foreclose is sent to the borrower, giving 30 days to cure 
the delinquency.  If not cured, foreclosure proceedings are initiated.

   Impaired Loans.  A loan is impaired when, based on current 
information and events, it is probable that a creditor will be unable to 
collect all amounts due according to the contractual terms of the loan 
agreement.

   Non-Performing Assets.  Loans are reviewed on a regular basis and 
are placed on a non-accrual status when, in the opinion of management, 
the collection of additional interest is doubtful.  Loans are placed on 
non-accrual status when either principal or interest is 90 days or more 
past due.  Interest accrued and unpaid at the time a loan is placed on a 
non-accrual status is charged against interest income.  At December 31, 
1996, the Bank had non-performing loans of $3.3 million, and a ratio of 
non-performing loans to net loans receivable of .50%.

   Real estate acquired by the Bank as a result of foreclosure or by 
the deed in lieu of foreclosure is classified as real estate owned 
("REO") until such time as it is sold.  When real estate is acquired 
through foreclosure or by deed in lieu of foreclosure, it is recorded at 
its fair value, less estimated costs of disposal. If the value of the 
property is less than the loan, less any related specific loan loss 
provisions, the difference is charged against the Bank's earnings. Any 
subsequent write-down of REO is also charged against earnings. At 
December 31, 1996, the Bank had approximately $93,000 of property 
acquired as the result of foreclosure and classified as REO.  At 
December 31, 1996, the Bank had non-performing assets of $3.4 million 
and a ratio of non-performing assets to total assets of .39%.

Delinquent Loans and Non-Performing Assets

   The following table sets forth information regarding the Bank's 
non-accrual loans delinquent 90 days or more, and real estate acquired 
or deemed acquired by foreclosure at the dates indicated.  When a loan 
is delinquent 90 days or more, the Bank fully reserves all accrued 
interest thereon and ceases to accrue interest thereafter.  For all the 
dates indicated, the Bank did not have any material restructured loans 
within the meaning of SFAS 15.


<TABLE>
<CAPTION>

                                                                                 At December 31, 
                                                             ---------------------------------------------------
                                                                1992       1993      1994       1995      1996   
                                                             --------    --------  --------   --------  --------
                                                                             (Dollars in Thousands)
<S>                                                           <C>         <C>       <C>        <C>       <C>
Delinquent Loans:
  One- to four-family residential (1)                          $1,966      $3,091    $1,299     $1,513    $2,637
  Commercial and multi-family real estate                       1,070         379       335        201       461
  Land                                                             --          --       159         10        84
  Consumer and commercial business loans                          263         347       135        140       108
                                                             --------    --------  --------   --------  --------
Total Delinquent loans                                          3,299       3,817     1,928      1,864     3,290
Total REO and loans foreclosed in-substance                     3,226         463       608        643        93
                                                             --------    --------  --------   --------  --------
    Total nonperforming assets (2)                             $6,525      $4,280    $2,536     $2,507    $3,383
                                                             ========    ========  ========   ========  ========

Total loans delinquent 90 days or more to net
  loans receivable                                               0.75%       0.88%     0.42%      0.35%     0.50%
Total loans delinquent 90 days or more to
  total assets                                                   0.52%       0.56%     0.27%      0.24%     0.38%
Total nonperforming loans, loans foreclosed
  in substance and REO to total assets                           1.02%       0.63%     0.36%      0.32%     0.39%

------------------------------------
(1) At December 31, 1996, the Bank had no delinquent or non-
performing construction loans. 
 
(2) Net of specific valuation allowances.

   During the year ended December 31, 1996, gross interest income of 
approximately $192,000 would have been recorded on loans accounted for 
on a non-accrual basis if the loans had been current throughout the 
period.  No interest income on non-accrual loans was included in income 
during 1996.





</TABLE>
<TABLE>
<CAPTION>

     The following table sets forth information with respect to loans 
past due 60-89 days in the Bank's portfolio at the dates indicated.

                                                                       At December 31,
                                                     --------------------------------------------------
                                                      1992       1993       1994       1995       1996
                                                     ------     ------     ------     ------     ------
                                                                   (Dollars in Thousands)
<S>                                               <C>        <C>        <C>        <C>        <C>
Loans past due 60-89 days:
     One- to four-family residential (1)           $  4,496   $  1,929   $  1,554   $  1,272   $  2,038 
     Commercial real estate and multi-family            159        219        100        106         55
     Consumer and commercial business loans              54         50          7        106         19
     Land loans                                           -         97         48          1          -
                                                   --------   --------   --------   --------   --------
       Total past due 60-89 days                   $  4,709   $  2,295   $  1,709   $  1,485   $  2,112
                                                   ========   ========   ========   ========   ========
-------------------------------------
(1)     (Includes construction loans)

</TABLE>


     Classification of Assets.  Federal regulations provide for the 
classification of loans and other assets such as debt and equity 
securities considered by the OTS to be of lesser quality as 
"substandard," "doubtful," or "loss" assets.  An asset is considered 
"substandard" if it is inadequately protected by the current net worth 
and paying capacity of the obligor or of the collateral pledged, if any.  
"Substandard" assets include those characterized by the "distinct 
possibility" that the savings institution will sustain "some loss" if 
the deficiencies are not corrected.  Assets classified as "doubtful" 
have all of the weaknesses inherent in those classified "substandard," 
with the added characteristic that these weaknesses  make "collection or 
liquidation in full," on the basis of currently existing facts, 
conditions, and values, "highly questionable and improbable."  Assets 
classified as "loss" are those considered "uncollectible" and of such 
little value that their continuance as assets without the establishment 
of a specific loss reserve is not warranted.  Assets that do not expose 
the savings institution to risk sufficient to warrant classification in 
one of the aforementioned categories, but which possess some weaknesses, 
are designated "special mention" by management.

     When a savings institution classifies problem assets as either 
substandard or doubtful, it is required to establish general allowances 
for loan losses in an amount deemed prudent by management.  General 
allowances represent loss allowances that have been established to 
recognize the inherent risk associated with lending activities, but 
which, unlike specific allowances, have not been allocated to particular 
problem assets.  When a savings institution classifies problem assets as 
"loss," it is required either to establish a specific allowance for 
losses equal to 100% of the amount of the assets so classified, or to 
charge off such amount.  A savings institution's determination as to the 
classification of its assets and the amount of its valuation allowances 
is subject to review by the OTS, which can order the establishment of 
additional general or specific loss allowances.  The Bank regularly 
reviews the problem loans in its portfolio to determine whether any 
loans require classification in accordance with applicable regulations.



<TABLE>
<CAPTION>

     The following table sets forth the aggregate amount of the Bank's 
classified assets at the dates indicated.

                                                                           At December 31,     
                                                             ----------------------------------------
                                                               1994             1995            1996
                                                             -------          -------         -------
                                                                          (In Thousands)
<S>                                                       <C>               <C>             <C>
Substandard assets (1)(2)                                  $  5,227          $  5,106        $  3,207
Doubtful assets (2)                                               -                 -               -
Loss assets (2)                                                  24                58               -
                                                           --------          --------        --------
   Total classified assets (2)                             $  5,251          $  5,164         $ 3,207 
                                                           ========          ========        ========
---------------------------------------------------
(1)     Includes REO and in-substance foreclosures.
(2)     Net of specific valuation allowances.

</TABLE>



<TABLE>
<CAPTION>

     The following table sets forth information regarding the Bank's 
delinquent loans, REO and loans foreclosed in-substance at 
December 31, 1996.

                                                            Balance            Number
                                                            -------            ------
                                                              (Dollars In Thousands)
<S>                                                        <C>                   <C>
     Residential real estate:
          Loans 60 to 89 days delinquent                    $ 2,038                34
          Loans more than 89 days delinquent                  2,637                32
     Commercial and multi-family real estate:
          Loans 60 to 89 days delinquent                         55                 1
          Loans more than 89 days delinquent                    461                 1
     Land loans:
          Loans 60 to 89 days delinquent                          -                 -
          Loans more than 89 days delinquent                     84                 3
     Consumer and commercial business loans
           60 days or more delinquent                           127                12
     REO                                                         93                 3
                                                            -------           -------
               Total                                        $ 5,495                86
                                                            =======           =======

</TABLE>



     Allowance for Loan Losses.  Management's policy is to provide for 
estimated losses on the Bank's loan portfolio based on management's 
evaluation of the potential losses that may be incurred.  The Bank 
regularly reviews its loan portfolio, including problem loans, to 
determine whether any loans require classification or the establishment 
of appropriate reserves or allowances for losses.  Such evaluation, 
which includes a review of all loans of which full collectibility of 
interest and principal may not be reasonably assured, considers, among 
other matters, the estimated net realizable value (or fair value, where 
appropriate) of the underlying collateral.  Other factors considered by 
management include the size and risk exposure of each segment of the 
loan portfolio, present indicators such as delinquency rates and the 
borrower's current financial condition, and the potential for losses in 
future periods.  Management calculates the general  allowance for loan 
losses in part based on past experience, and in part based on specified 
percentages of loan balances.  While both general and specific loss 
allowances are charged against earnings, general loan loss allowances 
are added back to capital in computing risk-based capital under OTS 
regulations.

     Management will continue to review the entire loan portfolio to 
determine the extent, if any, to which further additional loan loss 
provisions may be deemed necessary.  Management believes that the Bank's 
current allowance for loan losses is adequate; however, there can be no 
assurance that the allowance for loan losses will be adequate to cover 
losses that may in fact be realized in the future or that additional 
provisions for loan losses will not be required.

<TABLE>
<CAPTION>

     Analysis of the Allowance For Loan Losses.  The following table 
sets forth the analysis of the allowance for loan losses for the periods 
indicated.


                                                                               At December 31, 
                                                        -----------------------------------------------------------
                                                          1992         1993         1994         1995         1996 
                                                        -------      -------      -------      -------      -------
                                                                            (Dollars in Thousands)
<S>                                                  <C>          <C>          <C>          <C>          <C>
Total net loans receivable outstanding                $ 437,564    $ 434,967    $ 456,543    $ 532,333    $ 661,700 
                                                      =========    =========    =========    =========    =========

Average net loans receivable outstanding              $ 449,264    $ 434,522    $ 441,573    $ 490,088    $ 605,507
                                                      =========    =========    =========    =========    =========
Allowance balance (at beginning of period)            $   1,600    $   1,824    $   2,865    $   2,566    $   2,265
Reclassification of valuation allowances
  on in-substance foreclosure                                 -          169            -            -            -
Provision for losses:
     Real estate                                            299        1,201           73         (199)         133
     Consumer and commercial business loans                  31           35           39          (11)          31
Charge-offs:
     Real estate                                            (97)        (362)        (229)         (89)        (145)
     Consumer and commercial business loans                  (9)          (2)        (182)          (2)         (21)
Recoveries:
     Real estate                                              -            -            -            -            -
     Consumer and commercial business loans                   -            -            -            -            -
                                                      ---------    ---------    ---------    ---------    ---------
               Allowance balance (at end of period)   $   1,824   $    2,865    $   2,566    $   2,265    $   2,263 
                                                      =========    =========    =========    =========    =========

Allowance for loan losses as a percent of net
       loans receivable at end of period                   0.42%        0.66%        0.56%        0.43%        0.34%
Net loans charged off as a percent of average
     loans outstanding                                     0.02%        0.08%        0.10%        0.02%        0.03%
Ratio of allowance for loan losses to total 
     non-performing loans at end of period (1)            55.29%       75.06%      132.61%      121.51%       68.78%
Ratio of allowance for loan losses to total
     non-performing loans, REO and in-substance
     foreclosures at end of period (1)                    27.95%       66.94%      100.90%       90.35%       66.89%


---------------------------------
(1)     Net of specific reserves.

</TABLE>



<TABLE>
<CAPTION>

     Allocation of Allowance for Loan Losses.  The following table sets 
forth the allocation of allowance for loan losses by loan category for 
the periods indicated.  Management believes that the allowance can be 
allocated by category only on an approximate basis.  The allocation of 
the allowance by category is not necessarily indicative of future losses 
and does not restrict the use of the allowance to absorb losses in any 
category.



                                                                                 At December 31, 
                                                           --------------------------------------------------------------
                                                               1994                     1995                    1996     
                                                           --------------          --------------          --------------
                                                                  % of Loans               % of Loans             % of Loans
                                                                   In Each                  In Each                In Each
                                                                  Category to              Category to            Category to
                                                       Amount     Total Loans     Amount   Total Loans   Amount  Total Loans
                                                       ------     -----------     ------   -----------  -------   ----------
                                                                                    (Dollars in Thousands)
<S>                                                 <C>            <C>          <C>          <C>        <C>         <C>
Balance at end of period applicable to:
     One- to four-family residential mortgage         $ 1,462       83.62%       $ 1,351      84.23%     $ 1,095     83.89%
     Commercial real estate and
          multi-family residential                        860        9.65            574       8.03          596      6.12
     Land loans                                            84        2.29             91       1.92          119      1.70
     Other                                                160        4.44            249       5.82          453      8.29
                                                      -------     -------        -------    -------      -------   -------
          Total allowance for loan losses             $ 2,566      100.00%       $ 2,265     100.00%     $ 2,263    100.00%
                                                      =======     =======        =======    =======      =======   =======

</TABLE>


Investment Activities

     In prior years, the Bank had increased the percentage of its assets 
held in its investment portfolio as part of its strategy of maintaining 
higher levels of liquidity which improve the Bank's interest rate risk 
position.  During 1995, in a declining interest rate environment, the 
Bank began using this excess liquidity to fund a portion of its loan 
production.  The Bank's investment portfolio comprises investment 
securities, FHLB Stock and interest earning deposits.  The carrying 
value of the Bank's investment securities totaled $41.7 million at 
December 31, 1996, compared to $43.1 million at December 31, 1995.  The 
Bank's interest-bearing deposits due from other financial institutions 
with original maturities of three months or less, totaled $27.1 million 
at December 31, 1996, compared to $10.0 million at December 31, 1995.

     The Bank is required under federal regulations to maintain a 
minimum amount of liquid assets that may be invested in specified short 
term securities and certain other investments.  See "Regulation-Federal 
Regulations-Liquidity Requirements" below and "Management's Discussion 
and Analysis of Financial Condition and Results of Operations-Liquidity 
and Capital Resources" in the Annual Report.  The Bank generally has 
maintained a portfolio of liquid assets that exceeds regulatory 
requirements.  Liquidity levels may be increased or decreased depending 
upon the yields on investment alternatives and upon management's 
judgment as to the attractiveness of the yields then available in 
relation to other opportunities and its expectation of the level of 
yield that will be available in the future, as well as management's 
projections as to the short term demand for funds to be used in the 
Bank's loan origination and other activities. 


     Investment Portfolio.  The following tables set forth the carrying 
value of the Bank's investments at the dates indicated.  At December 31, 
1996, the market value of the Bank's investments was approximately $41.7 
million.  As allowed by SFAS 115, "Accounting for Certain Investments in 
Debt and Equity Securities,"  the Bank declared its investment in U.S. 
Government and agency obligations as available for sale.  As a result, 
such securities are now presented at fair value, as determined by market 
quotations.  The market value of investments includes interest-earning 
deposits and FHLB stock at book value, which approximates market value.


<TABLE>
<CAPTION>


                                                                  At December 31,     
                                                     ---------------------------------------
                                                        1994           1995           1996  
                                                     ---------      ---------      ---------
                                                                  (In Thousands)
<S>                                                 <C>            <C>            <C>
U.S. Government and agency obligations               $ 50,777       $ 26,546       $  8,035
Municipal bonds                                           422            440            430
Interest-earning deposits                              25,063          9,974         27,127
FHLB stock                                              6,148          6,148          6,148
                                                     --------       --------       --------
          Total investments                          $ 82,410       $ 43,108       $ 41,740 
                                                     ========       ========       ========

</TABLE>



<TABLE>
<CAPTION>

     Investment Portfolio Maturities.  The following table sets forth 
the scheduled maturities, amortized cost, market values and average 
yields for the Bank's investment securities at December 31, 1996.  At 
December 31, 1996, the Bank did not have any investment securities 
maturing after three years.

                                                                       At December 31, 1996 
                                      ------------------------------------------------------------------------------------------
                                         One Year or Less            One to Three Years                          
                                      ----------------------       ----------------------
                                                 Annualized                   Annualized                              Annualized
                                                  Weighted                     Weighted                      Average   Weighted
                                       Amortized  Average           Amortized  Average    Amortized  Market   Life in   Average
                                         Cost      Yield              Cost      Yield       Cost      Value  Years (1)   Yield
                                       -------   ---------          -------   ---------   ---------  ------  -------   --------
                                                                                (Dollars in Thousands)
<S>                                <C>            <C>            <C>            <C>      <C>      <C>         <C>      <C> 
Debt securities:
U.S. Government agency securities   $   2,000      5.82%          $  6,024       6.71%    $  8,024  $  8,035   1.92     6.49%
Municipal bonds                             -         -                419       5.49          419       430   2.66     5.49
FHLB stock                              6,148      7.25                  -          -        6,148     6,148      -     7.25
Interest-earning deposits              27,127      5.20                  -          -       27,127    27,127      -     5.20
                                    --------- ---------          ---------  ---------    --------- --------- ------  -------
          Total                     $  35,275      5.59%          $  6,443       6.63%    $ 41,718  $ 41,740   1.96     5.75%
                                    ========= =========          =========  =========    =========  ======== ======  =======

----------------------------------------------------------------------
(1)     Total weighted average life in years calculated only on United 
States Government agency securities and municipal bonds.

</TABLE>



Sources of Funds

     General.  Deposits are the major source of the Bank's funds for 
lending and other investment purposes.  In addition to deposits, the 
Bank derives funds from the amortization and prepayment of loans and 
mortgage-backed securities, the maturity of investment securities, 
operations and, if needed, advances from the FHLB.  Scheduled loan 
principal repayments are a relatively stable source of funds, while 
deposit inflows and outflows and loan prepayments are influenced 
significantly by general interest rates and market conditions.  
Borrowings may be used on a short-term basis to compensate for 
reductions in the availability of funds from other sources or on a 
longer term basis for general business purposes.

     Deposits.  Consumer and commercial deposits are attracted 
principally from within the Bank's market area through the offering of a 
broad selection of deposit instruments including non-interest-bearing 
demand accounts, NOW accounts, passbook savings, money market deposits, 
term certificate accounts and individual retirement accounts.  Deposit 
account terms vary according to the minimum balance required, the period 
of time during which the funds must remain on deposit, and the interest 
rate, among other factors.  The Bank regularly evaluates its internal 
cost of funds, surveys rates offered by competing institutions, reviews 
the Bank's cash flow requirements for lending and liquidity, and 
executes rate changes when deemed appropriate.  The Bank does not obtain 
funds through brokers.

<TABLE>
<CAPTION>

     Deposit Portfolio.  The following table sets forth information 
regarding interest rates, terms, minimum amounts and balances of the 
Bank's deposit portfolio as of December 31, 1996.

    Weighted                                                                                 Percentage
    Average                                                                                    of Total
 Interest Rate     Minimum Term     Checking and Savings Deposits     Amount     Balances     Deposits
 -------------     ------------     -----------------------------     ------     --------     --------
                                                                              (In Thousands)
    <S>              <C>            <C>                              <C>       <C>             <C>
     0.00  %          None           Non-interest-bearing demand      $1,000    $  26,406        3.80%
     1.01             None           NOW accounts                        100       70,558       10.16
     2.00             None           Passbooks                           100       87,534       12.60
     2.50             None           Money market accounts             2,500       44,012        6.34
     

                                    Certificates of Deposit
                                    -----------------------
     4.75         0 - 3 months      Fixed term, fixed rate             1,000      140,670       20.25
     5.15         3 - 6 months      Fixed term, fixed rate             1,000       90,970       13.09
     5.50        6 - 12 months      Fixed term, fixed rate             1,000      127,272       18.32
     5.81       12 - 36 months      Fixed term, fixed rate             1,000       79,894       11.50
     6.00       36 - 60 months      Fixed term, fixed rate             1,000       27,323        3.93
     6.10       Over 60 months      Fixed term, fixed rate             1,000           79         .01
                                                                                ---------   ---------
                                                                                $ 694,718      100.00%
                                                                                =========   =========

</TABLE>



<TABLE>
<CAPTION>

     The following table sets forth the change in dollar amount of 
savings deposits in the various types of savings accounts offered 
by the Bank between the dates indicated.


                                   Balance     Balance     Deposit     Incr.     Balance     Deposit     Incr.  
                                  12/31/92    12/31/93        %       (Decr)     12/31/94       %       (Decr)  
                                  --------    --------     --------  --------    --------   --------   -------- 
                                                                                       (Dollars in Thousands)
<S>                             <C>         <C>             <C>    <C>          <C>          <C>    <C>         
Noninterest bearing demand
  accounts                       $  11,043   $  14,630       2.5%   $  3,587     $ 19,551     3.6%   $   4,921  
NOW, Super NOW and funds 
  transfer accounts                 65,598      68,380      11.7       2,782       65,025    12.1       (3,355) 
Passbook and statement accounts    101,684     128,530      21.9      26,846       99,198    18.4      (29,332) 
Variable rate money market 
  accounts                          68,107      67,661      11.5        (446)      55,516    10.3      (12,145) 
Time Deposits:
  Maturing within 12 months        279,895     256,560      43.7     (23,335)     243,557    45.3      (13,003) 
  Maturing within 12-36 months      47,290      23,388       4.0     (23,902)      34,405     6.4       11,017  
  Maturing beyond 36 months              6      27,378       4.7      27,372       20,983     3.9       (6,395) 
                                 ---------   --------- ---------   ---------    --------- --------   ---------  
      Total                      $ 573,623   $ 586,527    100.00%   $ 12,904    $ 538,235  100.00%   $ (48,292) 
                                 =========   ========= =========   =========    ========= =========  =========  


                                   Balance     Deposit     Incr.     Balance     Deposit     Incr.
                                   12/31/95       %       (Decr)    12/31/96        %        (Decr) 
                                   --------    --------  --------   --------     --------   --------
                                
<S>                             <C>            <C>      <C>       <C>             <C>     <C> 
Noninterest bearing demand
  accounts                       $   21,430      3.6%    $ 1,879   $  26,406        3.8%   $  4,976
NOW, Super NOW and funds 
  transfer accounts                  67,886     11.4       2,861      70,558       10.2       2,672
Passbook and statement accounts      86,471     14.5     (12,727)     87,534       12.6       1,063
Variable rate money market 
  accounts                           44,677      7.5     (10,839)     44,012        6.3        (665)
Time Deposits:
  Maturing within 12 months         294,202     47.4      38,676     358,912       51.7      64,710
  Maturing within 12-36 months       57,236     12.7      41,018      79,894       11.5      22,658
  Maturing beyond 36 months          23,278      2.9      (3,923)     27,402        3.9       4,124
                                  ---------  --------- ---------   ---------  ---------   ---------
      Total                      $  595,180   100.00%   $ 56,945   $ 694,718     100.00%   $ 99,538
                                  ========= =========  =========   =========  =========   =========

</TABLE>



<TABLE>
<CAPTION>

     The following table sets forth the certificates of deposit in the 
Bank classified by rates as of the dates indicated.

                                                                      At December 31,     
                                                       ----------------------------------------
                                                          1994            1995           1996 
                                                       ---------       ---------      ---------
Rate                                                                 (In Thousands)
----
<S>                                                 <C>             <C>            <C>
1.01 - 2.00%                                         $   1,590       $     834      $     949
2.01 - 3.00%                                             1,699               2              2
3.01 - 4.00%                                            62,823           1,198             20
4.01 - 5.00%                                           137,818          49,308         34,308
5.01 - 6.00%                                            63,804         205,595        333,998
6.01 - 7.00%                                            24,998         109,737         93,788
7.00 - 8.00%                                             6,141           8,025          3,079
8.01 - 9.00%                                                72              17             64
                                                     ---------       ---------      ---------
                                                     $ 298,945       $ 374,716      $ 466,208
                                                     =========       =========      =========

</TABLE>



<TABLE>
<CAPTION>

     The following table sets forth the amount and maturities of 
certificates of deposit at December 31, 1996.

                                                    Amount Due 
                    -------------------------------------------------------------------------
                    Less Than      1-2       2-3        3-4        4-5      After 5
                     One Year     Years     Years      Years      Years      Years      Total 
                    --------    --------  --------   --------   --------   --------  --------
                                                  (In Thousands)
<S>               <C>          <C>        <C>       <C>         <C>        <C>      <C> 
Rate

1.01 - 2.00%       $     934    $     15   $      -  $      -    $      -   $     - $     949
2.01 - 3.00%               -           2          -         -           -         -         2
3.01 - 4.00%              15           -          5         -           -         -        20
4.01 - 5.00%          32,673         610        945        48           -        32    34,308
5.01 - 6.00%         255,478      58,482     11,010     3,888       4,247       893   333,998
6.01 - 7.00%          30,047      15,739     16,643    13,095      17,620       644    93,788
7.01 - 8.00%           2,865         161          -         -           -        53     3,079
8.01 - 9.00%              30          34          -         -           -         -        64
                   ---------   ---------  ---------  --------   --------- --------- ---------
                   $ 322,042    $ 75,043   $ 28,603  $ 17,031    $ 21,867   $ 1,622 $ 466,208
                   =========   =========  ========== ========   ========= ========= =========

</TABLE>



<TABLE>
<CAPTION>

     The following table indicates the amount of the Bank's negotiable 
certificates of deposit of $100,000 or more by time remaining until maturity as of December 31, 1996.


     Remaining Maturity                                  Amounts 
     ------------------                              --------------
                                                     (In Thousands)
<S>                                               <C>
     Three months or less                          $     12,849
     Three through six months                             8,871
     Six through twelve months                           12,720
     Over twelve months                                  19,240
                                                   ------------
         Total                                     $     53,680
                                                   ============

</TABLE>



<TABLE>
<CAPTION>

     The following table sets forth the net changes in the deposit 
activities of the Bank for the periods indicated.

                                                                                Year Ended December 31,     
                                                                 --------------------------------------------------
                                                                    1994                 1995               1996
                                                                 ----------           ----------         ----------
                                                                                    (In Thousands)

<S>                                                            <C>                 <C>                 <C>
Deposits                                                        $ 1,903,691         $  2,114,143        $  2,557,621
Withdrawals                                                       1,966,162            2,076,361           2,480,059
                                                                -----------         ------------        ------------
Net increase (decrease) before interest credited                    (62,471)              37,782              77,562
Interest credited                                                    14,179               19,163              21,976
                                                                -----------         ------------        ------------
Net increase (decrease) in deposits                             $   (48,292)        $     56,945        $     99,538
                                                                ===========         ============        ============

</TABLE>



Borrowings

     Savings deposits are the primary source of funds of the Bank's 
lending and investment activities and for its general business purposes.  
If the need arises, the Bank, may rely upon advances from the FHLB and 
the Federal Reserve Bank discount window to supplement its supply of 
lendable funds and to meet deposit withdrawal requirements.  Advances 
from the FHLB typically are collateralized by the Bank's stock in the 
FHLB and a portion of the Bank's first mortgage loans.  At December 31, 
1996, the Bank had $82.5 million in FHLB advances outstanding.

     The FHLB functions as a central reserve bank providing credit for 
the Bank and other member savings institutions and financial 
institutions.  As a member, the Bank is required to own capital stock in 
the FHLB and is authorized to apply for advances on the security of such 
stock and certain of its home mortgages and other assets (principally, 
securities that are obligations of, or guaranteed by, the United States) 
provided certain standards related to creditworthiness have been met.  
Advances are made pursuant to several different programs.  Each credit 
program has its own interest rate and range of maturities.  Depending on 
the program, limitations on the amount of advances are based either on a 
fixed percentage of a member institution's net worth or on the FHLB's 
assessment of the institution's creditworthiness.  All FHLB advances 
have fixed interest rates and mature between two and 10 years.

<TABLE>
<CAPTION>

                                                                                Year Ended December 31,          
                                                                 ----------------------------------------------------
                                                                    1994                 1995                 1996  
                                                                 ----------           ----------           ----------
                                                                                (Dollars in Thousands)

<S>                                                             <C>                  <C>                   <C>
FHLB advances:
     Maximum month-end balance                                   $ 86,659             $ 86,168              $ 91,135
     Balance at end of period                                      86,659               85,169                82,517
     Average balance                                               28,259               78,368                84,351

Weighted average interest rate on:
     Balance at end of period                                        6.94%                6.86%                 6.74%
     Average balance for period                                      6.54%                7.00%                 6.79%

</TABLE>


Competition

     The Bank's market area in Southeast Florida has a large 
concentration of financial institutions, many of which are significantly 
larger and have greater financial resources than the Bank, and all of 
which are competitors of the Bank to varying degrees.  As a result, the 
Bank encounters strong competition both in attracting deposits and in 
originating real estate and other loans.  Its most direct competition 
for deposits has come historically from commercial banks, brokerage 
houses, other savings associations, and credit unions in its market 
area, and the Bank expects continued strong competition from such 
financial institutions in the foreseeable future.  The Bank's market 
area includes branches of several commercial banks that are 
substantially larger than the Bank in terms of state-wide deposits.  The 
Bank competes for savings by offering depositors a high level of 
personal service and expertise together with a wide range of financial 
services. 

     The competition for real estate and other loans comes principally 
from commercial banks, mortgage banking companies, and other savings 
associations.  This competition for loans has increased substantially in 
recent years as a result of the large number of institutions competing 
in the Bank's market area as well as the increased efforts by commercial 
banks to expand mortgage loan originations.

     The Bank competes for loans primarily through the interest rates 
and loan fees it charges and the efficiency and quality of services it 
provides borrowers, real estate brokers, and builders.  Factors that 
affect competition include general and local economic conditions, 
current interest rate levels, and volatility of the mortgage markets.

     Based on total assets as of June 1996, the Bank was the second 
largest savings institution headquartered in Palm Beach County, and the 
Bank held approximately 3.5% of all financial institution deposits in 
Palm Beach County.

Subsidiary Activities

     The Bank has one active wholly owned subsidiary, Fidelity Realty 
and Appraisal Service, Inc., a Florida corporation ("FRAS").  FRAS is 
primarily engaged in providing appraisal services for the Bank and 
selling the Bank's REO.  At December 31, 1996, the Bank had an equity 
investment in FRAS of $207,000.  For the year ended December 31, 1996, 
FRAS had a net loss of $8,000.

     Under FIRREA, SAIF-insured institutions are required to provide 30 
days advance notice to the OTS and FDIC before establishing or acquiring 
a subsidiary or conducting a new activity in a subsidiary.  The insured 
institution must also provide the FDIC and the OTS such information as 
may be required by applicable regulations and must conduct the activity 
in accordance with the rules and orders of the OTS.  In addition to 
other enforcement and supervision powers, the OTS may determine after 
notice and opportunity for a hearing that the continuation of a savings 
association's ownership of or relation to a subsidiary (i) constitutes a 
serious risk to the safety, soundness or stability of the savings 
association, or (ii) is inconsistent with the purposes of FIRREA.  Upon 
the making of such a determination, the OTS may order the savings 
association to divest the subsidiary or take other actions.

Personnel

     As of December 31, 1996, the Bank had 267 full-time and 31 part-
time employees.  None of the Bank's employees is represented by a 
collective bargaining group.  The Bank believes its relationship with 
its employees to be good.

Regulation

     As a federally chartered, SAIF-insured savings association the Bank 
is subject to examination, supervision and extensive regulation by the 
OTS, and the FDIC.  The Bank is a member of and owns stock in the FHLB 
of Atlanta, which is one of the twelve regional banks in the Federal 
Home Loan Bank System.  This regulation and supervision establishes a 
comprehensive framework of activities in which an institution can engage 
and is intended primarily for the protection of the insurance fund and 
depositors.

     The Bank also is subject to regulation by the Board of Governors of 
the Federal Reserve System (the "Federal Reserve Board") governing 
reserves to be maintained against deposits and certain other matters.  
The Holding Company will be subject to supervision and regulation by the 
OTS.

     The OTS regularly examines the Bank and prepares reports for the 
consideration of the Bank's Board of Directors on any deficiencies that 
they may find in the Bank's operations.  The FDIC also examines the Bank 
in its role as the administrator of the SAIF.  The Bank's relationship 
with its depositors and borrowers also is regulated to a great extent by 
both federal and state laws especially in such matters as the ownership 
of savings accounts and the form and content of the Bank's mortgage 
documents.  Any change in such regulation, whether by the FDIC, OTS, or 
Congress, could have a material adverse impact on the Holding Company 
and the Bank and their operations.

     The Federal Deposit Insurance Corporation Improvement Act of 1991.  
The Federal Deposit Insurance Corporation Improvement Act of 1991 
("FDICIA") primarily addresses the recapitalization of the BIF, which 
insures the deposits of commercial banks and savings banks.  In 
addition, FDICIA established a number of new mandatory supervisory 
measures for savings associations and banks.

     Standards for Safety and Soundness.  FDICIA requires the federal 
bank regulatory agencies to prescribe regulatory standards for all 
insured depository institutions and depository institution holding 
companies relating to: (i) internal controls, information systems and 
audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) 
interest rate risk exposure; (v) asset growth; and (vi) compensation, 
fees and benefits.  The compensation standards would prohibit employment 
contracts, compensation or benefit arrangements, stock option plans, fee 
arrangements or other compensatory arrangements that provide excessive 
compensation, fees or benefits or could lead to material financial loss.  
In addition the federal banking regulatory agencies are required to 
prescribe by regulation standards specifying:  (i) maximum classified 
assets to capital ratios; (ii) minimum earnings sufficient to absorb 
losses without impairing capital; and (iii) to the extent feasible, a 
minimum ratio of market value to book value for publicly traded shares 
of depository institutions and depository institution holding companies.

     Financial Management Requirements.  Pursuant to FDICIA, in May 
1993, the FDIC adopted rules establishing annual independent audits and 
financial reporting requirements for all depository institutions with  
assets of more than $500 million, their management and their independent 
auditors.  The rules also establish new requirements for the 
composition, duties, and authority of such institutions' audit 
committees and boards of directors, effective in fiscal years beginning 
after December 31, 1992.  Among other things, all depository 
institutions with assets in excess of $500 million are required to 
prepare and make available to the public annual reports on their 
financial condition and management, including statements of management's 
responsibility under regulations relating to safety and soundness, and 
an assessment of the institution's compliance with internal controls, 
laws and regulations.  The institution's independent auditors are 
required to attest to these management assessments.  Each such 
institution also is required to have an audit committee composed of 
independent directors.  Audit Committees of large institutions 
(institutions with assets exceeding $3.0 billion) must:  (i) include 
members with banking or related financial management experience; (ii) 
have the ability to engage their own independent legal counsel; and 
(iii) must not include any large customers (as defined) of the 
institution.

     Prompt Corrective Action Regulation.  FDICIA establishes a system 
of prompt corrective action to resolve the problems of undercapitalized 
institutions.  Under this system, the OTS and the other 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, FDICIA requires the requisite banking regulator to appoint a 
receiver or conservator for an institution that is critically 
undercapitalized.

     Under the OTS rule implementing the prompt corrective action 
provisions, a savings institution that: (i) has a total risk-based 
capital ratio of 10.0% or greater, a Tier I (core) risk-based capital 
ratio of 6.0% or greater and a leverage ratio of 5.0% or greater; and 
(ii) is not subject to any written agreement, order, capital directive 
or prompt corrective action directive issued by the OTS, is deemed to be 
well-capitalized.  An institution with a total risk-based capital ratio 
of 8.0% or greater, a Tier I risk-based capital ratio of 4.0% or greater 
and a leverage ratio of 4.0% or greater, is considered to be adequately 
capitalized.  A savings institution that has a total risk-based capital 
ratio of less than 8.0%, a Tier I risk-based capital ratio of less than 
4.0%, or a leverage ratio that is less than 4.0% is considered to be 
undercapitalized.  A savings institution that has a total risk-based 
capital ratio of less than 6.0%, a Tier I risk-based capital ratio of 
less than 3.0% or a leverage ratio that is less than 3.0%, is considered 
to be significantly undercapitalized.  A savings institution that has a 
tangible equity capital to assets ratio equal to or less than 2.0% is 
deemed to be critically undercapitalized.  For purposes of the 
regulation, the term "tangible equity" includes core capital elements 
counted as Tier I capital for purposes of the risk-based capital 
standards plus the amount of outstanding cumulative perpetual preferred 
stock (including related surplus), minus all intangible assets except 
certain purchased mortgage servicing rights and qualifying supervisory 
goodwill.

     FDICIA authorizes the appropriate federal banking agency, after 
notice and an opportunity for a hearing, to treat a well-capitalized, 
adequately capitalized or undercapitalized insured depository 
institution as if it had a lower capital classification if it is in an 
unsafe or unsound condition or is engaging in an unsafe or unsound 
practice.  Thus, an adequately capitalized institution can be subjected 
to the restrictions on undercapitalized institutions (provided that a 
capital restoration plan cannot be required of the institution) 
described below and an undercapitalized institution can be subjected to 
the restrictions applicable to significantly undercapitalized 
institutions described below.

     Under FDICIA, an insured depository institution cannot make a 
capital distribution (as broadly defined to include, among other things, 
dividends, redemptions and other repurchases of stock) or pay management 
fees to any person that controls the institution if thereafter it would 
be undercapitalized.  The appropriate federal banking agency, however, 
may (after consultation with the FDIC) permit an insured depository 
institution to repurchase, redeem, retire or otherwise acquire its 
shares if such action:  (i) is taken in connection with the issuance of 
additional shares or obligations in at least an equivalent amount; and 
(ii) will reduce the institution's financial obligations or otherwise 
improve its financial condition.  An undercapitalized institution 
generally is prohibited form increasing its average total assets.  An 
undercapitalized institution also generally is prohibited from making 
acquisitions, establishing any branches or engaging in any new line of 
business except in accordance with an accepted capital restoration plan 
or with the approval of the FDIC.  In addition, the appropriate federal 
banking agency is given authority with respect to any undercapitalized 
depository institution to take any of the actions it is required to or 
may take with respect to a significantly undercapitalized institution as 
described below if it determines that such actions are necessary to 
carry out the purpose of FDICIA.

Federal Regulations

     Regulatory Capital.  The capital requirements consist of a 
"tangible capital requirement," a "leverage limit" and a "risk-based 
capital requirement."

     Under the tangible capital requirement, a savings association must 
maintain tangible capital in an amount equal to at least 1.5% of 
adjusted total assets.  Tangible capital is defined as core capital less 
all intangible assets (including supervisory goodwill), plus a specified 
amount of purchased mortgage servicing rights.  Further, the valuation 
allowance applicable to the write-down of investments and mortgage-
backed securities in accordance with SFAS 115 is excluded from the 
regulatory capital calculation.

     The leverage limit adopted by the OTS requires that savings 
associations maintain "core capital" in an amount equal to at least 3% 
of adjusted total assets.  The OTS, however, has proposed an amendment 
to this requirement that would increase core capital requirements for 
nearly all savings associations, as discussed below.  Core capital is 
defined as common stockholders' equity (including retained earnings), 
non-cumulative perpetual preferred stock, and minority interests in the 
equity accounts of consolidated subsidiaries, plus purchased mortgage 
servicing rights valued at the lower of 90% of fair market value, 90% of 
original cost or the current amortized book value as determined under 
generally accepted accounting principles ("GAAP"), and "qualifying 
supervisory goodwill," less non-qualifying intangible assets. 

     In addition, the OTS has proposed a rule that would limit the 
amount of purchased mortgage servicing rights includable as core capital 
to 50% of such capital.  No assurance can be given as to the final form 
of such regulation, the date of its effectiveness, or whether it will 
differ materially from the proposal.  The proposal, if adopted as 
proposed, is not anticipated to have any immediate effect on the Bank.

     In April 1991, the OTS published a proposed amendment to the 
regulatory capital requirements applicable to all savings associations 
to conform to Office of the Comptroller of the Currency ("OCC") capital 
regulations applicable to national banks.  Under the OTS proposal, those 
savings associations receiving a CAMEL rating of "1", the best possible 
rating on a scale of 1 to 5, will be required to maintain a ratio of  
core capital to adjusted total assets of 3%.  All other savings 
associations will be required to maintain minimum core capital of 4% to 
5% of total adjusted assets.  In determining the required minimum core 
capital ratio, the OTS will assess the quality of risk management and 
the level of risk in each savings association on a case-by-case basis.  
The OTS did not indicate in the proposed regulation the standards it 
will use in establishing the appropriate core capital requirement for 
savings associations not rated "1" under the CAMEL rating system.  At 
December 31, 1996, the Bank's ratio of core capital to total adjusted 
assets was 9.2%.  The OTS prohibits savings associations from disclosing 
their CAMEL ratings.

     A savings association that does not meet the minimum regulatory 
capital requirements because of the new core capital requirement will be 
required to submit a capital restoration plan to the OTS that sets forth 
in reasonable detail the steps the association will take to be in 
compliance.  The capital plans will be required to be filed within 60 
days of the effective date of the new regulation.  If the OTS rejects a 
savings association's capital plan, the OTS may require an amended 
capital plan to be filed, or the OTS can take supervisory action against 
the association.  The Bank is unable to predict when such regulation 
will be adopted, or, if adopted, the final form that such regulation 
will take.

     Under the risk-based capital requirement, a savings association 
must maintain total capital (which is defined as core capital plus 
supplementary capital) equal to at least 8.0% of risk-weighted assets.  
A savings association must calculate its risk-weighted assets by 
multiplying each asset and off-balance sheet item by various risk 
factors, which range from 0% for cash and securities issued by the 
United States Government or its agencies to 100% for repossessed assets 
or loans more than 90 days past due.  Supplementary capital may include, 
among other items, cumulative perpetual preferred stock, perpetual 
subordinated debt, mandatory convertible subordinated debt, 
intermediate-term preferred stock, and general allowances for loan 
losses.  The allowance for loan losses includable in supplementary 
capital is limited to 1.25% of risk-weighted assets.  Supplementary 
capital is limited to 100% of core capital.

     Effective January 1, 1994, the OTS has amended its risk-based 
capital requirements to require institutions with an "above normal" 
level of interest rate risk to exclude certain amounts of capital to 
take account of such risk in determining compliance with the risk-based 
requirements.  A savings institution will be considered to have a 
"normal" level of interest rate risk if the decline in the market value 
of its portfolio equity after an immediate 200 basis  point increase or 
decrease in market interest rates (whichever leads to the greater 
decline) is less than two percent of the current estimated market value 
of its assets.  The market value of portfolio equity is defined as the 
net present value of expected cash inflows and outflows from an 
institution's assets, liabilities and off-balance sheet items.  The 
amount of additional capital that an institution with an above normal 
interest rate risk would be required to maintain (the "interest rate 
risk component") would equal one-half of the dollar amount by which its 
measured interest rate risk exceeds the normal level of interest rate 
risk.  The interest rate risk component would be in addition to the 
capital otherwise required to satisfy the risk-based capital 
requirement.  At December 31, 1996, the OTS had not implemented the 
interest rate risk component.  Had the interest rate risk component been 
implemented as originally proposed, the Bank would not have been 
required to allocate any of its excess risk-based capital for interest 
rate risk purposes at December 31, 1996.

     Certain exclusions from capital and assets are required to be made 
for the purpose of calculating total capital, in addition to the 
adjustments required for calculating core capital.  Such exclusions 
consist of equity investments (as defined by regulation) and that 
portion of land loans and non-residential construction loans in excess 
of an 80% loan-to-value ratio (these items are excluded on a sliding 
scale through December 31, 1996, after which they must be excluded in 
their entirety) and reciprocal holdings of qualifying capital 
instruments.

     The OTS and the FDIC generally are authorized to take enforcement 
action against a savings association that fails to meet its capital 
requirements, which action may include restrictions on operations and 
banking activities, the imposition of a capital directive, a cease-and-
desist order, civil money penalties or harsher measures such as the 
appointment of a receiver or conservator or a forced merger into another 
institution.  In addition, under current regulatory policy, a savings 
association that fails to meet its capital requirements is prohibited 
from paying any dividends.  Except under certain circumstances, further 
disclosure of final enforcement actions by the OTS is required.

     Federal Home Loan Bank System.  The Bank is a member of the Federal 
Home Loan Bank ("FHLB") of Atlanta, which is one of the 12 regional 
FHLBs.  As a member of the FHLB, the Bank is required to purchase and 
maintain stock in the FHLB of Atlanta in an amount equal to the greater 
of 1% of its aggregate unpaid residential mortgage loans, home purchase 
contracts or similar obligations at the beginning of each year, or 1/20 
(or such greater fraction as established by the FHLB) of outstanding 
FHLB advances.  At December 31, 1996 the Bank had $6.1 million in FHLB 
of Atlanta stock, which was in compliance with this requirement.  In 
past years the Bank has received dividends on its FHLB stock.  Over the 
past five years such dividends have averaged 6.50%, and was 7.25% for 
the year ended December 31, 1996.  Certain provisions of FIRREA require 
all 12 FHLBs to provide financial assistance for the resolution of 
troubled savings associations and to contribute to affordable housing 
programs through direct loans or interest subsidies on advances targeted 
for community investment and low- and moderate-income housing projects.  
These contributions could cause rates on the FHLB advances to increase 
and could affect adversely the level of FHLB dividends paid and the 
value of FHLB stock in the future.

     Each FHLB serves as a reserve or central bank for its members 
within its assigned region.  It is funded primarily from proceeds 
derived from the sale of consolidated obligations of the FHLB System.  
It makes loans to members (i.e., advances) in accordance with policies 
and procedures established by the board of directors of the FHLB.  These 
policies and procedures are subject to the regulation and oversight of 
the Federal Housing Finance Board (the "FHFB").

     FHLB advances must be fully secured by sufficient collateral as 
determined by the FHLB.  Eligible collateral consists of mortgage loans 
less than 90 days delinquent or securities evidencing interests therein, 
securities (including mortgage-backed securities) issued, insured, or 
guaranteed by the federal government or any agency thereof, FHLB 
deposits, and to a limited extent, real estate with readily 
ascertainable value in which a perfected security interest may be 
obtained.  Other forms of collateral may be accepted as 
collateralization under certain circumstances.  All long-term advances 
are required to be used to provide funds for residential home financing.  
In addition, the FHFB has established standards of community service 
that members must meet to maintain access to long-term advances.  FHLBs 
are authorized to make short-term liquidity advances to solvent 
associations in poor financial condition but with prospects of 
improving, upon the request of the OTS.  In addition, pursuant to FHLB 
regulations, each FHLB is required to establish programs for affordable 
housing that involve interest subsidies from the FHLBs on advances to 
members engaged in lending at subsidized interest rates for low- and 
moderate-income, owner-occupied housing and affordable housing, and 
certain other community purposes.

     Qualified Thrift Lender Test.  The qualified thrift lender ("QTL") 
test requires that a savings institution maintain at least 65% of its 
total portfolio assets in "qualified thrift investments" on an average 
basis in nine out of every twelve months.  For purposes of the test, 
portfolio assets are defined as the total assets of the savings 
institution minus:  goodwill and other intangible assets, the value of 
property used by the savings institution to conduct its business and 
liquid assets not to exceed 20% of the savings institution's total 
assets.

     Under the QTL's statutory and regulatory provisions, all forms of 
home mortgages, home improvement loans, home equity loans and loans on 
the security of other residential real estate and mobile homes as well 
as a designated percentage of consumer loans are "qualified thrift 
investments," as are shares of stock of the FHLB, investments or 
deposits in other insured institutions, securities issued by the FNMA, 
FHLMC, GNMA or the RTC Financing Corporation and other mortgage-related 
securities.  Investments in nonsubsidiary corporations or partnerships 
whose activities include servicing mortgages or real estate development 
are also considered qualified thrift investments in proportion to the 
amount of primary revenue such entities derive from housing-related 
activities.  Also included in qualified thrift investments are mortgage 
servicing rights, whether such rights are purchased by the insured 
institution or created when the institution sells loans and retains the 
right to service such loans.

     A savings institution that fails to become, or maintain its status 
as, a qualified thrift lender must either become a bank (other than a 
savings bank) or be subject to certain restrictions.  A savings 
institution that fails to meet the QTL test and does not convert to a 
bank will be: (i) prohibited from making an investment or engaging in 
activities that would not be permissible for national banks; (ii) 
prohibited from establishing any new branch office where a national bank 
located in the savings institution's home state would not be able to 
establish a branch office; (iii) ineligible to obtain new advances from 
any Federal Home Loan Bank; and (iv) subject to limitations on the 
payment of dividends comparable to the statutory and regulatory dividend 
restrictions applicable to national banks.  Also, beginning three years 
after the date on which the savings institution ceases to be a qualified 
thrift lender, the savings institution would be prohibited from 
retaining any investment or engaging in any activity not permissible for 
a national bank and would be required to repay any outstanding advances 
to any FHLB.  A savings institution may requalify as a qualified thrift 
lender if it thereafter complies with the QTL test.

     As of December 31, 1996, the Bank was in compliance with the QTL 
requirement.  At December 31, 1996, 90.6% of the Bank's assets were 
"qualified thrift investments."

     Liquidity Requirements.  Federally insured savings associations are 
required to maintain an average daily balance of liquid assets equal to 
a certain percentage of the sum of average daily balances of net 
withdrawable deposit accounts and borrowings payable in one year or 
less.  The liquidity requirement may vary from time to time (between 
4.0% and 10.0%) depending upon economic conditions and savings flows of 
all savings associations.  At the present time, the required liquid 
asset ratio is 5.0%.

     For purposes of this ratio, liquid assets include specified short-
term assets (such as cash, certain time deposits, certain bankers' 
acceptances and short-term United States Treasury obligations), and 
long-term assets such as United States Treasury obligations of more than 
one and less than five years and federal agency obligations with a 
minimum term of 18 months.  The regulations governing liquidity 
requirements include as liquid assets debt securities hedged with 
forward commitments obtained from dealers in United States Government 
securities or Associations whose accounts are insured by the FDIC, debt 
securities directly hedged with a short financial futures position, and 
debt securities that provide the holder with a right to redeem the 
security at par value, regardless of the stated maturities of such 
securities.  FIRREA also authorizes the OTS to designate as liquid 
assets certain mortgage-related securities and certain mortgage loans 
(qualifying as backing for certain mortgage-backed securities) with less 
than one year to maturity.  Short-term liquid assets currently must 
constitute at least 1% of an association's average daily balance of net 
withdrawable deposit accounts and current borrowings.  Penalties may be 
imposed upon associations for violations of the liquidity requirements.  
The monthly average liquidity ratio of the Bank for December 1996 was 
6.15% and exceeded the then applicable requirement of 5.0%.

     Insurance of Accounts and Regulation by the FDIC.  The Bank's 
deposits are insured up to $100,000 per insured member (as defined by 
law and regulation) by the SAIF.  This insurance is backed by the full 
faith and credit of the United States Government.  The SAIF is 
administered and managed by the FDIC.  As insurer, the FDIC is 
authorized to conduct examinations of and to require reporting by SAIF-
insured associations.  It also may prohibit any SAIF-insured association 
from engaging in any activity the FDIC determines by regulation or order 
to pose a serious threat to the SAIF.  The FDIC also has the authority 
to initiate enforcement actions against savings associations, after 
first giving the OTS an opportunity to take such action.

     The minimum annual deposit insurance premiums are currently 
assessed at the rate of .065% of deposits for all SAIF-insured members.  
The FDIC, however, is authorized to raise premiums in certain 
circumstances related to fund losses and severe economic circumstances 
and has exercised this authority several times with respect to premiums 
paid to the BIF by commercial banks and BIF-member savings associations.

     In September 1996, Congress enacted legislation to recapitalize the 
SAIF by a one-time assessment on all SAIF-insured deposits held as of 
March 31, 1995.  The assessment was 65.7 basis points per $100 in 
deposits, payable on November 27, 1996.  In addition, beginning January 
1, 1997, pursuant to the legislation, interest payments on FICO bonds 
issued in the late 1980's by the Financing Corporation to recapitalize 
the now defunct Federal Savings and Loan Insurance Corporation will be 
paid jointly by BIF-insured institutions and SAIF-insured institutions.  
The FICO assessment will be 1.29 basis points per $100 in BIF deposits 
and 6.44 basis points per $100 in SAIF deposits.  Beginning January 1, 
2000, the FICO interest payments will be paid pro rata by banks and 
thrifts based on deposits (approximately 2.4 basis points per $100 in 
deposits).  

The legislation also provides for the merger of the BIF and SAIF on 
January 1, 1999 if there are no more savings associations as of that 
date.  Several bills have been introduced in the current Congress that 
would eliminate the federal thrift charter and OTS.  The bills would 
require that all federal savings associations convert to national banks 
or state depository institutions by no later than January 1, 1998 in one 
bill and June 30, 1998 in the other and would treat all state savings 
associations as state banks for purposes of federal banking laws.  
Subject to a narrow grandfathering, all savings and loan holding 
companies would become subject to the same regulation as bank holding 
companies under the pending legislative proposals.  Under such 
proposals, any lawful activity in which a savings association would be 
permitted for up to two years following the effective date of its 
conversion to the new charter, with two additional one-year extension 
which may be granted at the discretion of the regulator.  Additionally, 
such proposals would grandfather existing thrift intrastate and 
interstate branches which were operated as branches or in the process of 
being established on January 1, 1997 or January 7, 1997, respectively.  
The legislative proposals would also abolish the OTS and transfer its 
functions to the federal bank regulators with respect to the 
institutions and to the Federal Reserve Board with respect to the 
regulation of holding companies.  The Company is unable to predict 
whether the legislation will be enacted or, given such uncertainty, 
determine the extent to which the legislation, if enacted, would affect 
its business.  The Company is also unable to predict whether the SAIF 
and BIF funds will eventually be merged.  

     Limitations on Capital Distributions.  OTS regulations impose 
limitations on all capital distributions by savings institutions.  
Capital distributions include cash dividends, payments to repurchase or 
otherwise acquire the savings association's shares, payments to 
stockholders of another institution in a cash-out merger, and other 
distributions charged against capital.  The rule establishes three tiers 
of institutions.  An institution that exceeds all fully phased-in 
capital requirements before and after a proposed capital distribution 
("Tier 1 Association") may, after prior notice but without the approval 
of the OTS, make capital distributions during a calendar year up to (i) 
100% of its net income to date during the calendar year plus the amount 
that would reduce by one-half its surplus capital at the beginning of 
the calendar year or (ii) 75% of its net income over the most recent 
four-quarter period.  Any additional capital distributions would require 
prior regulatory approval.  An institution that meets its regulatory 
capital requirement, but not its fully phased-in capital requirement 
before or after its capital distribution ("Tier 2 Association") may, 
after prior notice but without the approval of the OTS, make capital 
distributions of:  up to 75% of its net income over the most recent four 
quarter period if it satisfies the risk-based capital requirement that 
would be applicable to it on January 1, 1993, computed based on its 
current portfolio; up to 50% of its net income over the most recent four 
quarter period if it satisfies the risk based capital standard that was 
applicable to it on January 1, 1991, computed based on its current 
portfolio; and up to 25% of its net income over the most recent four 
quarter period if it satisfies its current risk-based capital 
requirement.  In computing the institution's permissible percentage of 
capital distributions, previous distributions made during the prior four 
quarter period must be included.  A savings institution that does not 
meet its current regulatory capital requirement before or after payment 
of a proposed capital distribution ("Tier 3 Association") may not make 
any capital distributions without the prior approval of the OTS.  In 
addition, the OTS would prohibit a proposed capital distribution by any 
institution, which would otherwise be permitted by the regulation, if 
the OTS determines that such distribution would constitute an unsafe or 
unsound practice.  In addition, FDICIA provides that, as a general rule, 
a financial institution may not make a capital distribution if it would 
be undercapitalized after making the capital distribution.  Also, an 
institution meeting the Tier 1 capital criteria which has been notified 
that it needs more than normal supervision will be treated as a Tier 2 
or Tier 3 Association unless the OTS deems otherwise.  A recently 
proposed OTS rule would amend the capital distribution regulation to 
provide that a Tier 1 Association would be permitted to make capital 
distributions under the Tier 1 standard or, consistent with the highest 
Tier 2 standard, at 75% of its net income to date over the most recent 
four quarter period.  As of December 31, 1996, the Bank was a Tier 1 
Association. 

     Investment Limitations.  FIRREA generally provides that state-
chartered savings associations may not engage as principal in any type 
of activity, or in any activity in any amount not permitted for 
federally-chartered associations, or directly acquire or retain any 
equity investment of a type or amount not permitted for federally-
chartered associations.  The FDIC has authority to grant exceptions from 
these prohibitions (other than with respect to non-service corporation 
equity investments) if it determines no significant risk to the 
insurance fund is posed by the amount of the investment or the activity 
to be engaged in if the Bank is and continues to be in  compliance with 
fully phased-in standards.  Among activity restrictions applicable to 
federally-chartered institutions that are also applicable to the Bank is 
the prohibition on investing directly in equity securities or real 
estate (other than that used for offices and related facilities or 
acquired through, or in lieu of, foreclosure).  In addition, the Bank is 
authorized to invest directly in service corporation to a maximum of 2% 
of the Bank's assets, plus an additional 1% of assets if the amount over 
2% is used for specified community or intercity development purposes.  
Federal laws and regulations also impose certain limitations on 
operations, including restrictions on loans to one borrower, 
transactions with affiliates and affiliated persons and liability 
growth.

     FIRREA also imposed investment and lending restrictions that are 
applicable to all federally- or state-chartered associations.  FIRREA 
provides that no savings association may invest in corporate debt 
securities not rated in one of the four highest rating categories by a 
nationally recognized rating organization.  FIRREA and FDICIA amend the 
authority of savings associations to engage in transactions with 
affiliates or to make loans to certain insiders, by making such 
transactions subject to Sections 23A, 23B, 22(g) and 22(h) of the 
Federal Reserve Act.  Among other things, these provisions generally 
require that these transactions with affiliates be on terms and 
conditions comparable to those for similar transactions with non-
affiliates.  In addition, these affiliate transactions may be regulated 
further by the OTS to address safety and soundness concerns.

     Holding Company Regulation.  The Company and the MHC are holding 
companies within the meaning of the Home Owners' Loan Act of 1933, as 
amended ("HOLA").  As such, the Company and the MHC are registered with 
and is subject to OTS examination and supervision as well as certain 
reporting requirements.  In addition, the operations of the Company and 
the MHC are subject to the Regulations as well as other regulations 
promulgated by the OTS from time to time.  As a SAIF-insured subsidiary 
of a savings and loan holding company, the Bank is subject to certain 
restrictions in dealing with the Company and MHC and with other persons 
affiliated with the Company and the MHC and will continue to be subject 
to examination and supervision by the OTS and the FDIC.

     Transactions with Affiliates.  Section 11 of HOLA provides that 
transactions between an insured subsidiary of a holding company and an 
affiliate thereof will be subject to the restrictions that apply to 
transactions between banks that are members of the Federal Reserve 
System and their affiliates pursuant to Sections 23A and 23B of the 
Federal Reserve Act.  Generally, Sections 23A and 23B: (i) limit the 
extent to which a financial institution or its subsidiaries may engage 
in "covered transactions" with an "affiliate," to an amount equal to 10% 
of the institution's capital and surplus, and limit all "covered 
transactions" in the  aggregate with all affiliates to an amount equal 
to 20% of such capital and surplus; and (ii) require that all 
transactions with an affiliate, whether or not "covered transactions," 
be on terms substantially the same, or at least as favorable to the 
institution or subsidiary as those provided to a non-affiliate.  The 
term "covered transaction" includes the making of loans, purchase of 
assets, issuance of a guarantee and similar types of transactions.  
Management believes that the Bank is in compliance with the requirements 
of Sections 23A and 23B.  In addition to the restrictions that apply to 
financial institutions generally under Sections 23A and 23B, Section 11 
of the HOLA places three other restrictions on savings associations, 
including those that are part of a holding company organization.  First, 
savings associations may not make any loan or extension of credit to an 
affiliate unless that affiliate is engaged only in activities 
permissible for bank holding companies.  Second, savings associations 
may not purchase or invest in affiliate securities except for those of a 
subsidiary.  Finally, the Director is granted authority to impose more 
stringent restrictions when justifiable for reasons of safety and 
soundness.

     Extensions of credit by the Bank to executive officers, directors, 
and principal stockholders and related interests of such persons are 
subject to Sections 22 (g) and 22(h) of the Federal Reserve Act and 
Subpart A of the Federal Reserve Board's Regulation O.  These rules 
prohibit loans to any such individual where the aggregate amount exceeds 
an amount equal to 15% of an institution's  unimpaired capital and 
surplus plus an additional 10% of unimpaired capital and surplus in the 
case of loans that are fully secured by readily marketable collateral, 
and/or when the aggregate amount outstanding to all such individuals 
exceeds the institution's unimpaired capital and unimpaired surplus.  
These rules also provide that no institution shall make any loan or 
extension of credit in any manner to any of its executive officers or 
directors, or to any person who directly or indirectly, or acting 
through or in concert with one or more persons, owns, controls, or has 
the power to vote more than 10% of any class of voting securities of 
such institution ("Principal Stockholder"), or to a related interest 
(i.e., any company controlled by such executive officer, director, or 
Principal Stockholder), or to any political or campaign committee the 
funds or services of which will benefit such executive officer, 
director, or Principal Stockholder or which is controlled by such 
executive officer, director, or Principal Stockholder, unless such loan 
or extension of credit is made on substantially the same terms, 
including interest rates and collateral, as those prevailing at the time 
for comparable transactions with other persons,  does not involve more 
than the normal risk of repayment or present other unfavorable features, 
and the institution follows underwriting procedures that are not less 
stringent than those applicable to comparable transactions by the 
institution with persons who are not executive officers, directors, 
Principal Stockholders, or employees of the institution.  A savings 
association is therefore prohibited from making any new loans or 
extensions or credit to the savings association's executive officers, 
directors, and 10% stockholders at different rates or terms than those 
offered to employees of the Bank generally.  The rules identify  limited 
circumstances in which an institution is permitted to extend credit to 
executive officers.  Management believes that the Bank is in compliance 
with Sections 22(g) and 22(h) of the Federal Reserve Act and Subpart A 
of the Federal Reserve Board's Regulation O.

     The Federal Reserve System.  Federal Reserve Board regulations 
require all depository institutions to maintain non-interest earning 
reserves against their transaction accounts (primarily NOW and Super NOW 
checking accounts) and non-personal time deposits.  Reserves of 3% must 
be maintained against total transaction accounts of $54.0 million or 
less (after a $4.0 million exemption), and an initial reserve of 10% 
(subject to adjustment by the Federal Reserve Board to a level between 
8% and 14%) must be maintained against that portion of total transaction 
accounts in excess of such amount.  At December 31, 1996, the Bank was 
in compliance with these reserve requirements.  The balances maintained 
to meet the reserve requirements imposed by the Federal Reserve Board 
may be used to satisfy liquidity requirements that may be imposed by the 
OTS.  See "-Federal Regulations-Liquidity Requirements."

     Savings associations are authorized to borrow from the Federal 
Reserve Bank "discount window," but Federal Reserve Board regulations 
require savings associations to exhaust other reasonable alternative 
sources of funds, including FHLB advances, before borrowing from the 
Federal Reserve Bank.

Federal and State Taxation

     Federal Taxation. For federal income tax purposes, the Company 
files a federal income tax return on a calendar year basis. Because the 
Mutual Holding Company owns less than 80% of the outstanding common 
stock of the Bank, it is not permitted to file a consolidated federal 
income tax return with the Bank.  Because the Mutual Holding Company has 
nominal assets other than the stock of the Bank, it will initially have 
no material federal income tax liability.

     Under recently enacted legislation, the percentage of taxable 
income method has been repealed for years beginning after December 31, 
1995, and "large" associations, i.e., the quarterly average of the 
association's total assets or of the consolidated group of which it is a 
member, exceeds $500 million for the year, may no longer be entitled to 
use the experience method of computing additions to their bad debt 
reserve.  A "large" association must use the direct write-off method for 
deducting bad debts, under which charge-offs are deducted and recoveries 
are taken into taxable income as incurred. If the Bank is not a "large" 
association, the Bank will continue to be permitted to use the 
experience method. The Bank will be required to recapture (i.e., take 
into income) over a six-year period its applicable excess reserves, i.e, 
the balance of its reserves for losses on qualifying loans and 
nonqualifying loans, as of the close of the last tax year beginning 
before January 1, 1996, over the greater of (a) the balance of such 
reserves as of December 31, 1987 (pre-1988 reserves) or (b) in the case 
of a bank which is not a "large" association, an amount that would have 
been the balance of such reserves as of the close of the last tax year 
beginning before January 1, 1996, had the Bank always computed the 
additions to its reserves using the experience method. Postponement of 
the recapture is possible for a two-year period if an association meets 
a minimum level of mortgage lending for 1996 and 1997.

     If an association ceases to qualify as a "bank" (as defined in Code 
Section 581) or converts to a credit union, the pre-1988 reserves and 
the supplemental reserve are restored to income ratably over a six-year 
period, beginning in the tax year the association no longer qualifies as 
a bank.  The balance of the pre-1988 reserves are also subject to 
recapture in the case of certain excess distributions to (including 
distributions on liquidation and dissolution), or redemptions of, 
shareholders.

     Delaware Taxation.  As a Delaware holding company doing business in 
another state, the Company is exempted from Delaware corporate income 
tax but is required to file an annual report with and pay an annual fee 
to the State of Delaware.  The Company is also subject to an annual 
franchise tax imposed by the State of Delaware.

     Florida Taxation.  Foreign corporations, like the Company, pay a 
5_% tax on the portion of their net taxable income which is allocable to 
the State of Florida.

     The Company has not been audited by the Internal Revenue Service, 
the State of Delaware or the State of Florida within the past five 
years.  See Notes 1 and 13 to the Financial Statements.

Executive Officers of the Registrant

     Listed below is information, as of December 31, 1996, concerning 
the Registrant's executive officers.  There are no arrangements or 
understandings between the Registrant and any of persons named below 
with respect to which he or she was or is to be selected as an officer.

     Name                 Age                  Position and Term     
     ----                 ---     --------------------------------------
Vince A. Elhilow          57      President since 1987 and Chief 
                                  Executive Officer since 1992; Director 
                                  of the Bank since 1984

J. Robert McDonald        66      Executive Vice President of the Bank 
                                  as of December; 31, 1994; Manager of 
                                  the Appraisal Department since 1972; 
                                  President of Fidelity Realty & 
                                  Appraisal Service, Inc. since 1982

Richard D. Aldred         52      Executive Vice President as of 
                                  December 31, 1994; Treasurer and Chief 
                                  Financial Officer since 1985

Joseph C. Bova            52      Executive Vice President as of 
                                  December 31, 1994; Lending Operations 
                                  Manager

Robert L. Fugate          48      Executive Vice President as of 
                                  December 31, 1994; Banking Operations 
                                  Manager since 1982

Christopher H. Cook       53      Executive Vice President as of 
                                  December 31, 1996; Corporate Counsel 
                                  since 1996; Director of the Bank since 
                                  1993

David R. Hochstetler      52      Senior Vice President since 1984; 
                                  Director of Marketing since 1980; CRA 
                                  Officer since 1989

Janice R. Newlands        48      Senior Vice President since 1989; 
                                  Director of Human Resources Director 
                                  since 1986

Kenneth B. Stone, Jr.     46      Senior Vice President since 1989; Loan 
                                  Production Manager since 1984

Daniel F. Turk            42      Senior Vice President since 1991; 
                                  Property and Risk Manager since 1983

Patricia C. Clager        61      Vice President since 1990; Corporate 
                                  Secretary since 1987; Assistant to the 
                                  Chairman of the Board

Flora R.  Schmidt         41      Senior Vice President since 1995; 
                                  Banking Administration Manager since 
                                  1984

Joseph B. Shearouse III   39      Senior Vice President since 1995; 
                                  Commercial Loan Manager since 1995

Brian C. Mahoney          36      Senior Vice President since December 
                                  31, 1995; Controller since 1988

ITEM 2.     PROPERTIES

     The Bank conducts its business through its main office located in 
West Palm Beach, Florida, and 19 additional full service branch offices 
located in Palm Beach and Martin counties.  The following table sets 
forth certain information concerning the main office and each branch 
office of the Bank at December 31, 1996.  The aggregate net book value 
of the Bank's premises and equipment was $18.1 million at December 31, 
1996.

LOCATION                   OPENING DATE    OWNERSHIP        ANNUAL RENT
--------                   ------------    ---------        -----------

Main Office                  12/22/52     Fee Simple/       $     7,420
218 Datura St.                            Ground Lease
West Palm Beach, Florida

45th St.                     10/23/60     Fee Simple                  -
4520 45th St.
West Palm Beach, Florida

Northlake                    11/15/65     Fee Simple                  -
950 Northlake Blvd
Lake Park, Florida

Forest Hill                   4/05/71     Fee Simple                  -
399 Forest Hill Blvd
West Palm Beach, Florida

Palm Beach                    6/18/73     Fee Simple                  -
245 Royal Poinciana
Palm Beach, Florida

Century Corners               6/25/73     Fee Simple                  -
4835 Okeechobee Blvd
West Palm Beach, Florida

Singer Island                 2/04/74     Fee Simple                  -
1200 E. Blue Heron
Riviera Beach, Florida

Jupiter/Tequesta              1/26/76     Ground Lease     $     13,250
171 Tequesta Dr
Tequesta, Florida

Royal Palm Beach              3/15/76     Fee Simple                  -
100 Royal Palm Beach Blvd
Royal Palm Beach, Florida

Boynton Beach                12/19/77     Lease           $     120,458
1501 Corporate Dr
Boynton Beach, Florida

West Lake Worth              12/03/79     Fee Simple                  -
6535 Lake Worth Rd
Lake Worth, Florida

Wellington                    6/02/80     Fee Simple                  -
12000 W. Forest Hill Blvd
Wellington, Florida

Delray Beach                 10/20/80     Ground Lease     $     68,916.
5017 W. Atlantic Ave
Delray Beach, Florida

Jensen Beach                  9/14/81     Fee Simple                  -
1021 NE Jensen Beach Blvd
Jensen Beach, Florida

Bear Lakes                    5/15/89     Lease           $     192,286
701 Village Blvd
West Palm Beach, Florida

Palm Beach Gardens            5/20/91     Lease           $     143,523
10973 N. Military Tr
Palm Beach Gardens, Florida

Kanner/Monterey               7/06/93     Fee Simple                  -
2401 S. Kanner Highway
Stuart, Florida

Stuart                       12/13/93     Fee Simple                  -
2980 South Federal Highway
Stuart, Florida

West Forest Hill              9/30/96     Fee Simple                  -
3989 Forest Hill Blvd.
West Palm Beach, Florida


     The Bank's accounting and record keeping activities are maintained 
on the Florida Informanagement Services, Inc. (FIS) service bureau 
system. FIS is owned by its participating members, of which the Bank is 
one.  The Bank's investment in FIS at December 31, 1996 was $96,000, 
which represented a 9.88% interest in the Company.  The  Bank also owns 
data processing equipment it uses for its internal processing needs. The 
net book value of such data processing equipment and related software at 
December 31, 1996, was approximately $950,000.


ITEM 3.     LEGAL PROCEEDINGS
-----------------------------

     There are various claims and lawsuits in which the Bank is 
periodically involved incident to the Bank's business.  In the opinion 
of management, no material loss is expected from any of such pending 
claims or lawsuits.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------------------

     No matters were submitted during the fourth quarter of the year 
ended December 31, 1996 to a vote of security holders.


                          PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
            STOCKHOLDER MATTERS                             
------------------------------------------------------------

     For information concerning the market for the Registrant's common 
stock, the section captioned "Stockholder Information" of the 
Registrant's Annual Report to Stockholders for the Year Ended December 
31, 1996 (the "Annual Report to Stockholders") is incorporated herein by 
reference.

ITEM 6.     SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
----------------------------------------------------------

     The "Selected Consolidated Financial and Other Data" section of the 
Registrant's Annual Report to Stockholders is incorporated herein by 
reference.

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS                
-------------------------------------------------------------

     The "Management's Discussion and Analysis of Financial Condition 
and Results of Operations" section of the Registrant's Annual Report to 
Stockholders is incorporated herein by reference.

ITEM 8.     FINANCIAL STATEMENTS
--------------------------------

     The financial statements identified in Item 14(a)(1) hereof are 
incorporated by reference hereunder.

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

     There were no changes in or disagreements with accountants in the 
Registrant's accounting and financial disclosure during 1996.


                             PART III

ITEM 10.     DIRECTORS AND OFFICERS OF THE REGISTRANT
-----------------------------------------------------

     Information concerning Directors of the Registrant is incorporated 
herein by reference from the Registrant's definitive Proxy Statement 
dated March 15, 1997 (the "Proxy Statement"), specifically the section 
captioned "Proposal I-Election of Directors."  In addition, see Item 1. 
"Executive Officers of the Registrant" for information concerning the 
Company's executive officers.

ITEM 11.     EXECUTIVE COMPENSATION
-----------------------------------

     Information concerning executive compensation is incorporated 
herein by reference from the Registrant's Proxy Statement, specifically 
the sections captioned "Proposal I-Election of Directors-Executive 
Compensation," "-Directors' Compensation," and "-Benefits."

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
             AND MANAGEMENT                               
------------------------------------------------------------

     Information concerning security ownership of certain owners and 
management is incorporated herein by reference from the Registrant's 
Proxy Statement.

ITEM 13.     CERTAIN TRANSACTIONS
---------------------------------

     Information concerning relationships and transactions is 
incorporated herein by reference from the Registrant's Proxy Statement.


                                  PART IV

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

             The exhibits and financial statement schedules filed as a 
             part of this Form 10-K are as follows:

     (a)(1)  Financial Statements
             --------------------

             *  Independent Auditors' Report
             *  Consolidated Statements of Financial Condition,
                  December 31, 1995 and 1996
             *  Consolidated Statements of Operations,
                  Years Ended December 31, 1994, 1995 and 1996
             *  Consolidated Statements of Changes in Stockholders' 
                  equity, Years Ended December 31, 1994, 1995 and 1996
             *  Consolidated Statements of Cash Flows,
                  Years Ended December 31, 1994, 1995 and 1996
             *  Notes to Consolidated Financial Statements.

     (a)(2)  Financial Statement Schedules
             -----------------------------

             No financial statement schedules are filed because the 
             required information is not applicable or is included in 
             the consolidated financial statements or related notes.

     (a)(3)  Exhibits
             --------

             3.1  Federal Stock Charter of Fidelity Federal Savings Bank 
                  of Florida (Incorporated by reference to Exhibit 
                  2(C)(5) of the Bank's Form MHC-1, as amended)

             3.2  Bylaws of Fidelity Federal Savings Bank of Florida 
                 (Incorporated by reference to Exhibit 2(C)(6) of the 
                  Bank's Form MHC-1, as amended)

             4      Common Stock Certificate of the Bank (Incorporated 
                    by reference to Exhibit 2(B)(1) of the Bank's Form 
                    MHC-1, as amended)

             10.1   Incentive Stock Option Plan  (Incorporated by 
                    reference to  Exhibit 2(D)(6) of the Bank's Form 
                    MHC-1, as amended)

             10.2   Stock Option Plan  for Outside Directors 
                   (Incorporated by reference to Exhibit 2(D)(7) of the 
                    Bank's Form MHC-1, as amended)

             10.3   Employment Agreement with Vince A. Elhilow, 
                    President and Chief Executive Officer (Incorporated 
                    by reference to Exhibit 2(D)(1) of the Bank's Form 
                    10-K filed on March 29, 1994)

             10.4   Recognition and Retention Plan for Employees 
                   (Incorporated by reference to Exhibit 2(D)(4) of the 
                    Bank's Form MHC-1, as amended)

             10.5   Recognition and Retention Plan for Outside Directors 
                   (Incorporated by reference to Exhibit 2(D)(5) of the 
                    Bank's Form MHC-1, as amended)

             10.6   Employee Severance Compensation Plan  (Incorporated 
                    by reference to Exhibit 2(D)(2) of the Bank's Form 
                    MHC-1, as amended)

             10.6.A Severance Agreement between the Bank and Richard D. 
                    Aldred, Executive Vice President (Incorporated by 
                    reference to Exhibit 10.6A of the Bank's Form 10-K 
                    filed on March 29, 1994)

             10.6.B Severance Agreement between the Bank and Joseph C.
                    Bova, Executive Vice President

             10.6.C Severance Agreement between the Bank and Robert L. 
                    Fugate, Executive Vice President

             10.7   Employee Stock Ownership Plan (Incorporated by 
                    reference to Exhibit 2(D)(3) of the Bank's Form 
                    MHC-1, as amended)

             10.8   Fidelity Federal Savings Bank of Florida Senior 
                    Management Performance Incentive Award Plan 
                   (Incorporated by reference to Exhibit 2(D)(8) of the 
                    Bank's Form MHC-1, as amended)

              13    1996 Annual Report to Stockholders

              21    Subsidiaries of the Registrant

              99.1  Proxy Statement for Annual Meeting of Stockholders  

     (b)         Reports on Form 8-K:
                 -------------------

                 The Registrant filed no Current Report on Form 8-K 
                 during the fourth quarter of fiscal 1996.

     (c)         The exhibits listed under (a)(3) above are filed 
                 herewith.

     (d)         Not applicable.



                               SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                   FIDELITY BANKSHARES, INC.


Date:  March 25, 1997              By: /s/ Vince A. Elhilow 
             --                        ---------------------------------
                                       Vince A. Elhilow
                                       President and Chief 
                                       Executive Officer

     Pursuant to the requirements of the Securities Exchange 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.



By: /s/ Vince A. Elhilow           By: /s/ Richard D. Aldred 
    -----------------------------      ---------------------------------
    Vince A. Elhilow President         Richard D. Aldred, Executive Vice
    and Chief Executive Officer        President, Chief Financial
                                       Officer and Treasurer
   (Principal Executive Officer)      (Principal Financial and 
                                       Accounting Officer)

Date:  March 25, 1997                  Date:  March 25, 1997
             --                                     --

By: /s/ Joseph B. Shearouse        By: /s/ Keith D. Beaty
    -----------------------------      ---------------------------------
    Joseph B. Shearouse, Jr.,          Keith D. Beaty, Director
    Chairman of the Board

Date:  March 25, 1997                  Date:  March 25, 1997
             --                                     --


By: /s/ F. Ted Brown               By: /s/ Christopher H. Cook 
    -----------------------------      ---------------------------------
     F. Ted Brown, Jr., Director       Christopher H. Cook, Director

Date:  March 25, 1997                  Date:  March 25, 1997
             --                                     --

By: /s/ Donald E. Warren 
    -----------------------------
    Donald E. Warren, Director

Date:  March 25, 1997
             --