<PAGE>   1
F.F.O. FINANCIAL GROUP, INC.
Financial Highlights
For the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                                  1996          1995           1994
                                                                  ----          ----           ----
                                                          (Dollars in thousands, except per share amounts)
<S>                                                          <C>            <C>            <C>
For the Year
    Interest Income                                          $    21,997    $    19,730    $    16,882
    Interest Expense                                              12,023         10,111          7,553
    Provision (Credit) for Loan Losses                               782            477         (1,403)
    Noninterest Income                                             2,387          2,602          2,487
    Noninterest Expenses                                           9,176          9,457         12,545
    Net Income                                                     1,600          1,646            440
    Net Income per Share of Common Stock                     $      0.19    $      0.20    $      0.06

At Year End
    Total Assets                                             $   316,949    $   301,485    $   253,428
    Securities                                                    66,368         90,544         60,757
    Loans Receivable (1)                                         219,467        183,955        163,992
    Deposits                                                     286,927        248,936        210,832
    Borrowed Funds                                                 7,000         30,000         21,400
    Stockholders' Equity                                          20,280         18,780         16,545
    Book Value per Share                                     $      2.41    $      2.23    $      1.96
    Shares Outstanding                                         8,430,000      8,430,000      8,430,000

Certain Ratios
    Return on Average Assets                                        0.54%          0.64%          0.18%
    Return on Average Equity                                        8.18%          9.17%          3.08%
    Equity to Assets at Year End                                    6.40%          6.23%          6.53%
    Interest Rate Spread During the Year                            3.20%          3.86%          4.24%
    Net Interest Margin During the Year                             3.44%          3.99%          4.25%
    Ratio of Allowance for Loan Losses to Gross Loans (1)           2.38%          2.62%          4.61%
    Nonperforming Assets to Total Assets                            3.12%          4.00%          8.96%

    (1) Includes loans held for sale.

------------------------------------------------------------------------------------------------------
</TABLE>



TABLE OF CONTENTS

President's Message                                             1

Marketing Profile                                               2

Selected Consolidated Financial and Other Data                  3

Management's Discussion and Analysis of
  Financial Condition and Results of Operations                 4

Consolidated Financial Statements                              16

Independent Auditors' Report                                   43

Office Locations                                               44


<PAGE>   2


                          F.F.O. FINANCIAL GROUP, INC.
                 Selected Consolidated Financial and Other Data
                (Dollars in thousands, except per share amounts)



<TABLE>
<CAPTION>
                                                 1996       1995        1994          1993         1992
                                                 ----       ----        ----          ----         ----
<S>                                         <C>         <C>         <C>           <C>           <C>
At Year End
  Total assets                              $ 316,949   $ 301,485   $ 253,428     $ 249,399     $ 308,930
  Securities                                   66,368      90,544      60,757        36,660        22,073
  Loans receivable (1)                        219,467     183,955     163,992       165,130       231,300
  Deposits                                    286,927     248,936     210,832       211,118       278,463
  Borrowed funds                                7,000      30,000      21,400        20,000        15,000
  Stockholders' equity                         20,280      18,780      16,545        14,527         8,718



For the Year
  Interest income                           $  21,997   $  19,730   $  16,882     $  18,888     $  25,395
  Interest expense                             12,023      10,111       7,553         9,033        14,197
                                            ---------   ---------   ---------     ---------     ---------

  Net interest income                           9,974       9,619       9,329         9,855        11,198
  Provision (credit) for loan losses              782         477      (1,403)        4,807         7,591
                                            ---------   ---------   ---------     ---------     ---------
  Net interest income after
      provision (credit) for loan losses        9,192       9,142      10,732         5,048         3,607
  Noninterest income                            2,387       2,602       2,487         3,004         4,166
  Noninterest expenses                          9,176       9,457      12,545        10,614        13,386
                                            ---------   ---------   ---------     ---------     ---------
  Income (loss) before
     income tax expense (benefit)               2,403       2,287         674        (2,562)       (5,613)
  Income tax expense (benefit)                    803         641         234        (2,844)       (1,012)
                                            ---------   ---------   ---------     ---------     ---------

  Net income (loss)                         $   1,600   $   1,646   $     440     $     282     ($  4,601)
                                            =========   =========   =========     =========     =========

  Net income (loss) per
      share of common stock                 $    0.19   $    0.20   $    0.06     $    0.08     ($   2.11)
                                            =========   =========   =========     =========     =========



Other Data
  Return on average assets                       0.54%       0.64%       0.18%         0.11%        (1.36)%
  Return on average equity                       8.18%       9.17%       3.08%         2.60%       (41.00)%
  Equity to assets at year end                   6.40%       6.23%       6.53%         5.82%         2.82 %
  Interest rate spread during the year           3.20%       3.86%       4.24%         4.17%         3.97 %
  Net interest margin during the year            3.44%       3.99%       4.25%         4.08%         3.73 %
  Ratio of allowance for loan losses
      to gross loans (1)                         2.38%       2.62%       4.61%         5.31%         2.66 %
  Nonperforming assets to total assets           3.12%       4.00%       8.96%        11.51%        17.36 %
  Number of full-service offices                   11          11          10            10            12
</TABLE>


(1)  Includes $10.5 million, $22.8 million, $7.9 million, $11.3 million and
     $62.7 million in loans held for sale as of December 31, 1996, 1995, 1994,
     1993 and 1992, respectively.



                                      3
<PAGE>   3



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

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

INTRODUCTION

      F.F.O. FINANCIAL GROUP, INC. F.F.O. Financial Group, Inc. (the "Holding
Company") was incorporated in the State of Florida on June 6, 1988. On October
20, 1988 the Holding Company became the unitary savings and loan holding
company for First Federal Savings and Loan Association of Osceola County (the
"Association") (together, the "Company"). The Holding Company's operations are
limited to ownership of the Association. As of December 31, 1996, the Company
had consolidated assets of $316.9 million, consolidated deposits of $286.9
million, and consolidated stockholders' equity of $20.3 million. The Company's
executive office is located at 2013 Live Oak Boulevard, St. Cloud, Florida
34771, and its telephone number is (407) 892-1200.

      THE ASSOCIATION. The Association is a federally chartered savings and
loan association which conducts business from its headquarters and main office
in Kissimmee, Florida and ten branch offices located in Central Florida. The
Association was founded in 1934 as a mutual savings and loan association. On
October 20, 1988, the Association converted to a federally chartered stock
association. The Association's deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") up to applicable limits through the Savings
Association Insurance Fund ("SAIF"). The Association has one wholly-owned
subsidiary, Gulf American Financial Corporation, which is currently inactive.

      The principal business of the Association is to attract deposits,
primarily in the form of savings deposits from the general public, and to
invest these funds, together with borrowings and other funds, in loans,
securities and other investments. Loans are primarily made to enable borrowers
to purchase, refinance, construct or improve residential and other real estate
and are secured by mortgages on the real estate. Funds are also provided for
the operations of the Association through proceeds from the sale of loans,
repayment of outstanding loans, proceeds from the sale and maturity of
securities, and borrowings from the Federal Home Loan Bank ("FHLB") of Atlanta.
The Association's operating results depend substantially on (i) net interest
income (the difference between its interest income and interest expense), (ii)
provisions for losses on loans and foreclosed real estate, (iii) noninterest
income, (iv) noninterest expenses and (v) income taxes. Net interest income is
determined primarily by interest rate spread and the relative amounts of
interest-earning assets (primarily loans, securities and other investments) and
interest-bearing liabilities (primarily deposits and borrowings).

LIQUIDITY AND CAPITAL RESOURCES

      The Company's primary sources of cash are from time deposit inflows, loan
principal repayments, principal repayments and proceeds from sales and
maturities of securities available for sale, proceeds from sales of loans held
for sale, and a net decrease in trading account securities. During 1996, net
time deposit inflows were $42.5 million, loan principal repayments were $42.0
million, principal repayments on securities available for sale were $18.8
million, proceeds from maturities and sales of securities available for sale
were $10.0 million and $26.7 million, respectively, proceeds from sales of
loans held for sale were


                                      4

<PAGE>   4

$25.7 million and the net decrease in trading securities was $13.5 million.
Cash was used primarily to fund loan disbursements of $80.3 million, and to
purchase securities available for sale of $47.4 million. At December 31, 1996,
the Company had approved commitments to originate real estate loans of $5.1
million and to fund the undisbursed portions of loans in process of $10.8
million. It is expected that these requirements will be funded from the sources
described above.

      The Association is required under federal regulations to maintain
specified levels of liquid assets, which include qualifying types of U.S.
government and federal agency securities, cash and other investments. Current
regulations require the Association to maintain liquid assets of not less than
5% of its average daily balance of net withdrawable deposit accounts plus short
term borrowings during the preceding calendar month; short term liquid assets
must consist of not less than 1% of that amount. These levels are established
by the Office of Thrift Supervision ("OTS") and are adjustable periodically to
reflect current conditions. The Association has generally maintained liquidity
in excess of required levels. The Association's average daily liquidity ratio
was 7.64% and the short-term liquidity ratio was 6.22% at December 31, 1996.

      In accordance with applicable law, the Association is required to meet
certain minimum regulatory capital requirements. The following table is a
summary of the capital requirements, the Association's regulatory capital and
the amounts in excess at December 31, 1996 (dollars in thousands):

<TABLE>
<CAPTION>
                                       TANGIBLE                      CORE                     RISK-BASED
                                  -------------------         ---------------------       ------------------
                                                                                                       % OF
                                                % OF                        % OF                       RISK
                                               ADJUSTED                   ADJUSTED                   WEIGHTED
                                   AMOUNT      ASSETS           AMOUNT     ASSETS          AMOUNT     ASSETS
                                   ------      ------           ------     ------          ------     ------
<S>                               <C>           <C>           <C>           <C>           <C>          <C>
Regulatory capital                $18,772       5.9%          $ 18,772      5.9%          $ 20,926     12.3%
Requirement                         4,734       1.5              9,469      3.0             13,572      8.0
                                  -------       ---           --------      ---             ------    -----

Excess                            $14,038       4.4%          $  9,303      2.9%          $  7,354      4.3%
                                  =======       ===           ========      ===           ========    =====
</TABLE>

      If an association is unable to comply with all of its regulatory capital
requirements, the OTS may take such action as it deems appropriate to protect
the deposit insurance funds, the association and its depositors. Such action
may include various operating restrictions, limitations on liability growth,
limitations on deposit account interest rates and investment restrictions. As a
means of limiting regulatory discretion to allow undercapitalized depository
institutions to remain in operation, and thereby minimizing insurance fund
losses, the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") required the OTS and the other federal banking agencies to establish
a prompt regulatory action system pursuant to which banks and thrifts will be
classified, according to their capital levels, into five categories: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized.

      Under regulations adopted by the federal banking agencies to implement
these requirements, the Association met the capital requirements of a "well
capitalized" institution as of December 31, 1996.



                                      5
<PAGE>   5

      On September 30, 1996, legislation was enacted which, among other things,
imposed a special one-time assessment on SAIF member institutions, including
the Association, to recapitalize the SAIF and spread the obligation for
repayment of Financing Corporation ("FICO") bonds across all SAIF and Bank
Insurance Fund ("BIF") members. The FDIC special assessment amounted to 65.7
basis points on SAIF-assessable deposits held as of March 31, 1995. The special
assessment of $1.5 million was recognized in the third quarter of 1996 and is
tax deductible.

      Beginning on January 1, 1997, BIF members will pay a portion of the FICO
payment equal to 1.3 basis points on BIF-insured deposits, compared to 6.5
basis points payable by SAIF members on SAIF-insured deposits, and will pay a
pro rata share of the FICO payment on the earlier of January 1, 2000 or the
date upon which the last savings association ceases to exist. The legislation
also requires BIF and SAIF to be merged by January 1, 1999, provided that
subsequent legislation is adopted to eliminate the savings association charter
and no savings associations remain as of that time.

      The FDIC recently lowered SAIF assessments to a range comparable to those
of BIF members, although SAIF members will continue to pay the higher FICO
payments described above. Management cannot predict the level of FDIC insurance
assessments on an ongoing basis or whether the BIF and SAIF will eventually be
merged.

ASSET QUALITY

      The Company is required by the OTS to classify its own assets and to
establish valuation allowances based in part on such classifications. These
classifications are subject to review by OTS examiners. Management of the
Company reviews its loan, foreclosed real estate and securities portfolios on a
monthly basis, classifying those assets deemed appropriate and establishing
valuation allowances as appropriate. In addition, the Company continues to
establish general loss allowances for unclassified loans based on its
historical loss experience. An asset is classified substandard if it is
determined to involve a distinct possibility that the Company could sustain
some loss if deficiencies associated with the asset are not corrected. An asset
is classified doubtful if full collection is highly questionable or improbable.
An asset is classified loss if it is considered uncollectible, even if a
partial recovery could be expected in the future. If an asset is classified
substandard or doubtful pursuant to the Company's policies or by regulatory
examiners, general allowances for losses may be established. If an asset is
classified loss, the Company is required to establish a specific allowance in
an amount equal to 100% of the portion of the asset classified loss or it must
charge off that amount.

      Pursuant to applicable regulations, the OTS and the FDIC have the
authority to require the Association to increase its valuation allowances if
either agency determines that the allowances are inadequate. The estimation of
appropriate levels of loss allowances is a process that involves a high degree
of subjectivity, and the regulatory authorities may arrive at conclusions that
differ from management's regarding allowance levels. The OTS last performed an
examination of the Association as of December 31, 1996. The examination was
part of the OTS' routine supervision of the Association and included
evaluations of the Association's loan and foreclosed real estate loss
allowances. Based upon the results of the OTS examination, management believes
the Association's policies and procedures for determination of loan and
foreclosed real estate allowances are generally consistent with those used by
the OTS in determining the adequacy of the loss allowances maintained by thrift
institutions. However, there is no assurance that the OTS will concur with this
assessment in future examinations.


                                      6

<PAGE>   6

      The following table illustrates the Company's classified assets as of
December 31, 1996 (in thousands):

<TABLE>
         <S>                                                    <C>
         Substandard                                            $ 6,747
         Doubtful                                                   145
         Loss                                                       800
                                                                -------

         Total classified assets                                $ 7,692
                                                                -------
</TABLE>


      The Company had nonperforming assets as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                               AT DECEMBER 31,
                                                                           1996      1995       1994
                                                                           ----      ----       ----
<S>                                                                       <C>      <C>          <C>
Nonperforming Loans:
       Nonaccrual Loans:
             Single family residential                                    $ 2,080      887          371
             Improved and unimproved land                                     544      414          214
             Commercial real estate                                         1,434      623        2,178
             SBA loans                                                       --        751          588
             Consumer loans                                                  --       --             12
                                                                          -------  -------      -------
                 Total                                                      4,058    2,675        3,363
                                                                          -------  -------      -------

       Troubled Debt Restructured:
             Multifamily residential                                        4,862    4,890       10,424
                                                                          -------  -------      -------

                 Total Nonperforming Loans                                  8,920    7,565       13,787
                                                                          -------  -------      -------

Foreclosed Real Estate:
       Single family residential                                               57       38           86
       Multifamily residential                                               --      2,651         --
       Improved and unimproved land                                           900    1,278        6,171
       Commercial real estate                                                --        515        2,255
       SBA loans                                                             --       --            415
                                                                          -------  -------      -------
                 Total Foreclosed Real Estate                                 957    4,482        8,927
                                                                          -------  -------      -------

                 Total Nonperforming Assets                               $ 9,877   12,047       22,714
                                                                          -------  -------      -------

Nonperforming Assets to Total Assets                                         3.12%    4.00%        8.96%
                                                                          -------  -------      -------

Allowance for Loan Losses                                                 $ 5,613    5,138        8,207
Allowance for Foreclosed Real Estate Losses                                   158    1,124        2,873
                                                                          -------  -------      -------

                 Total Allowance for Losses                               $ 5,771    6,262       11,080
                                                                          =======  =======      =======
</TABLE>





                                      7
<PAGE>   7

      NONACCRUAL LOANS. At December 31, 1996, loans on nonaccrual status
totaled $4.1 million. During 1996 and 1995, approximately $523,000 and
$400,000, respectively, in interest income would have been recorded on loans
accounted for on a nonaccrual basis and troubled debt restructurings if each
loan had been current in accordance with its original contract and had been
outstanding throughout the period. These amounts were not included in the
Company's interest income in the respective periods.

      TROUBLED DEBT RESTRUCTURED. At December 31, 1996, the Company's troubled
debt restructurings totaled $4.9 million and consisted of one multifamily real
estate loan. The loan is collateralized by a 172-unit apartment complex located
in Seminole County, Florida. The apartment complex was appraised for $6.4
million as of the most recent appraisal in 1988. During December 1992, while
the loan was delinquent, the Association allowed it to be assumed by a
nonprofit organization, and reduced the interest rate from 10.75% to 7.0%.
Under the restructured terms, the loan requires monthly principal and interest
payments of approximately $31,000 plus a balloon payment of $4,361,000 in
December 2007. The Association retained the personal guarantees of two
individuals who executed the note at the time of origination. Subsequent to the
date of modification, the loan has performed in accordance with the
restructured terms of the contract. In conjunction with the quarterly
evaluation of the reasonableness of the carrying value of this property,
management has considered, among other factors, the 1988 appraisal of the
property, the indicated valuation of the property by the nonprofit organization
which assumed the loan in 1992, the location of the property and management's
assessment of the current real estate valuation of similar properties in the
local real estate market, management's assessment of the cash flows generated
by the collateral property based on current operating information provided by
the borrower, and management's assessment of the financial capacity of the two
individuals whose personal guarantees also secure the loan.

      FORECLOSED REAL ESTATE. Foreclosed real estate includes property acquired
by foreclosure or deed in lieu of foreclosure. Total foreclosed real estate
decreased from $4.5 million at December 31, 1995 to $957,000 at December 31,
1996. The decrease was due to sales of foreclosed real estate properties,
partially offset by foreclosures during the year ended December 31, 1996.

ASSET/LIABILITY MANAGEMENT

     The Association, like most other savings institutions, is engaged
primarily in the business of investing funds obtained from deposits, borrowings
and other sources, in loans, securities and other investments. Consequently,
the Company's earnings depend to a significant extent on its net interest
income, which is the difference between the interest earned on loans,
securities and other investments, and the interest paid on deposits and
borrowings. The Company is subject to interest rate risk, and corresponding
fluctuations in its net interest income, to the extent that its
interest-earning assets and interest-bearing liabilities do not mature or
reprice at the same time.

     Asset/liability management policies are employed in an effort to reduce
the Company's exposure to interest rate risk and thereby reduce the volatility
of net interest income. The primary goal of these policies is to achieve a
reasonable interest rate spread while reducing the repricing imbalance by
increasing the interest rate sensitivity and shortening the repricing period of
the Company's interest-earning assets and lengthening the repricing period of
its interest-bearing liabilities.


                                      8

<PAGE>   8

     In order to increase the interest-rate sensitivity of its interest-earning
assets, the Company has emphasized the origination of residential mortgage
loans with adjustable interest rates and loans with short-term maturities. The
Company also has sought in recent years to diversify and increase the
interest-rate sensitivity of its loan portfolio by emphasizing the origination
of construction loans for residential properties within its primary market
area. Such loans generally provide for contractual maturities within one year.
Although competitive pressures require the Company to offer long-term,
fixed-rate mortgage loans, most such loans are originated under terms and
conditions intended to permit their sale in the secondary market.

      The following table summarizes the anticipated maturities or repricing of
the Company's interest-earning assets and interest-bearing liabilities as of
December 31, 1996, based upon certain estimates and assumptions as to loan
prepayment rates and certain deposit erosion rates which management believes
are reasonable based on the Company's experience (dollars in thousands).


<TABLE>
<CAPTION>
                                                                One Year    Over
                                                One Year       to Three     Three
                                                 or Less         Years      Years      Total
                                                 -------         -----      -----      -----
<S>                                              <C>           <C>         <C>        <C>
Rate-Sensitive Assets:
    Loans (1)                                    $110,600       56,902     53,689     221,191
    Securities                                     47,780       10,893      7,679      66,352
    Other interest-earning assets (2)              11,665         --        2,378      14,043
                                                 --------     --------     ------     -------

Total Rate-Sensitive Assets                      $170,045       67,795     63,746     301,586
                                                 ========     ========     ======     =======

Rate-Sensitive Liabilities:
    Deposits (3)                                  153,428      104,626     28,873     286,927
    Borrowed funds                                  7,000         --         --         7,000
                                                 --------     --------     ------     -------

Total Rate-Sensitive Liabilities                 $160,428      104,626     28,873     293,927
                                                 ========     ========     ======     =======

GAP (Repricing differences)                      $  9,617      (36,831)    34,873       7,659
                                                 ========     ========     ======     =======

Cumulative GAP                                   $  9,617      (27,214)     7,659        --
                                                 ========     ========     ======     =======

Cumulative GAP as a
    Percent of Total Assets                          3.03%        8.59%      2.42%       --
                                                 ========     ========     ======     =======
</TABLE>

------------------------------

(1)  Loans are net of the undisbursed portion of loans in process and
     nonaccrual loans.
(2)  Consists of interest-earning deposits and FHLB stock.
(3)  In preparing the table above, the following assumptions were made
     regarding the withdrawal of deposits: (i) passbook withdrawals of 17% for
     the first three years and (ii) NOW account withdrawals of 36% for the
     first year and 32% for years two and three.

      The above assumptions are annual percentages based on remaining balances
and should not be regarded as indicative of the actual withdrawals that may be
experienced by the Company. Moreover, certain shortcomings are inherent in the
analysis presented in the foregoing table. For example, although certain assets
and liabilities may have similar maturities or periods to repricing, they may
react differently to changes in market interest rates. Also, interest rates on
certain types of assets and liabilities may fluctuate in advance of or lag
behind changes in market interest rates. Additionally, certain assets, such as
adjustable rate mortgage loans, have features that restrict changes in interest
rates on a short-term basis and over the life of the assets. Moreover, in the
event of a change in interest rates, prepayment and early withdrawal levels
would likely deviate significantly from those assumed in calculating the above
table.



                                      9
<PAGE>   9

RESULTS OF OPERATIONS

      The Company's operating results depend substantially on (i) net interest
income (the difference between its interest income and interest expense), (ii)
provisions for losses on loans and foreclosed real estate, (iii) noninterest
income (including gains and losses on the sale of securities and loans, and
fees from lending and deposit operations), (iv) noninterest expenses (including
salaries and employee benefits, and occupancy expense) and (v) income taxes.
Net interest income is determined primarily by interest rate spread and the
relative amounts of interest-earning assets and interest-bearing liabilities.

The following table shows selected ratios for the periods ended or at the dates
indicated:

<TABLE>
<CAPTION>
                                                                                  AT OR FOR THE
                                                                              YEAR ENDED DECEMBER 31,
                                                                             1996      1995     1994
                                                                             ----      ----     ----
<S>                                                                          <C>       <C>      <C>
Average equity as a percentage of
    average assets                                                           6.57%     6.96%    5.98%
Equity to assets at end of year                                              6.40%     6.23%    6.53%
Return on average assets                                                      .54%      .64%     .18%
Return on average equity                                                     8.18%     9.17%    3.08%
Noninterest expenses to average assets                                       3.08%     3.67%    5.25%
Nonperforming assets to total assets
    at end of year                                                           3.12%     4.00%    8.96%
Interest rate spread during the year                                         3.20%     3.86%    4.24%
</TABLE>

The following table shows weighted average interest rates as of the dates
indicated:

<TABLE>
<CAPTION>
                                                                                 AT  DECEMBER 31,
                                                                             ------------------------
                                                                             1996      1995     1994
                                                                             ----      ----      ----
<S>                                                                          <C>       <C>      <C>
Interest-earning assets:
   Loans                                                                     8.15%     8.44%    8.05%
   Mortgage-backed securities                                                6.23%     6.59%    6.00%
   Investment securities                                                     7.57%     6.58%    6.28%
   Other interest-earning assets                                             6.70%     5.56%    5.65%
        Total interest-earning assets                                        7.72%     7.80%    7.49%

Interest-bearing liabilities:
   Deposits                                                                  4.57%     4.50%    3.79%
   Borrowed funds                                                            6.95%     5.85%    6.81%
        Total interest-bearing liabilities                                   4.63%     4.65%    4.07%

Interest rate spread                                                         3.09%     3.15%    3.42%
</TABLE>



                                      10
<PAGE>   10


      The following table sets forth information regarding (i) the average
balance of the Company's interest-earning assets and interest-bearing
liabilities, (ii) the total dollar amount of interest and dividend income from
interest-earning assets and the resultant average yields, (iii) the total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost, (iv) net interest/dividend income, (v) interest rate
spread and (vi) net interest margin.


<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31,    YEAR ENDED DECEMBER 31,     YEAR ENDED DECEMBER 31,
                                                      1996                          1995                       1994
                                             -------------------------  ---------------------------- ------------------------
                                                                AVERAGE                     AVERAGE                   AVERAGE
                                             AVERAGE   INTEREST/ YIELD/ AVERAGE   INTEREST/  YIELD/  AVERAGE INTEREST/  YIELD/
                                             BALANCE   DIVIDENDS RATE   BALANCE    DIVIDENDS RATE    BALANCE  DIVIDENDS RATE
                                                                         (Dollars in thousands)
<S>                                          <C>       <C>      <C>     <C>        <C>      <C>    <C>       <C>       <C>
Interest - earning assets:
     Loans (1)                               $206,755  16,712   8.08%   174,203    15,357   8.82%  167,192   13,752    8.23%
     Securities                                77,524   4,917   6.34%    58,024     3,782   6.52%   41,155    2,647    6.43%
     Other interest - earning assets            5,330     368   6.92%     8,585       591   6.88%   11,168      483    4.32%
                                             --------  ------   ----    -------    ------   ----   -------   ------    ----


     Total interest - earning assets          289,609  21,997   7.60%   240,812    19,730   8.19%  219,515   16,882    7.69%

Noninterest - earning assets                    8,010                    17,028                     19,589
                                             --------                   -------                    -------

   Total assets                              $297,619                   257,840                    239,104
                                             --------                   -------                    -------

Interest - bearing liabilities:
   Deposits:
     Noninterest - bearing accounts            14,054    --     --      12,.415      --     --      10,243     --      --
     NOW accounts                              24,386     339   1.39%    29,708       440   1.48%   25,331      423    1.67%
     Passbook and statement accounts           37,935     597   1.57%    35,920       914   2.55%   52,672    1,034    1.96%
     Certificate accounts                     190,927  10,774   5.64%   152,716     8,594   5.63%  121,704    5,685    4.67%
                                             --------  ------   ----    -------    ------   ----   -------   ------    ----


Total deposits                                267,302  11,710   4.38%   230,759     9,948   4.31%  209,950    7,142    3.40%
Borrowed funds                                  5,627     313   5.56%     2,705       163   6.03%    8,672      411    4.74%
                                             --------  ------   ----    -------    ------   ----   -------   ------    ----

Total interest - bearing liabilities          272,929  12,023   4.40%   233,464    10,111   4.33%  218,622    7,553    3.45%
                                                       ------                      ------                    ------

Noninterest - bearing liabilities               5,134                     6,420                      6,181
Stockholders' equity                           19,556                    17,956                     14,301
                                             --------                    ------                     ------

   Total liabilities & stockholders' equity  $297,619                   257,840                    239,104
                                             ========                    ======                   =========

Net interest/dividend income                            9,974                       9,619                     9,329
                                                        =====                       =====                     =====
Interest rate spread (2)                                        3.20%                       3.86%                      4.24%
                                                                                            =====                      =====
Net average interest - earning assets,
   net interest margin (3)                   $ 16,680           3.44%     7,348             3.99%      893             4.25%
                                             ========           ====    =======            =====  ========             ====
Ratio of average interest - earning
   assets to average interest - bearing
   liabilies                                     1.06                      1.03                       1.00
                                             ========                   =======                   ========
</TABLE>



----------------------------------

(1)  Includes nonaccrual loans.
(2)  Interest rate spread represents the difference between the average yield
     on interest-earning assets and the average cost of interest-bearing
     liabilities.
(3)  Net interest margin is net interest income divided by average
     interest-earning assets.



                                      11
<PAGE>   11


      The following table presents certain information regarding changes in
interest and dividend income and interest expense of the Company for the years
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided with respect to changes attributable to
(i) changes in rate (change in rate multiplied by prior volume), (ii) changes
in volume (change in volume multiplied by prior rate) and (iii) changes in
rate/volume (change in rate multiplied by change in volume).

<TABLE>
<CAPTION>
                                              YEAR ENDED DECEMBER 31,                   YEAR ENDED DECEMBER 31,
                                                  1996 VS. 1995                              1995 VS. 1994
                                            INCREASE (DECREASE) DUE TO                  INCREASE (DECREASE) DUE TO
                                    ---------------------------------------      -------------------------------------
                                                           RATE/                                      RATE/
                                     RATE       VOLUME     VOLUME     TOTAL      RATE      VOLUME     VOLUME     TOTAL
                                    -----       ------     ------     -----      ----      ------     ------     -----
<S>                                 <C>          <C>       <C>       <C>       <C>            <C>       <C>     <C>
Interest-earning assets:
   Loans                            $(1,276)     2,870     (239)     1,355     $   987        577       41      1,605
   Securities                          --        1,237     (103)     1,134          25      1,010      100      1,135
   Other interest-earning assets          3       (224)      (1)      (222)        286       (112)     (66)       108
                                    -------     ------     ----     ------     -------     ------     ----     ------

   Total                             (1,273)     3,883     (343)     2,267       1,298      1,475       75      2,848
                                    -------     ------     ----     ------     -------     ------     ----     ------

Interest-bearing liabilities:
   Deposits                             161      1,575       26      1,762       1,909        708      189      2,806
   Borrowings                           (13)       176      (14)       149         112       (283)     (77)      (248)
                                    -------     ------     ----     ------     -------     ------     ----     ------

   Total                                148      1,751       12      1,911       2,021        425      112      2,558
                                    -------     ------     ----     ------     -------     ------     ----     ------

Net change in interest income       $(1,421)     2,132     (355)       356        (723)     1,050      (37)       290
                                    -------     ------     ----     ------     -------     ------     ----     ------
</TABLE>

        COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO DECEMBER 31, 1995

      GENERAL. The Company reported net earnings of $1.6 million or $0.19 per
share for the year ended December 31, 1996 compared to net earnings of $1.6
million or $0.20 per share for 1995.

     INTEREST INCOME. Total interest income for 1996 was $22.0 million, an
increase of $2.3 million from 1995. Interest income on loans increased $1.4
million or 8.8% in 1996 compared to 1995. The increase in interest income on
loans was the result of an increase in the average balance of loans outstanding
from $174.2 million in 1995 to $206.8 million in 1996, partially offset by a
decrease in the average yield earned on such loans from 8.82% in 1995 to 8.08%
in 1996. Interest income on securities increased $1.1 million or 30.0%, due to
an increase in the average balance from $58.0 million in 1995 to $77.5 million
in 1996, partially offset by a decrease in the average yield earned from 6.52%
in 1995 to 6.34% in 1996. Interest income on other interest-earning assets
decreased $223,000 from $591,000 in 1995 to $368,000 in 1996. The decrease was
the result of a decrease in the average balance outstanding during 1996
compared to 1995, partially offset by a slight increase in average yield earned
in 1996 compared to 1995.

      INTEREST EXPENSE. Total interest expense for 1996 increased from $10.1
million in 1995 to $12.0 million in 1996. Interest paid on deposit accounts
increased by $1.8 million. The increase in interest expense on deposits was due
to an increase in the average balances outstanding and an increase in the rates
paid thereon. During 1996,




                                      12
<PAGE>   12


deposits averaged $267.3 million at an average rate of 4.38% compared to $230.8
million at an average rate of 4.31% during 1995.

      PROVISION FOR LOAN LOSSES. The Company recorded a provision for loan
losses of $782,000 for 1996, compared to a $477,000 provision for 1995. The
ratio of nonperforming loans and foreclosed real estate to total assets was
3.12% at December 31, 1996, compared to 4.00% at December 31, 1995. The
Company's total allowance for losses on loans and foreclosed real estate
equaled 58.4% of nonperforming assets at December 31, 1996 compared to 52.0% of
nonperforming assets at December 31, 1995.

      NONINTEREST INCOME. For the year ended December 31, 1996, noninterest
income was $2.4 million, a decrease of $215,000 from 1995. The decrease was
primarily due to a net loss on trading securities during 1996 of $196,000
compared to a net profit on trading securities of $229,000 during 1995 and an
unrealized loss on loans held for sale of $150,000 at December 31, 1996
compared to no such loss at December 31, 1995. Partially offsetting these
decreases was a $264,000 increase in other income.

      NONINTEREST EXPENSES. During 1996 noninterest expenses decreased by
$281,000 from $9.5 million during 1995 to $9.2 million in 1996. The decrease
resulted from a $2.4 million decrease in loss on foreclosed real estate during
1996, partially offset by the one-time SAIF assessment of $1.5 million and an
increase of $247,000 in other expenses. The decrease in loss on foreclosed real
estate was due to a credit provision for losses on foreclosed real estate of
$1.5 million in 1996 compared to $240,000 provision for losses on foreclosed
real estate in 1995.

      INCOME TAXES. The income tax provision increased from $641,000 for 1995
(an effective rate of 28.0%) to $803,000 for 1996 (an effective rate of 33.4%).

        COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO DECEMBER 31, 1994

      GENERAL. The Company reported net earnings of $1.6 million or $0.20 per
share for the year ended December 31, 1995 compared to net earnings of $440,000
or $0.06 per share for 1994. The improvement in operating results for 1995 was
primarily due to a $3.1 million decrease in noninterest expenses partially
offset by a $1.9 million increase in provision for loan losses.

      INTEREST INCOME. Total interest income for 1995 was $19.7 million, an
increase of $2.8 million from 1994. Interest income on loans increased $1.6
million or 11.7% in 1995 compared to 1994. The increase in interest income on
loans was the result of an increase in the average balance of loans outstanding
from $167.2 million in 1994 to $174.2 million in 1995 and an increase in the
average yield earned on such loans from 8.23% in 1994 to 8.82% in 1995.
Interest income on securities increased $1.1 million or 42.9%, due to an
increase in the average balance from $41.2 million during 1994 to $58.0 million
during 1995, and an increase in the average yield earned from 6.43% during 1994
to 6.52% during 1995. Interest income on other interest-earning assets
increased in $108,000 from $483,000 in 1994 to $591,000 in 1995. The increase
was the result of an increase in the average yield earned in 1995 compared to
1994, partially offset by a decrease in the average balance outstanding during
1995 compared to 1994.


                                      13
<PAGE>   13


      INTEREST EXPENSE. Total interest expense for 1995 increased from $7.6
million in 1994 to $10.1 million in 1995. Interest paid on deposits increased
by $2.8 million. The increase in interest expense on deposits was due to an
increase in the average balances outstanding and an increase in the rates paid
thereon. During 1995, deposits averaged $230.8 million at an average rate of
4.31% compared to $210.0 million at an average rate of 3.40% during 1994.

      PROVISION FOR LOAN LOSSES. The Company recorded a credit for loan losses
for 1994 of $1.4 million, compared to a $477,000 provision for 1995. The credit
in 1994 was partially offset by a $3.4 million provision for losses on
foreclosed real estate. See "Noninterest Expenses" below. The ratio of
nonperforming loans and foreclosed real estate to total assets was 4.00% at
December 31, 1995, compared to 8.96% at December 31, 1994. The Company's total
allowance for losses on loans and foreclosed real estate equaled 52.0% of
nonperforming assets at December 31, 1995 compared to 48.8% of nonperforming
assets at December 31, 1994.

      NONINTEREST INCOME. For the year ended December 31, 1995, noninterest
income was $2.6 million, an increase of $115,000 from 1994. The increase was
primarily due to a net profit on trading securities during 1995 of $229,000
compared to a net loss on trading securities of $76,000 during 1994, and an
increase of $129,000 on loan related fees and service charges. Partially
offsetting these increases was a $277,000 gain on sale of premises and
equipment during 1994 compared to no such gain in 1995.

      NONINTEREST EXPENSES. During 1995, noninterest expenses decreased by $3.0
million from $12.5 million during 1994 to $9.5 million in 1995. The decrease
resulted primarily from a $3.2 million decrease in loss on foreclosed real
estate during 1995, from $3.8 million in 1994 to $613,000 during 1995. Such
decreased in noninterest expenses were partially offset by a $241,000 increase
in employee compensation and benefits. The decrease in loss on foreclosed real
estate was due to a decrease in provision for losses from $3.4 million in 1994
to $240,000 in 1995. The large provision in the allowance for losses on
foreclosed real estate during 1994 was the result of the Company's decision to
accelerate the disposition of such properties. During 1994 and 1995, foreclosed
real estate totaling $14.2 million was sold.

      INCOME TAXES. The income tax provision increased from $234,000 in 1994
(an effective rate of 34.7%) to $641,000 in 1995 (an effective rate of 28.0%).



                                      14
<PAGE>   14


FUTURE ACCOUNTING REQUIREMENTS

     The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 125 ("SFAS 125"). SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets as well as
extinguishments of liabilities. SFAS 125 also provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. SFAS 125 is effective for transfers and servicing of
financial assets as well as extinguishments of liabilities occurring after
December 31, 1996. Management does not anticipate SFAS 125 will have a material
impact on the Company.

IMPACT OF INFLATION AND CHANGING PRICES

      The Consolidated Financial Statements and related data presented herein
have been prepared in accordance with Generally Accepted Accounting Principles,
which require the measurement of financial position and operating results in
terms of historical dollars without considering changes in the relative
purchasing power of money over time due to inflation.

      Unlike many industrial companies, substantially all of the assets and
liabilities of the Company are monetary in nature. As a result, interest rates
have a more significant impact on the Company's performance than the effects of
general levels of inflation. Interest rates may not necessarily move in the
same direction or in the same magnitude as the prices of goods and services,
since such prices are affected by inflation to a larger extent than interest
rates. See "Asset/Liability Management" and "Results of Operations" above.




                                      15
<PAGE>   15


                          F.F.O. FINANCIAL GROUP, INC.

                          CONSOLIDATED BALANCE SHEETS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                                    AT DECEMBER 31,
                                                                               ------------------------
                                                                                    1996      1995
                                                                                    ----      ----
<S>                                                                            <C>            <C>
        ASSETS
Cash and due from banks                                                        $   6,300        6,989
Interest-bearing deposits with banks                                              11,665        2,768
Federal funds sold                                                                  --            669
                                                                               ---------      -------

                 Cash and cash equivalents                                        17,965       10,426

Trading securities                                                                 9,580       23,076
Securities available for sale                                                     41,445       49,832
Securities held to maturity, at cost                                              15,343       17,636
Loans held for sale, net of unrealized losses of $150 in 1996                     10,462       22,765
Loans receivable, net of allowances for loan losses of
      $5,613 in 1996 and $5,138 in 1995                                          209,005      161,190
Accrued interest receivable                                                        1,710        1,821
Premises and equipment                                                             5,324        5,700
5,700 Restricted securities - Federal Home Loan Bank stock, at cost                2,378        2,514
Foreclosed real estate, net of allowances of $158 in 1996 and
      $1,124 in 1995                                                                 799        3,358
Deferred tax asset                                                                 1,490        2,249
Other assets                                                                       1,448          918
                                                                               ---------      -------

                 Total assets                                                  $ 316,949      301,485
                                                                               =========      =======

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
      Demand deposits                                                             14,303       13,107
      Savings and NOW deposits                                                    57,981       63,682
      Time deposits                                                              214,643      172,147
                                                                               ---------      -------

                 Total deposits                                                  286,927      248,936

Accrued interest on deposits                                                         256          282
Due to bank                                                                          424        1,120
Advances from Federal Home Loan Bank                                               7,000       30,000
Advance payments by borrowers for taxes and insurance                                608          819
Other liabilities                                                                  1,454        1,548
                                                                               ---------      -------

                 Total liabilities                                               296,669      282,705
                                                                               ---------      -------

Commitments and Contingencies (Notes 6, 12, 13, 15 and 21)

Stockholders' Equity:
         Preferred stock, $.10 par value, 2,500,000 shares
                 authorized, none outstanding                                       --           --
         Common stock, $.10 par value, 20,000,000 shares authorized,
                 8,430,000 shares issued and outstanding                             843          843
         Additional paid-in capital                                               17,599       17,599
         Retained earnings                                                         1,844          244
         Net unrealized (depreciation) appreciation on securities
                 available for sale, net of tax of $4 in 1996
                 and $(56) in 1995                                                    (6)          94
                                                                               ---------      -------

                 Total stockholders' equity                                       20,280       18,780
                                                                               ---------      -------

                 Total liabilities and stockholders' equity                    $ 316,949      301,485
                                                                               =========      =======
</TABLE>


See Notes to Consolidated Financial Statements.



                                       16
<PAGE>   16

                          F.F.O. FINANCIAL GROUP, INC.

                       CONSOLIDATED STATEMENTS OF INCOME
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                        ---------------------------------------
                                                                              1996          1995            1994
                                                                              ----          ----            ----
<S>                                                                     <C>             <C>           <C>
Interest income:
         Loans receivable                                               $    16,712        15,357        13,752
         Securities available for sale                                        2,524         1,218         1,963
         Securities held to maturity                                          1,179         1,297           684
         Trading securities                                                   1,214         1,267          --
         Federal funds sold                                                      80           150           125
         Deposits with banks                                                    288           441           358
                                                                        -----------     ---------     ---------

                 Total interest income                                       21,997        19,730        16,882
                                                                        -----------     ---------     ---------

Interest expense:
         Deposits                                                            11,710         9,948         7,142
         Other borrowed funds                                                   313           163           411
                                                                        -----------     ---------     ---------

                 Total interest expense                                      12,023        10,111         7,553
                                                                        -----------     ---------     ---------
Net interest income                                                           9,974         9,619         9,329

Provision (credit) for loan losses                                              782           477        (1,403)
                                                                        -----------     ---------     ---------
         Net interest income after provision (credit)
                 for loan losses                                              9,192         9,142        10,732
                                                                        -----------     ---------     ---------
Noninterest income:
         Service charges on deposits                                          1,306         1,269         1,297
         Loan related fees and service charges                                  443           375           246
         Loan servicing fees                                                    279           367           409
         Net trading account (losses) profit                                   (196)          229           (76)
         Net realized gain on sales of available-for-sale securities             87            66          --
         Net gain on sale of loans                                              144            86
                                                                                                            131
         Unrealized loss on loans held for sale                                (150)         --            --
         Net gain on sale of premises and equipment                            --            --             277
         Other income                                                           474           210           203
                                                                        -----------     ---------     ---------
                 Total noninterest income                                     2,387         2,602         2,487
                                                                        -----------     ---------     ---------
Noninterest expenses:
         Salaries and employee benefits                                       4,192         4,043         3,802
         Occupancy expense                                                    1,925         1,814         1,755
         (Gain) loss on foreclosed real estate                               (1,818)          613         3,784
         Deposit insurance premium                                              657           646           645
         SAIF recapitalization assessment                                     1,466          --            --
         Marketing and advertising                                              381           299           298
         Data processing                                                        668           564           563
         Printing and office supplies                                           280           284           279
         Telephone expense                                                      255           271           272
         Other expense                                                        1,170           923         1,147
                                                                        -----------     ---------     ---------
                 Total noninterest expenses                                   9,176         9,457        12,545
                                                                        -----------     ---------     ---------
Income before income taxes                                                    2,403         2,287           674

Income tax expense                                                              803           641           234
                                                                        -----------     ---------     ---------

Net income                                                              $     1,600         1,646           440
                                                                        ===========     =========     =========

Net income per share of common stock                                    $       .19           .20           .06
                                                                        ===========     =========     =========

Weighted average number of shares outstanding                             8,430,000     8,430,000     7,354,658
                                                                        ===========     =========     =========
</TABLE>



See Notes to Consolidated Financial Statements.





                                       17
<PAGE>   17

                          F.F.O. FINANCIAL GROUP, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                   NET
                                                                               UNREALIZED
                                                                             (DEPRECIATION)
                                                                              APPRECIATION
                                                                    RETAINED       ON
                                                         ADDITIONAL EARNINGS   SECURITIES      TOTAL
                                                COMMON    PAID-IN (ACCUMULATED  AVAILABLE  STOCKHOLDERS'
                                                 STOCK    CAPITAL    DEFICIT)   FOR SALE      EQUITY
                                                 -----    -------    --------    --------      ------
<S>                                              <C>      <C>         <C>        <C>           <C>
Balance at December 31, 1993                     $718     15,324     (1,842)     327           14,527

Proceeds from issuance of 1,250,000
     shares of common stock                       125      2,275       --       --              2,400

Net income for 1994                               --        --          440     --                440

Net change in unrealized (depreciation)
     appreciation on securities available
     for sale                                     --        --         --       (822)            (822)
                                                 ----     ------     ------     -----          ------

Balance at December 31, 1994                      843     17,599     (1,402)    (495)          16,545

Net income for 1995                               --        --        1,646     --              1,646

Net change in unrealized (depreciation)
     appreciation on securities available
     for sale                                     --        --         --        589              589
                                                 ----     ------     ------     -----          ------

Balance at December 31, 1995                      843     17,599        244       94           18,780

Net income for 1996                               --        --        1,600     --              1,600

Net change in unrealized (depreciation)
     appreciation on securities available
     for sale                                     --        --         --       (100)            (100)
                                                 ----     ------     ------     -----          ------

Balance at December 31, 1996                     $843     17,599      1,844       (6)          20,280
                                                 ====     ======      =====     =====          ======
</TABLE>





See Notes to Consolidated Financial Statements.





                                       18
<PAGE>   18

                          F.F.O. FINANCIAL GROUP, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                        ---------------------------------
                                                                          1996         1995        1994
                                                                        -------        ----        ----
<S>                                                                     <C>            <C>           <C>
Cash flows from operating activities:
     Net income                                                         $  1,600       1,646         440
     Adjustments to reconcile net income to
       net cash provided by (used in) operations:
         Provision (credit) for loan losses                                  782         477      (1,403)
         (Credit) provision for losses on foreclosed real estate          (1,500)        240       3,410
         Net amortization of premiums and discounts                          159        (210)       (115)
         Net gain on sale of premises and equipment                         --          --          (277)
         Net amortization of deferred loan fees                             (180)         52        (168)
         Depreciation of premises and equipment                              554         566         597
         Net gain on sale of foreclosed real estate                         (368)        (35)       (175)
         Net realized gain on sales of available-for-sale securities         (87)        (66)       --
         Net decrease (increase) in trading account securities            13,496     (16,106)     (6,970)
         Provision (benefit) for deferred income taxes                       819       1,012        (276)
         Proceeds from sales of loans held for sale                       25,745       8,924       9,858
         Originations of loans held for sale                             (13,448)    (23,673)     (6,311)
         Decrease (increase) in accrued interest receivable                  111        (356)       (143)
         Increase in other assets                                           (530)       (216)       (157)
         Gain on sale of loans                                              (144)        (86)       (131)
         Unrealized loss on loans held for sale                              150        --          --
         (Decrease) increase in accrued interest payable                     (26)        123           9
         (Decrease) increase in other liabilities and due to bank           (790)     (1,131)        997
                                                                        --------     -------      ------

              Net cash provided by (used in) operating activities         26,343     (28,839)       (815)
                                                                        --------     -------      ------

Cash flows from investing activities:
     Purchase of available-for-sale securities                           (47,400)    (35,104)    (19,868)
     Purchase of held-to-maturity securities                                --          --       (47,504)
     Proceeds from maturities of held-to-maturity securities                --        12,526      47,129
     Proceeds from sale of available-for-sale securities                  26,673       7,755        --
     Proceeds from maturities of available-for-sale securities            10,000        --          --
     Principal repayments on available-for-sale securities                18,832         746       1,916
     Principal repayments on held-to-maturity securities                   2,343       1,613        --
     Net (increase) decrease in loans receivable                         (45,860)    (10,512)      1,110
     Proceeds from sale of premises and equipment                           --          --           524
     Net purchases of premises and equipment                                (178)       (501)       (365)
     Proceeds from sale of foreclosed real estate                          2,001       7,389       4,123
     Payments capitalized to foreclosed real estate                         (131)        (43)         (7)
     Redemption (purchase) of Federal Home Loan Bank stock                   136        --           (31)
                                                                        --------     -------      ------

              Net cash used in investing activities                      (33,584)    (16,131)    (12,973)
                                                                        --------     -------      ------
</TABLE>


                                      19

                                                                    (continued)


<PAGE>   19

                          F.F.O. FINANCIAL GROUP, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                          1996         1995       1994
<S>                                                                     <C>           <C>          <C>
Cash flows from financing activities:
     Net decrease in demand, savings and NOW deposits                     (4,505)     (6,180)     (5,979)
     Net increase in time deposits                                        42,496      44,284       5,693
     (Repayments of) proceeds from Federal Home Loan Bank advances       (23,000)      8,600       1,400
     Net proceeds from issuance of common stock                             --          --         2,400
     Net (decrease) increase in advances by borrowers for taxes
         and insurance                                                      (211)        126        (109)
                                                                        --------      ------       -----

              Net cash provided by financing activities                   14,780      46,830       3,405
                                                                        --------      ------       -----

Net increase (decrease) in cash and cash equivalents                       7,539       1,860     (10,383)
Cash and cash equivalents at beginning of year                            10,426       8,566      18,949
                                                                        --------      ------       -----

Cash and cash equivalents at end of year                                $ 17,965      10,426       8,566
                                                                        ========      ======       =====

Supplemental disclosures of cash flow information:
     Cash paid during the year for:
         (Refunds received) income tax paid                             $   (134)        550         311
                                                                        ========      ======       =====

         Interest                                                       $ 12,049       9,957       7,544
                                                                        ========      ======       =====

     Noncash investing and financing activities:
         Transfers of loans to foreclosed real estate                   $    339       6,382       1,447
                                                                        ========      ======       =====
         Loans originated for the sale of foreclosed real estate        $  2,896       1,527       1,346
                                                                        ========      ======       =====
</TABLE>





See Notes to Consolidated Financial Statements.



                                       20
<PAGE>   20

                          F.F.O. FINANCIAL GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     F.F.O. Financial Group, Inc. (the "Holding Company" or "F.F.O.") is the
          holding company for First Federal Savings and Loan Association of
          Osceola County (the "Association"). The Holding Company's operations
          are limited to ownership of the Association. The Association is a
          federally chartered savings and loan association which conducts
          business from its headquarters and main office in Kissimmee, Florida
          and ten branch offices located in Central Florida. The Association's
          deposits are insured by the Federal Deposit Insurance Corporation
          ("FDIC") up to applicable limits through the Savings Association
          Insurance Fund ("SAIF").

     PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
          the accounts of the Holding Company and its wholly-owned subsidiary,
          First Federal Savings and Loan Association of Osceola County, and
          the Association's wholly-owned subsidiary, Gulf American Financial
          Corporation. Gulf American Financial Corporation is currently
          inactive. All significant intercompany transactions and balances
          have been eliminated in consolidation.

     GENERAL. The accounting and reporting policies of F.F.O. Financial Group,
          Inc. and Subsidiaries (together, the "Company") conform to generally
          accepted accounting principles and to general practices within the
          thrift industry. The following summarizes the significant accounting
          policies of the Company:

     ESTIMATES. The preparation of financial statements in conformity with
          generally accepted accounting principles requires management to make
          estimates and assumptions that affect the reported amounts of assets
          and liabilities and disclosure of contingent assets and liabilities
          at the date of the financial statements and the reported amounts of
          revenues and expenses during the reporting period. Actual results
          could differ from those estimates.

     TRADING SECURITIES. Securities held principally for resale in the near
          term are classified as trading account securities and recorded at
          their fair values. Unrealized gains and losses on trading account
          securities are included immediately in noninterest income.

     SECURITIES HELD TO MATURITY. Securities for which the Company has the
          positive intent and ability to hold to maturity are reported at cost,
          adjusted for premiums and discounts that are recognized in interest
          income using the interest method over the period to maturity.

     SECURITIES AVAILABLE FOR SALE. Available-for-sale securities consist of
          securities not classified as trading securitie s nor as held-to-
          maturity securities.

                                                                     (continued)


                                      21
<PAGE>   21

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED SECURITIES AVAILABLE
     FOR SALE, CONTINUED. Unrealized holding gains and losses, net of tax, on
     available-for-sale securities are reported as a separate component of
     stockholders' equity until realized.

     Gains and losses on the sale of available-for-sale securities are
     determined using the specific identification method.

     Premiums and discounts are recognized in interest income using the
     interest method over the period to maturity.

     LOANS HELD FOR SALE. Mortgage loans originated and intended for sale in
          the secondary market are carried at the lower of cost or estimated
          market value in the aggregate . Net unrealized losses are recognized
          through a valuation allowance by charges to income.

     LOANS RECEIVABLE. Loans receivable that management has the intent and
          ability to hold for the foreseeable future or until maturity or
          pay-off are reported at their outstanding principal balance adjusted
          for any charge-offs, the allowance for loan losses, and any deferred
          fees or costs on originated loans and unamortized premiums or
          discounts on purchased loans.

          Discounts and premiums on purchased real estate loans are amortized
          to income using the interest method over the remaining period to
          contractual maturity, adjusted for anticipated prepayments.

          Loan origination fees and certain direct origination costs are
          capitalized and recognized as an adjustment of the yield of the
          related loan.

          The accrual of interest on impaired loans is discontinued when, in
          management's opinion, the borrower may be unable to meet payments as
          they become due. When interest accrual is discontinued, all unpaid
          accrued interest is reversed. Interest income is subsequently
          recognized only to the extent cash payments are received.

          The allowance for loan losses is increased by charges to income and
          decreased by charge-offs (net of recoveries). Management's periodic
          evaluation of the adequacy of the allowance is based on the Company's
          past loan loss experience, known and inherent risks in the portfolio,
          adverse situations that may affect the borrower's ability to repay,
          the estimated value of any underlying collateral and current economic
          conditions.


                                                                     (continued)


                                       22
<PAGE>   22

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
     FORECLOSED REAL ESTATE. Real estate properties acquired through, or in
          lieu of, loan foreclosure are to be sold and are initially recorded
          at fair value at the date of foreclosure establishing a new cost
          basis. After foreclosure, valuations are periodically performed by
          management and the real estate is carried at the lower of carrying
          amount or fair value less costs to sell. Revenue and expenses from
          operations and changes in the valuation allowance are included in
          the consolidated statements of income.

     INCOME TAXES. Deferred tax assets and liabilities are reflected at
          currently enacted income tax rates applicabl e to the period in which
          the deferred tax assets or liabiliti es are expected to be realized
          or settled. As changes in tax laws or rates are enacted, deferred tax
          assets and liabiliti es are adjusted through the provision for income
          taxes.

     PREMISES AND EQUIPMENT. Land is carried at cost. The Company's premises,
          furniture and equipment and leasehold improvements are carried at
          cost, less accumulated depreciation and amortization computed
          principally by the straight-line method.

     OFF-BALANCE SHEET INSTRUMENTS. In the ordinary course of business the
          Company has entered into off-balance-sheet financial instruments
          consisting of commitments to extend credit. Such financial
          instruments are recorded in the financial statements when they are
          funded or related fees are incurred or received.

     FAIR VALUES OF FINANCIAL INSTRUMENTS. The following methods and
          assumptions were used by the Company in estimating fair values of
          financial instruments:

          CASH AND CASH EQUIVALENTS. The carrying amounts of cash and
          short-term instruments approximate their fair value.

          TRADING SECURITIES. Fair values for trading account securities, which
          also are the amounts recognized in the consolidated balance sheets,
          are based on quoted market prices, where available. If quoted market
          prices are not available, fair values are based on quoted market
          prices of comparable instruments.

          AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES. Fair values for
          available-for-sale and held-to-maturity securities, excluding
          restricted equity securities, are based on quoted market prices.

          LOANS RECEIVABLE. For variable rate loans that reprice frequently and
          have no significant change in credit risk, fair values are based on
          carrying values. Fair values for certain fixed-rate mortgage (e.g.
          one-to-four family residential), commercial real estate and
          commercial loans are estimated using discounted cash flow analyses,
          using interest rates currently being offered for loans with similar
          terms to borrowers of similar credit quality.

          FEDERAL HOME LOAN BANK STOCK. Fair value of the Company's investment
          in FHLB stock is based on its redemption value, which is its cost of
          $100 per share.

                                                                     (continued)



                                       23
<PAGE>   23

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

     FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED. DEPOSITS. The fair values
          disclosed for demand, NOW, money market and savings deposits are, by
          definition, equal to the amount payable on demand at the reporting
          date (that is, their carrying amounts). Fair values for fixed-rate
          certificates of deposit are estimated using a discounted cash flow
          calculation that applies interest rates currently being offered on
          certificates to a schedule of aggregated expected monthly maturities
          on time deposits.

          SHORT-TERM BORROWINGS. The carrying amounts of borrowings maturing
          within 90 days approximate their fair values. Fair values of other
          borrowings are estimated using discounted cash flow analysis based on
          the Company's current incremental borrowing rates for similar types
          of borrowing arrangements.

          ACCRUED INTEREST RECEIVABLE. The carrying amounts of accrued interest
          receivable approximate their fair values.

          OFF-BALANCE-SHEET INSTRUMENTS. Fair values for off-balance-sheet
          lending commitments are based on fees currently charged to enter into
          similar agreements, taking into account the remaining terms of the
          agreements and the counterparties' credit standing.

     NET  INCOME PER SHARE. Net income per share of common stock has been
          computed on the basis of the weighted average number of shares of
          common stock outstanding.

     RECLASSIFICATIONS. Certain reclassifications have been made to the
          financial statements for 1994 and 1995 to conform to the presentat
          ions used in the financial statement s for 1996.

     FUTURE ACCOUNTING REQUIREMENTS. The Financial Accounting Standards Board
          (the "FASB") has issued Statement of Financial Accounting Standards
          No. 125 ("SFAS 125"). This Statement provides accounting and
          reporting standards for transfers and servicing of financial assets
          as well as extinguishments of liabilities. This Statement also
          provides consistent standards for distinguishing transfers of
          financial assets that are sales from transfers that are secured
          borrowings. SFAS 125 is effective for transfers and servicing of
          financial assets as well as extinguishments of liabilities occurring
          after December 31, 1996. Management does not anticipate SFAS 125 will
          have a material impact on the Company.



                                                                     (continued)


                                       24
<PAGE>   24

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(2)  SECURITIES

     Securities have been classified in the consolidated balance sheets
          according to management's intent. The carrying amounts of securitie s
          and their approximate fair values at December 31, were as follows
          (in thousands ):


<TABLE>
<CAPTION>
                                                                       GROSS        GROSS
                                                       AMORTIZED     UNREALIZED   UNREALIZED  FAIR
                                                         COST          GAINS        LOSSES    VALUE
                                                         ----          -----        ------    -----
<S>                                                    <C>              <C>                   <C>
    TRADING SECURITIES:
    DECEMBER 31, 1996:
         Agency notes and debentures                   $ 4,000           32         --         4,032
         Collateralized mortgage-backed obligations      5,554         --             (6)      5,548
                                                       -------          ---          ---      ------

                                                       $ 9,554           32           (6)      9,580
                                                       =======          ===          ---      ======

    DECEMBER 31, 1995:
         Agency notes and debentures                     9,359           42         --         9,401
         Collateralized mortgage-backed obligations     13,616           59         --        13,675
                                                       -------          ---          ---      ------

                                                       $22,975          101         --        23,076
                                                       =======          ===         ====      ======
    SECURITIES AVAILABLE FOR SALE:
    DECEMBER 31, 1996-
         Mortgage-backed securities                    $41,455          108         (118)     41,445
                                                       =======          ===         ====      ======

    DECEMBER 31, 1995:
         U.S. Treasury notes                             9,996           23         --        10,019
         Mortgage-backed securities                     39,686          127         --        39,813
                                                       -------          ---         ----      ------

                                                       $49,682          150         --        49,832
                                                       =======          ===        =====      ======
    SECURITIES HELD TO MATURITY:
    DECEMBER 31, 1996-
         Mortgage-backed securities                    $15,343          218          (47)     15,514
                                                       =======          ===        =====      ======

    DECEMBER 31, 1995-
         Mortgage-backed securities                    $17,636          204         --        17,840
                                                       =======          ===        =====      ======
</TABLE>



     Gross realized gains and gross realized losses on sales of
          available-for-sale securities were $141,000 and $54,000, respectively
          in 1996 and $75,000 and $9,000, respectively in 1995. There
          were no sales of available-for-sale securities during the year
          ended December 31, 1994.

     Net unrealized holding gains on trading securities of $26,000, $101,000
          and $76,000 were included in income during 1996, 1995 and 1994,
          respectively.

     The Board of Directors has authorized the Company to purchase and sell,
          from time to time, securities through third parties including through
          William R. Hough & Co. ("WRHC"), an investment banking firm
          headquartered in St. Petersburg, Florida. Mr. Hough (a director and
          principal shareholder of the Company) is Chairman and principal
          shareholder of WRHC. During the years ended December 31, 1996, 1995
          and 1994, the Company purchased approximately $53.3 million, $69.5
          million and $30.5 million of securities through WRHC, respectively.
          During the years ended December 31, 1996 and 1995, the Company sold
          approximately $46.0 million and $19.7 million of securities through
          WRHC, respectively. No securities were sold through WRHC in 1994. In
          connection with such transactions, the Company paid WRHC an aggregate
          of $118,000, $92,000 and $20,000 in commissions during the years
          ended December 31, 1996, 1995 and 1994, respectively.


                                                                     (continued)



                                       25
<PAGE>   25

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(3) LOANS RECEIVABLE
    The components of loans in the consolidated balance sheets were as follows
    (in thousands):

<TABLE>
<CAPTION>
                                                                                    AT DECEMBER 31,
                                                                               -----------------------
                                                                                  1996         1995
                                                                                  ----         ----
<S>                                                                            <C>            <C>
 Mortgage Loans:
     Conventional 1-4 family residential                                       $ 112,827       78,680
     FHA and VA single family residential                                         10,131       11,529
     Multifamily residential                                                      19,778       18,576
     Land                                                                          8,279        6,476
     Other nonresidential real estate                                             34,138       26,927
     Construction residential                                                     14,166       10,288
     Construction nonresidential                                                     990         --
                                                                               ---------      -------

         Total mortgage loans                                                    200,309      152,476
                                                                               ---------      -------

Other Loans:
     Deposit account loans                                                           957          868
     Credit card loans                                                               594        2,637
     Consumer loans                                                               20,537       13,717
     SBA loans                                                                     3,009        3,633
     Home improvement loans                                                           55           76
                                                                               ---------      -------

         Total other loans                                                        25,152       20,931
                                                                               ---------      -------
         Total loans                                                             225,461      173,407
                                                                               ---------      -------

Deduct:
     Undisbursed portion of loans in process                                     (10,824)      (6,880)
     Deferred net loan origination fees and discounts                                (19)        (199)
     Allowance for loan losses                                                    (5,613)      (5,138)
                                                                               ---------      -------

         Total deductions                                                        (16,456)     (12,217)
                                                                               ---------      -------

         Loans receivable, net                                                 $ 209,005      161,190
                                                                               =========      =======
</TABLE>

                                                                    (continued)
                                       26
<PAGE>   26

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(3) LOANS RECEIVABLE, CONTINUED
     An analysis of the change in the allowance for loan losses was as follows
(in thousands):

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                        ----------------------------------------
                                                                           1996           1995          1994
                                                                           ----           ----          ----
<S>                                                                     <C>                 <C>           <C>
Balance at January 1                                                    $     5,138         8,207         9,333

Loans charged-off, net of recoveries                                           (307)       (3,546)         (260)
Provision (credit) for loan losses                                              782           477        (1,403)
Reclassification due to adoption of SFAS 114 and 118                           --            --             537
                                                                        -----------         -----         -----

Balance at December 31                                                  $     5,613         5,138         8,207
                                                                        ===========         =====         =====
</TABLE>

    The amounts of impaired loans, all of which were collateral-dependent,
    were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                               ----------------------
                                                                                  1996          1995
                                                                               --------        ------
<S>                                                                            <C>              <C>
Loans identified as impaired:
    Gross loans with related allowances for losses recorded                    $   8,256        6,380
    Less:  Allowances on these loans                                              (1,766)      (1,537)
                                                                               ---------        -----

Net investment in impaired loans                                               $   6,490        4,843
                                                                               =========        =====
</TABLE>

    The average net investment in impaired loans and interest income recognized
    and received on impaired loans were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                Year Ended December 31,
                                                                        ---------------------------------------
                                                                          1996             1995           1994
                                                                          ----             ----           ----
<S>                                                                     <C>                <C>          <C>
Average investment in impaired loans                                    $  6,175           5,037        7,259
                                                                        ========           =====        =====

Interest income recognized on impaired loans                            $    521             337          307
                                                                        ========           =====        =====

Interest income received on impaired loans                              $    521             337          307
                                                                        ========           =====        =====
</TABLE>


                                                                    (continued)

                                      27
<PAGE>   27

                          F.F.O. FINANCIAL GROUP, INC.

             Notes to Consolidated Financial Statements, Continued


(3)  Loans Receivable, Continued
     Nonaccrual and renegotiated loans for which interest has been reduced
          totalled approximately $8.9 million, $7.6 million and $13.8 million
          at December 31, 1996, 1995 and 1994, respectively. Interest income
          that would have been recorded under the original terms of such loans
          and the interest income actually recognized are summarized below (in
          thousands):

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                                  -----------------------
                                                  1996     1995     1994
                                                  ----     ----     ----

<S>                                              <C>        <C>      <C>
Interest income that would have been recorded    $ 863      742      971
Interest income recognized                        (340)    (342)    (383)
                                                 -----      ---      ---
Interest income foregone                         $ 523      400      588
                                                 =====      ===      ===
</TABLE>

     The  Company is not committed to lend additional funds to debtors whose
          loans have been modified.

(4)  LOAN SERVICING

     Mortgage loans serviced for others are not included in the accompanying
          consolidated balance sheets. The unpaid principal balances of
          mortgage loans serviced for others was $103.6 million, $89.6 million
          and $101.2 million at December 31, 1996, 1995 and 1994, respectively.

     Custodial escrow balances maintained in connection with the foregoing loan
          servicing are included in advance payments by borrowers for taxes and
          insurance, and were approximately $494,000 and $498,000 at December
          31, 1996 and 1995, respectively.

(5) FORECLOSED REAL ESTATE

     Activity in the allowance for losses on foreclosed real estate was as
          follows (in thousands):

<TABLE>
<CAPTION>
                                                             Year Ended December 31,
                                                         -------------------------------
                                                           1996         1995       1994
                                                           ----         ----       ----
<S>                                                      <C>           <C>            <C>
Balance at January 1                                     $ 1,124       2,873          62
(Credit) provision charged to operations                  (1,500)        240       3,410
Recoveries (charge-offs), net                                534      (1,989)        (62)

                                                             158       1,124       3,410

Reclassification due to adoption of SFAS 114 and 118        --          --          (537)
                                                         -------       -----       -----

Balance at December 31                                   $   158       1,124       2,873
                                                         =======       =====       =====
</TABLE>

     Gain or loss on foreclosed real estate for the years ended December 31,
          1996, 1995 and 1994 includes net expense of $50,000, $408,000 and
          $549,000, respectively, from operation of foreclosed real estate.




                                                                    (continued)


                                      28
<PAGE>   28
                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(6)   PREMISES AND EQUIPMENT
     Components of premises and equipment were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 AT DECEMBER 31,
                                                              ------------------
                                                              1996          1995
                                                              ----          ----
<S>                                                       <C>               <C>
Cost:
   Land                                                   $  1,298          1,298
   Premises and leasehold improvements                       5,154          5,207
   Furniture and equipment                                   5,263          5,772
                                                          --------         ------

            Total cost                                      11,715         12,277

   Less accumulated depreciation                            (6,391)        (6,577)
                                                          --------         ------
            Total                                         $  5,324          5,700
                                                          ========         ======
</TABLE>

     At December 31, 1996, the Company was obligated under noncancelable
        operating leases for office space. Certain leases contain escalation
        clauses providing for increased rentals based primarily on increases
        in real estate taxes or in the average consumer price index. Net rent
        expense under operating leases, included in occupancy expense, was
        approximately $378,000, $363,000 and $341,000 for the years ended
        December 31, 1996, 1995 and 1994, respectively.

     At December 31, 1996, future minimum rental commitments under
        noncancellable leases were as follows (in thousands):

<TABLE>
<CAPTION>
    YEAR ENDING
    DECEMBER 31,                                  AMOUNT
    ------------                                  ------
        <S>                                     <C>
        1997                                    $   364
        1998                                        309
        1999                                        229
        2000                                         54
        2001                                         54
        Thereafter                                  126
                                                -------

        Total                                   $ 1,136
                                                =======
</TABLE>

(7)  ACCRUED INTEREST RECEIVABLE
     Accrued interest receivable is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                         At December 31,
                        ------------------
                        1996          1995
                        ----          ----
<S>                     <C>          <C>
Loans                   $1,279       1,164
Securities                 431         657

       Total            $1,710       1,821
</TABLE>

                                                                    (continued)


                                       29
<PAGE>   29

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(8)  DEPOSITS

     The aggregate amount of short-term jumbo certificates of deposit, each
         with a minimum denomination of $100,000, was approximately $13.2
         million and $14.2 million at December 31, 1996 and 1995,
         respectively.

     At December 31, 1996, the scheduled maturities of certificates of
        deposit were as follows (in thousands):

<TABLE>
<CAPTION>
     YEAR ENDING
     DECEMBER 31,                               AMOUNT
     ------------                               ------
      <S>                                    <C>
      1997                                   $ 132,990
      1998                                      53,346
      1999                                      13,834
      2000                                      11,962
      2001 and thereafter                        2,511
                                             ---------
      Total                                  $ 214,643
                                             =========
</TABLE>

(9)  ADVANCES FROM FEDERAL HOME LOAN BANK

     Maturities and interest rates of advances from the Federal Home Loan Bank
          of Atlanta ("FHLB") were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                YEAR ENDING             INTEREST            AT DECEMBER 31,
                DECEMBER 31,              RATE           1996            1995
                ------------              ----           ----            ----
                   <S>                    <C>          <C>               <C>
                   1996                   5.85%         $     -          30,000
                   1997                   6.95%           7,000            -
                                                        -------          ------
                   Total                                $ 7,000          30,000
                                                        =======          ======
</TABLE>

     At December 31, 1996, the Association was required by its collateral
        agreement with the FHLB to maintain qualifying first mortgage loans
        in an amount equal to at least 150% of the FHLB advances outstanding
        at December 31, 1996 as collateral. The Association's FHLB stock is
        also pledged as collateral for such advances. The FHLB advances
        outstanding at December 31, 1995 were collateralized by certain
        securities with a book value of $32.2 million and a market value of
        $32.6 million as allowed by the Association's collateral agreement
        with the FHLB. The Association's FHLB stock was also pledged as
        collateral for those advances while outstanding.


                                                                    (continued)

                                       30
<PAGE>   30

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(10)  INCOME TAXES
      The provision (credit) for income taxes is summarized as follows
(in thousands):

<TABLE>
<CAPTION>
                                 CURRENT   DEFERRED  TOTAL
                                 -------   --------  -----
<S>                              <C>          <C>     <C>
YEAR ENDED DECEMBER 31, 1996:
      Federal                    $ (16)       695     679
      State                       --          124     124
                                 -----      -----     ---

            Total                $ (16)       819     803
                                 =====      =====     ===
YEAR ENDED DECEMBER 31, 1995:
      Federal                     (371)       864     493
      State                       --          148     148
                                 -----      -----     ---

            Total                $(371)     1,012     641
                                 =====      =====     ===

YEAR ENDED DECEMBER 31, 1994:
      Federal                      435       (236)    199
      State                         75        (40)     35
                                 -----      -----     ---

            Total                $ 510       (276)    234
                                 =====      =====     ===
</TABLE>

     The effective tax rate on income before income taxes differs from the
         U.S. statutory rate of 34%. The following summary reconciles taxes at
         the U.S. statutory rate with the effective rates (dollars in
         thousands):

<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31,
                               ---------------------------------------------------------
                                    1996                  1995              1994
                               --------------      ----------------  -------------------
                               Amount      %       Amount      %      Amount       %
                               ------      -       ------      -      ------      ---
<S>                            <C>        <C>      <C>        <C>      <C>        <C>
Taxes on income at U.S.
    statutory rate             $ 817      34.0%    $ 777      34.0%    $ 229      34.0%
State income taxes, net of
    federal tax benefit           87       3.6        82       3.6        24       3.6
Recomputed bad-debt reserve     --        --        (178)     (7.8)     --        --
Other - net                     (101)     (4.2)      (40)     (1.8)      (19)     (2.8)
                               -----      -----    ------     -----    -----      -----
Taxes on income at
    effective rates            $ 803      33.4%    $ 641      28.0%    $ 234      34.7%
                               =====      =====    ======     =====    =====      =====
</TABLE>



                                                                    (continued)

                                       31
<PAGE>   31

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(10) INCOME TAXES, CONTINUED
     The tax effects of temporary differences that give rise to significant
         portions of the deferred tax assets and liabilities related to the
         following (in thousands):


<TABLE>
<CAPTION>
                                                                             AT DECEMBER 31,
                                                                             ---------------
                                                                             1996      1995
                                                                             ----      ----
<S>                                                                        <C>        <C>
Deferred tax assets:
       Allowance for loan losses                                           $1,454     1,516
       Allowance for losses on foreclosed real estate                          59       423
       Accrued pension expense                                               --         141
       Charitable contributions                                                 4      --
       Net operating loss carryforwards                                     1,601     2,149
       Alternative minimum tax credit carryforwards                           121       122
       Unrealized depreciation on securities available for sale                 4      --
                                                                           ------     -----

             Total gross deferred tax assets                                3,243     4,351
                                                                           ------     -----

Deferred tax liabilities:
       Deferred loan fees                                                   1,504     1,711
       Federal Home Loan Bank stock                                           226       239
       Accumulated depreciation on premises
             and equipment                                                     23        66
       Unrealized appreciation on securities available for sale              --          56
       Other                                                                 --          30
                                                                           ------     -----

             Total gross deferred tax liabilities                           1,753     2,102
                                                                           ------     -----

       Deferred tax asset                                                  $1,490     2,249
                                                                           ======     =====
</TABLE>

     With respect to the net deferred tax asset of $1.5 million at December 31,
          1996, management believes that it is more likely than not that the
          Company will have sufficient future taxable income to recover this
          asset. However, for purposes of calculating regulatory capital,
          Office of Thrift Supervision ("OTS") regulations limit the amount of
          deferred tax assets that can be included in regulatory capital to the
          lesser of (i) 10% of Tier 1 capital or (ii) the amount the
          Association expects to realize within the subsequent twelve-month
          period. OTS guidelines require the Association to recalculate this
          capital component on a quarterly basis.

                                                                    (continued)


                                       32

<PAGE>   32


                          F.F.O. FINANCIAL GROUP, INC.

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(10) INCOME TAXES, CONTINUED

     At December 31, 1996, the Company's net operating loss carryforwards for
        federal income tax purposes which are available to offset future
        federal taxable income were as follows (in thousands):

<TABLE>
<CAPTION>
                          YEAR OF
                        EXPIRATION                              AMOUNT
                        ----------                              ------
                          <S>                                  <C>
                          2007                                 $ 1,324
                          2008                                   1,826
                          2010                                     980
                                                               -------
                          Total                                $ 4,130
                                                               =======
</TABLE>

     Net operating loss carryforwards of $3,150,000 included above are subject
          to an annual limitation of $268,000 due to section 382 of the
          Internal Revenue Code. In addition, the Company has alternative
          minimum tax credit carryforwards of approximately $121,000 which are
          available to reduce future federal regular income taxes over an
          indefinite period.

(11) PENSION AND PROFIT SHARING PLANS
     Prior to 1996, the Company had a noncontributory defined benefit pension
          plan ("Plan") covering all employees who meet certain eligibility
          requirements. It was the Company's policy to fund the maximum amount
          that could be deducted for federal income tax purposes. Prior to
          1992, the Company periodically made contributions to a profit sharing
          plan covering all full-time employees in amounts determined by the
          Board of Directors. No contributions were made to the Plan during any
          of the years in the three-year period ended December 31, 1995. During
          1994, the Company decided to terminate the pension and profit sharing
          plans effective December 31, 1994 and ceased accrual of benefits as
          of that date. The Company submitted plan termination documents, which
          were subsequently approved, to the Internal Revenue Service ("IRS")
          and the Pension Benefit Guarantee Corporation for the Plan, and to
          the IRS for the profit sharing plan. Distributions from the plans
          were made during January and February of 1996.

     The following table sets forth the Plan's status as of December 31, 1995
     (in thousands):

<TABLE>
<CAPTION>
                                                                        AT DECEMBER 31,
                                                                             1995
                                                                             ----
<S>                                                                        <C>
Actuarial present value of accumulated benefit obligation, including
       vested benefits of $1,626                                           $ 1,626
                                                                           =======

Accrued pension liability:
       Projected benefit obligation for service rendered to date            (1,626)
       Plan assets at fair value                                             1,264
                                                                           =======
       Plan assets less than projected benefit obligation                     (362)
       Unrecognized net loss                                                   450
       Unrecognized net asset being amortized over 15 years                   (388)
                                                                           -------

Accrued pension liability included in other liabilities                    $  (300)
                                                                           =======
</TABLE>



                                                                    (continued)

                                       33
<PAGE>   33

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(11) Pension and Profit Sharing Plans, Continued
     Net periodic pension costs under the Plan prior to 1996 were as follows
     (in thousands):

<TABLE>
<CAPTION>
                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                              ----------------
                                                              1995        1994
                                                              ----        ----
<S>                                                         <C>           <C>
 Service cost-benefits earned during the year               $    -        150
 Interest cost of projected benefit obligation                  75         79
 Actual return on plan assets                                  173        (82)
 Net amortization and deferral adjustments                    (324)       (96)
                                                            ------         --

 Net periodic pension costs                                 $  (76)        51
                                                            ======         ==
</TABLE>

     Disclosure assumptions used in accounting for the Plan as of December 31,
     1995 and 1994 were as follows:

<TABLE>
<CAPTION>
                                                             1995         1994
                                                             ----         ----
<S>                                                           <C>         <C>
    Weighted average discount rate                            4.5%        5.0%
    Rate of increase in compensation levels                   N/A         6.0%
    Expected long-term rate of return on assets               6.0%        6.0%
</TABLE>

In  connection with the plan terminations, the Company adopted a new defined
    contribution profit sharing 401(k) plan (the "401(k) Plan") effective
    January 1, 1995. All employees who meet certain eligibility requirements
    are covered under the 401(k) Plan. Under the 401(k) Plan, an employee may
    elect to contribute up to 15% of their annual compensation. Employer
    contributions to the 401(k) Plan are made at the discretion of the Board of
    Directors. Contributions to the 401(k) Plan for the years ended December
    31, 1996 and 1995 were $78,000 and $49,000, respectively.

(12) FINANCIAL INSTRUMENTS

     The Company is a party to financial instruments with off-balance-sheet
          risk in the normal course of business to meet the financing needs of
          its customers and to reduce its own exposure to fluctuations in
          interest rates. These financial instruments are commitments to extend
          credit and may involve, to varying degrees, elements of credit and
          interest-rate risk in excess of the amount recognized in the
          consolidated balance sheets. The contract amounts of these
          instruments reflect the extent of involvement the Company has in
          these financial instruments.

     The Company's exposure to credit loss in the event of nonperformance by
          the other party to the financial instrument for commitments to extend
          credit is represented by the contractual amount of those instruments.
          The Company uses the same credit policies in making commitments as it
          does for on-balance-sheet instruments.

                                                                    (continued)



                                       34
<PAGE>   34

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(12) FINANCIAL INSTRUMENTS, CONTINUED
     Commitments to extend credit are agreements to lend to a customer as long
          as there is no violation of any condition established in the
          contract. Commitments generally have fixed expiration dates or other
          termination clauses and may require payment of a fee. Since some of
          the commitments are expected to expire without being drawn upon, the
          total commitment amounts do not necessarily represent future cash
          requirements. The Company evaluates each customer's credit worthiness
          on a case-by-case basis. The amount of collateral obtained by the
          Company upon extension of credit is based on management's credit
          evaluation of the counterparty.

     The estimated fair values of the Company's financial instruments were as
          follows (in thousands):

<TABLE>
<CAPTION>
                                                 AT DECEMBER 31, 1996   AT DECEMBER 31, 1995
                                                 --------------------   --------------------
                                                 CARRYING       FAIR    CARRYING      FAIR
                                                   AMOUNT       VALUE    AMOUNT      VALUE
                                                   ------       -----    ------      -----
<S>                                               <C>          <C>        <C>        <C>
     Financial Assets:
          Cash and cash equivalents               $ 17,965     17,965     10,426     10,426
          Trading securities                         9,580      9,580     23,076     23,076
          Securities available for sale             41,445     41,445     49,832     49,832
          Securities held to maturity               15,343     15,514     17,636     17,840
          Loans receivable                         209,005    209,354    161,190    163,660
          Loans held for sale                       10,462     10,462     22,765     22,765
          Accrued interest receivable                1,710      1,710      1,821      1,821
          Federal Home Loan Bank stock               2,378      2,378      2,514      2,514

    Financial Liabilities:
          Deposits                                 286,927    289,326    248,936    251,116
          Advances from Federal Home Loan Bank       7,000      7,000     30,000     30,000
</TABLE>

     The notional amount, which approximates fair value, of the Company's
          financial instruments with off-balance-sheet risk at December 31,
          1996, was as follows (in thousands):

<TABLE>
<CAPTION>
                                           NOTIONAL
                                           AMOUNT
           <S>                            <C>
           Commitments to extend credit   $ 5,062
</TABLE>


(13) SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
     The Company grants real estate, commercial and consumer loans to
          customers primarily in the State of Florida with the majority of such
          loans in the Central Florida area. Therefore, the Company's exposure
          to credit risk is significantly affected by changes in the economy of
          the Central Florida area.

     The contractual amounts of credit related financial instruments such as
          commitments to extend credit represent the amounts of potential
          accounting loss should the contract be fully drawn upon, the customer
          default and the value of any existing collateral become worthless.


                                                                    (continued)


                                       35
<PAGE>   35

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(14) RELATED PARTIES

     Loans to directors and officers of the Company, which were made at market
          rates, were made in the ordinary course of business and did not
          involve more than normal risk of collectibility or present other
          unfavorable features. Activity in loans to directors and officers
          were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            YEAR ENDED
                                                                            DECEMBER 31,
                                                                      ---------------------
                                                                      1996            1995
                                                                      ----            ----
<S>                                                                   <C>              <C>
           Beginning balance                                          $ 793            867
           Amounts related to new officers and directors                 15              7
           Loans originated                                              -               7
           Principal repayments                                         (35)           (88)

               Ending balance                                         $ 773            793
                                                                      =====            ===
</TABLE>


(15) COMMITMENTS AND CONTINGENCIES
     In the ordinary course of business, the Company has various outstanding
          commitments and contingent liabilities that are not reflected in the
          accompanying consolidated financial statements. In addition, the
          Company is a defendant in certain claims and legal actions arising in
          the ordinary course of business. In the opinion of management, after
          consultation with legal counsel, the ultimate disposition of these
          matters is not expected to have a material adverse effect on the
          consolidated balance sheets of the Company.

(16) RESTRICTIONS ON RETAINED EARNINGS
     The Association is subject to certain restrictions on the amount of
          dividends that it may declare without prior regulatory approval. At
          December 31, 1996, the Association was a Tier 2 institution for
          purposes of the regulations relating to capital distributions; as
          such, the Association may make capital distributions of up to 75% of
          its net income over the most recent four-quarter period (depending on
          its risk-based capital level) without prior regulatory approval.

(17) REGULATORY MATTERS
     The Association is subject to various regulatory capital requirements
          administered by the federal banking agencies. Failure to meet minimum
          capital requirements can initiate certain mandatory-and possibly
          additional discretionary-actions by regulators that, if undertaken,
          could have a direct material effect on the Company's financial
          statements. Under capital adequacy guidelines and the regulatory
          framework for prompt corrective action, the Association must meet
          specific capital guidelines that involve quantitative measures of the
          Association's assets, liabilities, and certain off-balance-sheet
          items as calculated under regulatory accounting practices. The
          Association's capital amounts and classification are also subject to
          qualitative judgements by the regulators about components, risk
          weightings, and other factors.

     Quantitative measures established by regulation to ensure capital adequacy
          require the Association to maintain minimum amounts (set forth in the
          following table) of total and Tier I capital (as defined in the
          regulations) to risk-weighted assets (as defined). Management
          believes, as of December 31, 1996, that the Association meets all
          capital adequacy requirements to which it is subject.



                                                                (continued)


                                       36
<PAGE>   36

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(17) REGULATORY MATTERS, CONTINUED

     As of December 31, 1996, the most recent notification from the OTS
          categorized the Association as well capitalized under the regulatory
          framework for prompt corrective action. To be categorized as well
          capitalized the Association must maintain minimum Tier I (core), Tier
          I (risk-based) and total risk-based capital ratios as set forth
          below. There are no conditions or events since that notification that
          management believes have changed the Association's category.

     The Association's actual capital amounts and ratios at December 31, 1996
          were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                    TO BE WELL
                                                                         MINIMUM                    CAPITALIZED
                                                                        FOR CAPITAL                  FOR PROMPT
                                                                        ADEQUACY                  CORRECTIVE ACTION
                                            ACTUAL                      PURPOSES                     PROVISIONS
                                       -----------------           -----------------           ---------------------
                                       RATIO      AMOUNT           RATIO      AMOUNT            RATIO        AMOUNT
                                       -----      ------           -----      ------           -------    ----------
    <S>                              <C>       <C>                <C>       <C>              <C>        <C>
    Stockholders' equity, and
        ratio to total assets        6.4%     $  20,167
    Less - nonincludable portion
        of deferred tax asset
        and mortgage
        servicing rights                         (1,401)
    Add back - unrealized
        depreciation on
        available-for-sale
        securities                                     6
                                               ---------
    Tangible capital, and ratio
        to adjusted total assets      5.9%     $  18,772          1.5%      $  4,734
                                               =========                    ========

    Tier 1 (core) capital, and
        ratio to adjusted total
        assets                        5.9%     $  18,772          3.0%      $  9,469         5.0%       $ 15,782
                                               =========                    ========                    ========

    Tier 1 capital, and ratio
        to risk-weighted assets      11.1%        18,772          4.0%      $  6,786         6.0%       $ 10,179
                                               =========                    ========                    ========

    Tier 2 capital (excess allowance
        for loan losses)                           2,154
                                               ---------
    Total risk-based capital,
        and ratio to risk-
        weighted assets              12.3%     $  20,926          8.0%      $ 13,572         10.0%      $ 16,965
                                               =========                    ========                    ========

    Total assets                               $ 317,024
                                               =========

    Adjusted total assets                      $ 315,630
                                               =========

    Risk-weighted assets                       $ 169,647
                                               =========
</TABLE>

                                                                    (continued)



                                       37



<PAGE>   37

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

(17) REGULATORY MATTERS, CONTINUED

     On September 30, 1996, legislation was enacted which, among other
          things, imposed a special one-time assessment on SAIF member
          institutions, including the Association, to recapitalize the SAIF and
          spread the obligations for payments of Financing Corporation ("FICO")
          bonds across all SAIF and Bank Insurance Fund ("BIF") members. That
          legislation eliminated the substantial disparity between the amount
          that BIF and SAIF members had been paying for deposit insurance
          premiums. The FDIC special assessment levied amounted to 65.7 basis
          points on SAIF assessable deposits held as of March 31, 1995. The
          special assessment was recognized in the third quarter and is tax
          deductible. The Association recorded a charge of $1.5 million before
          taxes as a result of the FDIC special assessment.

     Beginning on January 1, 1997, BIF members will pay a portion of the FICO
          payment equal to 1.3 basis points on BIF-insured deposits, compared
          to 6.48 basis points payable by SAIF members on SAIF-insured
          deposits, and will pay a pro rata share of the FICO payment on the
          earlier of January 1, 2000 or the date upon which the last savings
          association, such as the Association, ceases to exist. The
          legislation also requires BIF and SAIF to be merged by January 1,
          1999 provided that subsequent legislation is adopted to eliminate the
          savings association charter and no savings associations remain as of
          that time.

     The FDIC recently lowered SAIF assessments to a range comparable to those
          of BIF members, however, SAIF members will continue to pay the higher
          FICO payments described above. Management cannot predict the level of
          FDIC insurance assessments on an ongoing basis or whether the BIF and
          SAIF will eventually be merged.

(18) STOCK OPTION PLAN
     In 1988, the Company adopted a stock option program (the "Program") for
          the benefit of its directors, officers and other selected key
          employees of the Company. Four kinds of rights are contained in the
          program and are available for grant: incentive stock options (options
          to purchase common stock, granted to officers and key employees),
          compensatory stock options (options to purchase common stock, granted
          to directors), stock appreciation rights and performance share
          awards. A total of 241,500 shares of common stock were reserved for
          issuance pursuant to the exercise of stock options under the Program.
          As of December 31, 1996, the Company had granted incentive stock
          options and compensatory stock options as discussed in more detail
          below. No stock appreciation rights or performance share awards have
          been issued to date. The Program provides that incentive stock
          options and compensatory stock options are granted to purchase stock
          at the market value of the stock at the date of the grant; such
          grants are exercisable immediately for compensatory stock options,
          and ratably over a three-year period for incentive stock options. All
          stock options expire at the earlier of ten years from the date of the
          grant, or three months after the director, officer or employee ceases
          employment with the Company.


                                                                    (continued)



                                      38
<PAGE>   38


                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(18) STOCK OPTION PLAN, CONTINUED

     During 1996, the Company adopted the provisions of Statement of Financial
          Accounting Standards No. 123, "Accounting for Stock-Based
          Compensation" ("SFAS 123"). SFAS 123 applies to stock-based
          compensation under the Company's Program. As allowed by SFAS 123, the
          Company elected to continue to measure compensation cost for the
          options or shares granted under the Program using the intrinsic value
          method of accounting prescribed by APB Opinion No. 25, "Accounting
          for Stock Issued to Employees." Under that accounting method, the
          Company recorded no compensation expense related to the Program
          during the years ended December 31, 1996, 1995 and 1994.

     During the years ended December 31, 1996 and 1995, 47,000 and 52,100
          options were granted under the Program. If compensation cost for the
          Program had been determined based on the fair value of the awards at
          the grant date, using the fair value method defined in SFAS 123, the
          Company's net income and net income per share for 1996 and 1995 would
          not have been materially reduced.

    The stock option transactions were as follows:

<TABLE>
<CAPTION>
                                                  INCENTIVE                           COMPENSATORY
                                                 STOCK OPTIONS                        STOCK OPTIONS
                                            ---------------------------       --------------------------
                                                           OPTION PRICE                     OPTION PRICE
                                            SHARES           PER SHARE        SHARES          PER SHARE
                                            ------           ---------        ------          ---------
<S>                                        <C>         <C>      <C>             <C>              <C>
   Outstanding, December 31, 1993          133,125              $ 2.13          15,813           $ 2.13
   Granted                                  10,000              $ 2.13              -                 -
                                           -------                              ------
   Outstanding, December 31, 1994          143,125              $ 2.13          15,813           $ 2.13
   Granted                                  52,100              $ 2.25               -                -
   Cancelled or expired                    (10,000)             $ 2.13          (2,875)          $ 2.13
                                           -------                              ------
   Outstanding, December 31, 1995          185,225     $2.13 -  $ 2.25          12,938           $ 2.13
   Granted                                  47,000              $ 2.75               -                -
   Cancelled or expired                    (37,600)    $2.13 -  $ 2.25          (4,313)          $ 2.13
                                           -------                              ------
   Outstanding, December 31, 1996          194,625     $2.13 -  $ 2.75           8,625           $ 2.13
                                           =======                              ======
</TABLE>

     At December 31, 1996, the weighted-average option price per share for
          the incentive stock options was $2.30 and for the compensatory stock
          options was $2.13. The weighted- average option price per share of
          all options under the Program at December 31, 1996 was $2.29. Of the
          total incentive stock options outstanding at December 31, 1996, 1995
          and 1994, 114,624, 82,083 and 44,375, respectively, were exercisable.

                                                                    (continued)

                                       39
<PAGE>   39

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(19) PARENT COMPANY ONLY FINANCIAL STATEMENTS
     Condensed financial statements of the Holding Company are presented below.
          Amounts shown as investment in wholly-owned subsidiaries and equity
          in earnings of subsidiaries are eliminated in consolidation (in
          thousands).

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                   AT DECEMBER 31,
                                                   ---------------
                                                   1996      1995
                                                   ----      ----
           ASSETS
<S>                                               <C>           <C>
    Cash, deposited with subsidiary               $   113       117
    Investment in wholly-owned subsidiaries        20,167    18,663
                                                  -------    ------

                 Total                            $20,280    18,780
                                                  =======    ======

          LIABILITIES AND STOCKHOLDERS' EQUITY

    Liabilities                                      --        --
    Stockholders' equity                           20,280    18,780

                 Total                            $20,280    18,780
                                                  =======    ======
</TABLE>



                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                               ----------------------------
                                                               1996         1995       1994
                                                               ----         ----       ----
<S>                                                           <C>          <C>        <C>
     Income:
          Equity in undistributed earnings of subsidiaries    $ 1,604      1,591      379
          Other income                                            120        120      120

    Expense                                                      (124)       (65)     (59)
                                                              -------      -----      ---

    Net income                                                $ 1,600      1,646      440
                                                              =======      =====      ===
</TABLE>

                                                                    (continued)

                                       40
<PAGE>   40

                          F.F.O. FINANCIAL GROUP, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(19)  PARENT COMPANY ONLY FINANCIAL STATEMENTS, CONTINUED

                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                        -----------------------------
                                                                          1996       1995      1994
                                                                        ------       ----      ------
<S>                                                                     <C>          <C>          <C>
     Cash Flows from Operating Activities:
          Net earnings                                                  $ 1,600      1,646        440
          Adjustments to reconcile net earnings to net cash
                 (used in) provided by operations:
          Equity in earnings of subsidiaries                             (1,604)    (1,591)      (379)
                                                                        -------      -----        ---

                 Net cash (used in) provided by operating activities         (4)        55         61
                                                                        -------      -----        ---
    Cash Flows from Financing Activities:
          Proceeds from sale of common stock                               --         --        2,400
          Investment in subsidiary                                         --         --       (2,400)
                                                                        -------      -----        ---

                 Net cash provided by financing activities                 --         --         --
                                                                        -------      -----        ---

    Net (decrease) increase in cash                                          (4)        55         61

    Cash at beginning of year                                               117         62          1
                                                                        -------      -----        ---

    Cash at end of year                                                 $   113        117         62
                                                                        =======      =====        ===
</TABLE>

(20)  QUARTERLY FINANCIAL DATA (UNAUDITED)
     The following tables present summarized quarterly data (dollars in
     thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31, 1996
                                            ----------------------------------------------
                                              FIRST   SECOND    THIRD     FOURTH
                                            QUARTER   QUARTER  QUARTER   QUARTER     TOTAL
                                            -------   -------  -------   -------     -----
<S>                                          <C>       <C>       <C>       <C>      <C>
    Interest income                          $5,466    5,398     5,340     5,793    21,997
    Interest expense                          3,140    2,942     2,824     3,117    12,023
                                             ------    -----     -----     -----    ------

    Net interest income                       2,326    2,456     2,516     2,676     9,974

    Provision for loan losses                   150     --           7       625       782
                                             ------    -----     -----     -----    ------
    Net interest income
          after provision for loan losses     2,176    2,456     2,509     2,051     9,192

    Noninterest income                          304      563       535       985     2,387
    Noninterest expenses                      2,391    2,187     3,771       827     9,176
                                             ------    -----     -----     -----    ------

    Income (loss) before income taxes            89      832      (727)    2,209     2,403
    Provision (credit) for income taxes          33      310      (270)      730       803
                                             ------    -----     -----     -----    ------

    Net income (loss)                        $   56      522      (457)    1,479     1,600
                                             ======    =====     =====     =====    ======

    Income (loss) per share                  $  .01      .06      (.05)      .17       .19
                                             ======    =====     =====     =====    ======
</TABLE>


                                                                    (continued)

                                       41
<PAGE>   41

                         F.F.O. FINANCIAL GROUP, INC.
            Notes to Consolidated Financial Statements, Continued


(20)  QUARTERLY FINANCIAL DATA (UNAUDITED), CONTINUED

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31, 1996
                                            ----------------------------------------------
                                              FIRST   SECOND    THIRD     FOURTH
                                            QUARTER   QUARTER  QUARTER   QUARTER     TOTAL
                                            -------   -------  -------   -------     -----
<S>                                          <C>       <C>       <C>       <C>      <C>
    Interest income                          $4,978    4,780     4,897     5,075    19,730
    Interest expense                          2,259    2,477     2,616     2,759    10,111
                                             ------    -----     -----     -----    ------

    Net interest income                       2,719    2,303     2,281     2,316     9,619

    Provision for loan losses                   141       30       154       152       477
                                             ------    -----     -----     -----    ------
    Net interest income
          after provision for loan losses     2,578    2,273     2,127     2,164     9,142

    Noninterest income                          663      665       604       670     2,602
    Noninterest expenses                      2,530    2,428     2,182     2,317     9,457
                                             ------    -----     -----     -----    ------

    Income before income taxes                  711      510       549       517     2,287
    Provision for income taxes                  250      174       190        27       641
                                             ------    -----     -----     -----    ------

    Net income                               $  461      336       359       490     1,646
                                             ======    =====     =====     =====    ======

    Income per share                         $  .05      .04       .05       .06       .20
                                             ======    =====     =====     =====    ======
</TABLE>



(21) SUBSEQUENT EVENT - PENDING MERGER

     On March 10, 1997, the Holding Company executed a Letter of Intent to
          merge with Republic Bancshares, Inc. ("Republic"). Under the terms of
          the Letter of Intent, Republic will exchange shares of its common
          stock for all of the outstanding shares of F.F.O.'s common stock at
          an exchange ratio of .29 share of Republic common stock for each
          share of F.F.O. common stock. The exchange ratio may be adjusted for
          decreases in Republic's stock price, but in no event will the
          exchange ratio exceed .30 share of Republic common stock for each
          share of F.F.O. common stock. F.F.O. has the right to terminate the
          transaction if Republic's stock price is less than $13.50 shortly
          before closing. Outstanding options for F.F.O.'s common stock will be
          converted into options for Republic common stock on the same terms.
          The transaction is expected to be completed in 1997, and is to be
          accounted for as a corporate reorganization under which the
          controlling shareholder's interest in F.F.O. will be carried forward
          at its historical cost while the minority interest in F.F.O. will be
          recorded at fair value. The proposed merger is subject to completion
          of a definitive agreement, approval by the respective shareholders of
          F.F.O. and Republic, and approval by applicable regulatory
          authorities. Upon completion of the proposed merger, the
          then-outstanding options under the Company's stock option program
          (see Note 18) will become immediately exercisable.




                                       42

<PAGE>   42



                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
F.F.O. Financial Group, Inc.
St. Cloud, Florida:

         We have audited the accompanying consolidated balance sheets of F.F.O.
Financial Group, Inc. and Subsidiaries (the "Company") as of December 31, 1996
and 1995 and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1996.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995 and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1996 in conformity with generally accepted accounting principles.





HACKER, JOHNSON, COHEN & GRIEB
Orlando, Florida
February 11, 1997, except for Note 21,
as to which the date is March 11, 1997



                                      43
<PAGE>   43

                 F.F.O. FINANCIAL GROUP, INC. CORPORATE OFFICE
                            2013 LIVE OAK BOULEVARD
                            ST. CLOUD, FL 34771-8462

                 FIRST FEDERAL/OSCEOLA BRANCH OFFICE LOCATIONS

<TABLE>
<CAPTION>
OSCEOLA COUNTY                           BREVARD COUNTY

<S>                                      <C>
BROADWAY (Main Office)                   MELBOURNE
200 East Broadway (34741-5791)           1300 Babcock Street
P. O. Box 421708                         Melbourne, FL  32901-3097
Kissimmee, FL  34742-1708                (407) 984-3100
(407) 846-3000
                                         IMPERIAL PLAZA
BERMUDA                                  Building B, Suite 100
1115 North Bermuda Avenue                6769 North Wickham Road
Kissimmee, FL  34741-4209                Melbourne, FL  32940-2019
(407) 846-2171                           (407) 255-3300

MILL CREEK                               CAUSEWAY
1300 East Vine Street                    450 East Eau Gallie Boulevard
Kissimmee, FL  34744-3620                Indian Harbour Beach, FL  32937-4207
(407) 847-5566                           (407) 773-5000

NINTH STREET                             MELBOURNE BEACH
1220 Ninth Street                        401 Ocean Avenue
St. Cloud, FL  34769-3376                Melbourne Beach, FL  32951-2567
(407) 892-2181                           (407) 725-7420

OAK PARK                                 PALM BAY
4291 13th Street                         6000 Babcock Street, SE
St. Cloud, FL  34769-6730                Palm Bay, FL  32909-3921
(407) 892-2191                           (407) 768-2811

ORANGE COUNTY

WINTER GARDEN
232 South Dillard Street
Winter Garden, FL  32787-3510
(407) 656-5100
</TABLE>


                                      44

<PAGE>   44

CORPORATE INFORMATION

DIRECTORS AND EXECUTIVE OFFICERS

DONALD S. BROWN, D.V.M.
Director, D. Brown Enterprises

JAMES B. DAVIS
Director, President and Chief Executive Officer

WILLIAM R. HOUGH
Director, President of William R. Hough & Co.

ALFRED T. MAY
Chairman of the Board

EDWARD A. MOORE
Director, Vice President of Poe & Brown Insurance

MILDRED W. PIERSON
Director, Retired Savings and Loan Executive

PHYLLIS A. ELAM
Senior Vice President, Chief Financial Officer and Corporate Secretary

-----------------------------------------

Common Stock Data

      F.F.O. Financial Group, Inc.'s Common Stock is traded on the NASDAQ Small
Cap Market System under the symbol "FFFG."

      The following table sets forth, for the periods indicated, the range of
high and low bid prices for the Common Stock quoted on the NASDAQ Small Cap
Market System. Stock price data reflects inter-dealer prices, without retail
markup, markdown or commission, and may not necessarily represent actual
transactions. Because the Common Stock is not actively traded, the prices
indicated below may not be an accurate indication of the Common Stock's actual
value.


<TABLE>
<CAPTION>
          Quarter Ended             High    Low
          -------------             ----    ---
          <S>                       <C>     <C>
          December 31, 1996         4       2 3/4
          September 30, 1996        3 1/8   2 1/2
          June 30, 1996             3 1/2   2 5/8
          March 31, 1996            2 7/8   2 3/8
          December 31, 1995         2 5/8   2 1/4
          September 30, 1995        2 1/2   2 3/8
          June 30, 1995             2 3/8   2 1/4
          March 31, 1995            2 1/4   2 1/8
</TABLE>


      The prices shown in the table above are not necessarily reflective of
current or future prices. As of December 31, 1996, no dividends had been
declared or paid on the Company's Common Stock. The Board of Directors of the
Company anticipates that for the foreseeable future any earnings of the
Association and the Company will be retained for purposes of enhancing the
Company's or the Association's capital position and for other purposes.

      As of December 31, 1996, the Company's 8,430,000 outstanding shares of
Common Stock were held by 684 stockholders of record.


TRANSFER AGENT
ChaseMellon Shareholder Services
3rd Floor
4 Station Square
Pittsburgh, Pennsylvania  15219

INDEPENDENT AUDITORS
Hacker, Johnson, Cohen & Grieb
930 Woodcock Road, Suite 211
Orlando, Florida 32803

SPECIAL COUNSEL
Smith, Mackinnon, Harris, Greeley,
  Bowdoin & Edwards, P.A.
Citrus Tower
255 South Orange Avenue, Suite 800
Orlando, Florida  32801

ANNUAL MEETING

The annual meeting of stockholders is scheduled for April,23, 1997, 10:00 a.m.,
at the Osceola County Stadium Clubhouse, 1000 Bill Beck Boulevard, Kissimmee,
Florida. Holders of record of the Company's Common Stock as of February 28,
1997 will be eligible to vote.

FORM 10-K

A copy of the Company's 1996 Annual Report on Form 10-K as filed with the U.S.
Securities and Exchange Commission will be furnished without charge (excluding
exhibits) to shareholders upon written request to:

         Shareholder Relations
         F.F.O. Financial Group, Inc.
         2013 Live Oak Boulevard
         St. Cloud, Florida  34771-8462