SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   ----------

                                   FORM 10-QSB
(Mark One)

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

     For the quarterly period ended September 30, 1998

     OR

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

     For the transition period from ___________ to __________

     Commission File Number 0-27170


                            CLASSIC BANCSHARES, INC.
             (Exact name of registrant as specified in its charter)


                      Delaware                                 61-1259391
(State or other jurisdiction of incorporation or            (I.R.S. Employer
                    organization)                         Identification Number)

344 Seventeenth Street, Ashland, Kentucky                             41101
(Address of principal executive offices)                           (ZIP Code)

Registrant's telephone number, including area code: (606) 325-4789

     Check here  whether  the issuer (1) has filed all  reports  required  to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

     As of November 9, 1998,  there were  1,322,500  shares of the  Registrant's
common stock issued and 1,299,590 shares outstanding.

     Transitional Small Disclosure (check one): Yes [ ] No [X]



<PAGE>


                            CLASSIC BANCSHARES, INC.

                                      INDEX

                                                                          Page
                                                                         Number
                                                                         ------
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Balance Sheets as of September 30, 1998
          (Unaudited) and March 31, 1998                                    3

          Consolidated Statements of Income for the three and six months
          ended September 30, 1998 and 1997                                 4

          Consolidated Statements of Stockholders' Equity for the
          six months ended September 30, 1998 (Unaudited) and
          Year Ended March 31, 1998                                         5

          Consolidated Statements of Cash Flows for the six months ended
          September 30, 1998 and 1997                                      6-7

          Notes to Consolidated Financial Statements                      8-10


Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                       11-16

PART II.  OTHER INFORMATION                                                17

          Signatures                                                       18

          Index to Exhibits                                                19


                                       2
<PAGE>

                            CLASSIC BANCSHARES, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        September 30,     March 31,
                                                                           1998             1998
                                                                       -------------    -------------
                                                                        (Unaudited)
<S>                                                                    <C>              <C>
ASSETS
  Cash and due from bank                                               $   3,469,310    $   2,500,841
  Federal funds sold and securities purchased under resell agreement       2,943,135        1,131,414
  Certificates of deposits in other financial institutions                    99,000          293,000
  Investment securities available for sale                                24,503,117       18,176,807
  Mortgage-backed securities available for sale                            5,045,140        7,830,714
  Loans receivable, net                                                   96,042,290       90,100,000
  Real estate acquired in the settlement of loans                            273,290          229,390
  Accrued interest receivable                                                940,804          851,767
  Federal Home Loan Bank and Federal Reserve Bank stock                    1,347,950        1,297,150
  Premises and equipment, net                                              4,609,632        4,468,002
  Cost in excess of fair value of net assets acquired (goodwill),
    net of accumulated amortization                                        2,840,940        2,902,869
  Other assets                                                             1,335,877        1,338,572
                                                                       -------------    -------------

TOTAL ASSETS                                                           $ 143,450,485    $ 131,120,526
                                                                       =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
  Deposits                                                             $ 117,186,415    $ 104,926,667
  Securities sold under agreement to repurchase                            2,109,994        3,521,799
  Advances from Federal Home Loan Bank                                       397,325               --
  Other short-term borrowings                                                856,235          273,697
  Accrued expenses and other liabilities                                     412,509          402,090
  Accrued interest payable                                                   452,931          390,409
  Accrued income taxes                                                       125,220               --
  Long-term debt                                                             500,000          550,000
  Deferred income taxes                                                      692,907          648,802
                                                                       -------------    -------------

              Total Liabilities                                        $ 122,733,536    $ 110,713,464
                                                                       -------------    -------------

Commitments and contingencies

Stockholders' Equity
  Common stock, $.01 par value, 1,322,500 shares
    issued and 1,299,590 outstanding                                   $      13,225    $      13,225
  Additional paid-in capital                                              12,753,789       12,753,789
  Retained earnings - substantially restricted                             9,078,016        8,853,606
  Net unrealized gain (loss) on securities available for sale                350,802          297,125
  Unearned ESOP shares                                                      (834,970)        (834,970)
  Unearned RRP shares                                                       (340,198)        (371,879)
  Minimum pension liability adjustment                                        (9,835)          (9,954)
  Treasury stock, at cost                                                   (293,880)        (293,880)
                                                                       -------------    -------------

              Total Stockholders' Equity                               $  20,716,949    $  20,407,062
                                                                       -------------    -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $ 143,450,485    $ 131,120,526
                                                                       =============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                            CLASSIC BANCSHARES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED            SIX MONTHS ENDED
                                                    SEPTEMBER 30,                SEPTEMBER 30,
                                             -------------------------    -------------------------
                                                1998          1997           1998          1997
                                             -----------   -----------    -----------   -----------
<S>                                          <C>           <C>            <C>           <C>
INTEREST INCOME
  Loans                                      $ 1,941,667   $ 1,854,975    $ 3,859,136   $ 3,649,048
  Investment securities                          325,668       373,778        662,889       767,074
  Mortgage-backed securities                     111,274       142,093        253,617       293,514
  Other interest earning assets                   55,145        13,308         73,543        44,326
                                             -----------   -----------    -----------   -----------
              Total Interest Income            2,433,754     2,384,154      4,849,185     4,753,962
                                             -----------   -----------    -----------   -----------

INTEREST EXPENSE
  Interest on deposits                         1,208,474     1,051,107      2,325,741     2,081,094
  Interest on FHLB Advances                       13,202       102,375         57,111       184,833
  Interest on other borrowed funds                54,440        63,470        120,506       131,370
                                             -----------   -----------    -----------   -----------
              Total Interest Expense           1,276,116     1,216,952      2,503,358     2,397,297
                                             -----------   -----------    -----------   -----------

              Net Interest Income              1,157,638     1,167,202      2,345,827     2,356,665

Provision for loss on loans                       15,000        55,000         40,000       102,500
                                             -----------   -----------    -----------   -----------

              Net interest income after
               provision for loss on
               loans                           1,142,638     1,112,202      2,305,827     2,254,165
                                             -----------   -----------    -----------   -----------

NON-INTEREST INCOME
  Service charges and other fees                 105,187        84,668        222,279       158,225
  Gain on sale of securities
    available for sale                             3,340        17,556          3,904        18,054
  Pension plan settlement gain                        --       329,915             --       329,915
  Loss on disposal of assets                          --       (37,282)            --       (37,282)
  Other income                                    68,688        23,716         96,375        57,847
                                             -----------   -----------    -----------   -----------
              Total Non-Interest Income          177,215       418,573        322,558       526,759
                                             -----------   -----------    -----------   -----------

NON-INTEREST EXPENSES
  Employee compensation and benefits             471,905       449,529        968,545       899,038
  Occupancy and equipment expense                149,460       159,371        287,701       275,668
  Federal deposit insurance premiums               9,042         7,269         17,725        14,623
  Loss (gain) on foreclosed real estate              875        52,682            914        53,240
  Goodwill amortization                           31,133        31,133         61,929        61,929
  Other general and administrative
     expenses                                    366,418       443,600        738,700       759,696
                                             -----------   -----------    -----------   -----------
              Total Non-Interest Expense       1,028,833     1,143,584      2,075,514     2,064,194
                                             -----------   -----------    -----------   -----------

INCOME BEFORE INCOME TAXES                       291,020       387,191        552,871       716,730

              Income tax expense (benefit)        81,236       113,502        146,047       205,999
                                             -----------   -----------    -----------   -----------

NET INCOME                                   $   209,784   $   273,689    $   406,824   $   510,731
                                             ===========   ===========    ===========   ===========


Basic earnings per share                     $      0.18   $      0.22    $      0.35   $      0.42
                                             ===========   ===========    ===========   ===========
Diluted earnings per share                   $      0.17   $      0.22    $      0.33   $      0.42
                                             ===========   ===========    ===========   ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>


                            CLASSIC BANCSHARES, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                                            ACCUMULATED OTHER
                                                                                           COMPREHENSIVE INCOME
                                                                                       ------------------------------
                                                                                        NET UNREALIZED     MINIMUM
                                                          ADDITIONAL                   GAIN (LOSS) ON      PENSION
                                             COMMON        PAID-IN        RETAINED      AVAILABLE FOR     LIABILITY
                                              STOCK        CAPITAL        EARNINGS     SALE SECURITIES    ADJUSTMENT
                                          ------------   ------------   ------------   -------------    -------------
<S>                                       <C>            <C>            <C>             <C>             <C>
Balance at April 1, 1997                  $     13,225   $ 12,689,158   $  8,172,085    $    (58,614)   $    (11,376)

  Net income for the year
   ended March 31, 1998                             --             --      1,020,486              --              --
  Dividend paid                                     --             --       (338,965)             --              --
  ESOP shares earned                                --         49,796             --              --              --
  RRP shares earned                                 --             --             --              --              --
  RRP shares forfeited                              --            337             --              --              --
  Tax benefit from RRP                              --         14,498             --              --              --
  Purchased 20,000 treasury shares                  --             --             --              --              --
  Change in unrealized gain
   (loss) on securities available
   for sale                                         --             --             --         355,739              --
  Amortization of minimum
    pension liability adjustment                    --             --             --              --           1,422
                                          ------------   ------------   ------------    ------------    ------------

Balances at March 31, 1998                      13,225     12,753,789      8,853,606         297,125          (9,954)

  Net income for the six months
   ended September 30, 1998                         --             --        406,824              --              --
  Dividend paid                                     --             --       (182,414)             --              --
  RRP shares earned                                 --             --             --              --              --
Other comprehensive income, net of tax:
  Change in unrealized gain
    (loss) on securities available
    for sale                                        --             --             --          53,677              --
  Amortization of minimum
    pension liability adjustment                    --             --             --              --             119
                                          ------------   ------------   ------------    ------------    ------------

Balances at September 30, 1998            $     13,225   $ 12,753,789   $  9,078,016    $    350,802    $     (9,835)
                                          ============   ============   ============    ============    ============

<CAPTION>



                                            UNEARNED        UNEARNED        TREASURY
                                          ESOP SHARES      RRP SHARES        STOCK            TOTAL
                                          ------------    ------------    ------------    ------------
<S>                                       <C>             <C>             <C>             <C>
Balance at April 1, 1997                  $   (918,660)   $   (486,055)   $    (29,963)   $ 19,369,800

  Net income for the year
   ended March 31, 1998                             --              --              --       1,020,486
  Dividend paid                                     --              --              --        (338,965)
  ESOP shares earned                            83,690              --              --         133,486
  RRP shares earned                                 --         110,283              --         110,283
  RRP shares forfeited                              --           3,893          (4,230)             --
  Tax benefit from RRP                              --              --              --          14,498
  Purchased 20,000 treasury shares                  --              --        (259,687)       (259,687)
  Change in unrealized gain
   (loss) on securities available
   for sale                                         --              --              --         355,739
  Amortization of minimum
    pension liability adjustment                    --              --              --           1,422
                                          ------------    ------------    ------------    ------------

Balances at March 31, 1998                    (834,970)       (371,879)       (293,880)     20,407,062

  Net income for the six months
   ended September 30, 1998                         --              --              --         406,824
  Dividend paid                                     --              --              --        (182,414)
  RRP shares earned                                 --          31,681              --          31,681
Other comprehensive income, net of tax:
  Change in unrealized gain
    (loss) on securities available
    for sale                                        --              --              --          53,677
  Amortization of minimum
    pension liability adjustment                    --              --              --             119
                                          ------------    ------------    ------------    ------------

Balances at September 30, 1998            $   (834,970)   $   (340,198)   $   (293,880)   $ 20,716,949
                                          ============    ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                            CLASSIC BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                          ----------------------------
                                                              1998            1997
                                                          ------------    ------------
<S>                                                       <C>             <C>
OPERATING ACTIVITIES
  Net Income                                              $    406,824    $    510,731
  Adjustments to reconcile net income to net cash
    provided by operating activities:
       Depreciation and amortization                           188,784         147,853
       Provision for loss on loans                              40,000         102,500
       Provision for loss on foreclosed real estate                 --          50,000
       Gain on sale of securities available for sale            (3,904)        (18,054)
       Loss on disposal of assets                                   --          37,282
       Gain on pension plan settlement                              --        (329,915)
       Federal Home Loan Bank stock dividends                  (36,700)        (33,600)
       Deferred income tax expense (benefit)                    14,408         114,866
       Amortization and accretion of investment
         securities premiums and discounts, net                 50,737           2,523
       Amortization of goodwill                                 61,929          61,929
  Decrease (increase) in:
       Accrued interest receivable                             (89,037)       (165,507)
       Other assets                                              2,695         148,242
  Increase (decrease) in:
       Accrued interest payable                                 62,522          87,985
       Accrued income taxes                                    125,220            (864)
       Accounts payable and accrued expenses                    10,419         166,579
                                                          ------------    ------------
              Net cash provided by operating activities        833,897         882,550
                                                          ------------    ------------

INVESTING ACTIVITIES
  Securities:
       Proceeds from sale, maturities or calls              10,298,703       5,222,960
       Purchased                                           (16,481,096)     (2,803,155)
  Mortgage-backed securities:
       Proceeds from sale                                    5,035,426       1,004,375
       Purchased                                            (3,839,846)     (2,187,378)
       Principal payments                                    1,467,148         464,150
  Purchased Federal Home Loan Bank stock                       (14,100)             --
  Certificates of deposits with other banks:
      Proceeds from maturities                                 194,000              --
  Loan originations and principal payments, net             (5,970,083)     (6,498,761)
  Purchases of software                                         (6,677)        (10,414)
  Purchases of premises and equipment                         (332,574)       (353,295)
                                                          ------------    ------------
              Net cash used by investing activities         (9,649,099)     (5,161,518)
                                                          ------------    ------------
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

                            CLASSIC BANCSHARES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      SIX MONTHS ENDED
                                                                        SEPTEMBER 30,
                                                                ----------------------------
                                                                    1998            1997
                                                                ------------    ------------
<S>                                                             <C>             <C>
FINANCING ACTIVITIES
  Net increase (decrease) in deposits                             12,259,748      (1,190,595)
  Net proceeds from FHLB borrowings                                  397,325       2,725,000
  Repayment of long-term borrowings                                  (50,000)        (50,000)
  Decrease in securities sold under agreement to repurchase       (1,411,805)     (1,417,047)
  Net increase (decrease)  in short-term borrowings                  582,538        (206,363)
  Purchase of treasury stock                                              --        (259,687)
  Dividends paid                                                    (182,414)       (169,833)
                                                                ------------    ------------
             Net cash (used) provided by financing activities     11,595,392        (568,525)
                                                                ------------    ------------

(Decrease) increase in cash and cash equivalents                   2,780,190      (4,847,493)
Cash and cash equivalent at beginning of period                    3,632,255       8,834,309
                                                                ------------    ------------

Cash and cash equivalents at end of period                      $  6,412,445    $  3,986,816
                                                                ============    ============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       7
<PAGE>


                            CLASSIC BANCSHARES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Principles of Consolidation

     The financial  statements  for 1998 are  presented for Classic  Bancshares,
Inc. (the "Company") and its  wholly-owned  subsidiaries,  Classic Bank, and The
First National Bank of Paintsville ("First National").  The consolidated balance
sheets for  September  30, 1998 and March 31, 1998 is for the  Company,  Classic
Bank,  and First  National.  The  consolidated  statements of income include the
operations of the Company, Classic Bank and First National for the three and six
months ended September 30, 1998 and 1997.

(2)  Basis of Presentation

     The accompanying  Consolidated  Financial  Statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and  with the  instructions  to Form  10-QSB  and  Regulation  S-B.
Accordingly,  they do not include all the information and footnotes  required by
generally accepted accounting principles for complete financial statements.

     In the opinion of management, the Consolidated Financial Statements contain
all adjustments  (consisting only of normal recurring  adjustments) necessary to
present  fairly the  financial  condition  of  Classic  Bancshares,  Inc.  as of
September  30,  1998,  and the results of  operations  for all  interim  periods
presented. Operating results for the six months ended September 30, 1998 are not
necessarily  indicative  of the results that may be expected for the fiscal year
ended March 31, 1999.

     Certain financial information and footnote disclosures normally included in
annual  financial  statements  prepared in conformity  with  generally  accepted
accounting principles have been omitted pursuant to the rules and regulations of
the  Securities  and Exchange  Commission.  The unaudited  interim  consolidated
financial  statements  presented  herein should be read in conjunction  with the
annual consolidated financial statements of the Company as of and for the fiscal
year ended March 31, 1998.

(3)  Earnings Per Share

     Effective  December 31, 1997,  the Company  began  presenting  earnings per
share  pursuant  to the  provisions  of SFAS No. 128,  "Earnings  Per Share." In
accordance  with the  Statement,  the  September  30,  1997  earnings  per share
presentation have been restated to conform to SFAS No. 128.

     Basic  earnings  per share are  calculated  based on the  weighted  average
number of common shares outstanding during the respective periods.

     Diluted  earnings per share is computed  taking into  consideration  common
shares  outstanding and dilutive  potential common shares to be issued under the
Company's stock option plan and recognition and retention plan.

     Weighted  average  number of shares  used in the basic  earnings  per share
computations  was  1,182,451  and  1,167,883  for the three month  period  ended
September 30, 1998 and 1997 and 1,179,327 and 1,165,651 for the six month period
ended September 30, 1998 and 1997. Weighted average number of shares used in the
diluted  earnings per share  computations  was  1,236,459  and


                                       8
<PAGE>

1,215,716  for the three  month  period  ended  September  30, 1998 and 1997 and
1,232,710 and  1,213,484  for the six month period ended  September 30, 1998 and
1997.

(4)  Employee Stock Ownership Plan (ESOP)

     In conjunction with the Bank's conversion on December 28, 1995, the Company
established an Employee Stock  Ownership Plan (ESOP) which covers  substantially
all  employees.  The ESOP borrowed  $1,058,000  from the Company,  and purchased
105,800 common  shares,  equal to 8% of the total number of shares issued in the
conversion. Classic Bank makes scheduled discretionary contributions to the ESOP
sufficient to service the debt.  Shares are allocated to participants'  accounts
under the shares allocated  method.  The cost of shares committed to be released
and  unallocated  shares is  reported as a reduction  of  stockholders'  equity.
Compensation  expense is recorded  based on the average fair market value of the
ESOP shares when  committed to be released.  Furthermore,  ESOP shares that have
not been  committed to be released are not considered  outstanding.  The expense
under the ESOP was $17,929 and $33,816 for the three months ended  September 30,
1998 and 1997 and $53,292 and $62,316  for the six months  ended  September  30,
1998 and 1997. As of September 30, 1998, the Company considered 83,497 shares as
unearned ESOP shares with a fair value of $1,189,832.

     On  September  14, 1998,  the Board of  Directors of the Company  adopted a
resolution to refinance the ESOP loan by extending its term to twenty-five years
effective for the plan year beginning April 1, 1998.

(5)  Stock Option and Incentive Plan and Recognition and Retention Plan

     On July 29, 1996, the  shareholders of the Company ratified the adoption of
the  Company's  1996 Stock Option and  Incentive  Plan and the  Recognition  and
Retention Plan ("RRP"). Pursuant to the Stock Option Plan, 132,250 shares of the
Company's  common  stock are  reserved  for  issuance,  of which the Company has
granted  options  on 106,774  shares at  $10.8125  per share,  options on 19,750
shares at  $13.375  and  options on 4,500  shares at  $13.875.  Pursuant  to the
Recognition and Retention Plan,  52,900 shares of the Company's common stock are
reserved for issuance, of which the Company has granted awards on 49,990 shares.
Ungranted RRP shares  (2,910) are included in treasury stock at cost. RRP shares
that are granted are considered common stock equivalents.

     On July 27, 1998, the  shareholders of the Company ratified the adoption of
the  Company's  1998 Premium  Price Stock  Option Plan.  Pursuant to the Premium
Price Stock Option Plan, 50,000 shares of the Company's common stock is reserved
for  issuance.  No awards have been granted under the Premium Price Stock Option
Plan.

(6)  Cash Dividend

     On July 27,  1998,  the Board  declared a cash  dividend  of $.08 per share
payable on November 9, 1998 to shareholders of record on October 26, 1998.


                                       9
<PAGE>

(7)  Supplemental Disclosure of Cash Flows Information

                                                 Six months ended September 30,
                                                 ------------------------------
                                                    1998                1997
                                                 -----------        -----------
     Cash paid for:
          Interest on deposits and borrowings       $495,095         $797,234
          Taxes                                      112,341          164,128
     Transfer from loans to real estate
           acquired through foreclosure               37,782           33,347


                                       10
<PAGE>

                                 PART I - ITEM 2

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

Financial Condition

     The Company's total assets  increased  $12.4 million,  or 9.5%, from $131.1
million at March 31, 1998 to $143.5  million at September 30, 1998. The increase
was due primarily to an increase in cash and cash  equivalents  of $2.8 million,
an increase in loans of $5.9 million,  and an increase in investment  securities
of $6.3 million, partially offset by a decrease in mortgage-backed securities of
$2.8 million.

     Net loans receivable increased $5.9 million from $90.1 million at March 31,
1998 to $96.0  million  at  September  30,  1998 due to  aggressive  origination
efforts and improved loan demand that resulted in  originations  of $8.8 million
of one to four family loans,  $3.5 million in commercial real estate loans, $8.2
million in commercial  business  loans and $5.8 million in consumer loans offset
by repayments since March 31, 1998.

     Investment  securities  increased  approximately  $6.3  million  from $18.2
million at March 31, 1998 to $24.5  million at September  30, 1998  primarily as
the result of  purchases  of $16.5  million  partially  offset by sold or called
securities of $10.2.  Mortgage-backed  securities  decreased  approximately $2.8
million from $7.8  million at March 31, 1998 to $5.0  million at  September  30,
1998.  The  decrease  was  primarily  the result of  purchases  of $3.8  million
partially  offset  by  sales  of  $5.0  million  and  principal   repayments  of
approximately $1.5 million.

     Net deposits  increased $12.3 million from $104.9 million at March 31, 1998
to $117.2  million at September  30, 1998.  The increase in deposits was due the
opening of the two new  banking  offices in the last  quarter of fiscal 1998 and
increased  marketing  efforts within the Company's market area.  Securities sold
under agreement to repurchase  decreased $1.4 million from $3.5 million at March
31, 1998 to $2.1  million at  September  30,  1998.  The  decrease  was due to a
withdrawal in the normal course of business.

     Federal Home Loan Bank advances increased to $397,000 at September 30, 1998
compared to no advances at March 31, 1998.  Net  proceeds  from the advance were
used to fund a loan.

     Total stockholders'  equity was $20.4 million at March 31, 1998 compared to
$20.7 million at September 30, 1998.

Forward-Looking Statements

     When used in this Form 10-QSB and in future filings by the Company with the
Securities and Exchange  Commission (the "SEC"), in the Company's press releases
or other public or shareholder communications,  and in oral statements made with
the approval of an  authorized  executive  officer,  the words or phrases  "will
likely  result",   "are  expected  to",  "will  continue",   "is   anticipated",
"estimate",   "project"  or  similar   expressions   are  intended  to  identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform Act of 1995. Such statements are subject to certain risks and
uncertainties,  including changes in economic conditions


                                       11
<PAGE>

in the  Company's  market  area,  changes in  policies by  regulatory  agencies,
fluctuations  in interest rates,  demand for loans in the Company's  market area
and  competition,  that could cause  actual  results to differ  materially  from
historical  earnings and those presently  anticipated or projected.  The Company
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking  statements,  which speak only as of the date made.  The Company
wishes  to advise  readers  that the  factors  listed  above  could  affect  the
Company's financial performance and could cause the Company's actual results for
future periods to differ  materially  from any opinions or statements  expressed
with respect to future periods in any current statements.

     The Company does not undertake - and specifically declines any obligation -
to  publicly  release  the  result  of any  revisions  which  may be made to any
forward-looking  statements to reflect events or circumstances after the date of
such  statements or to reflect the occurrence of  anticipated  or  unanticipated
events.

Year 2000 Issue

     The advent of the year 2000 brings a  potentially  critical  problem to all
computers, software and micro-chip dependent systems. Many computer programs use
only a two-digit  character  for the year (1998  would  appear only as "98") and
thus the computer is unable to distinguish  between, for example, the years 1900
and 2000 or 1901 and 2001.  Left  uncorrected,  this  situation  will  result in
erroneous data and reports,  inability to effectuate electronic funds transfers,
and possibly the shut down of entire systems.

     The Company's  operations are heavily  dependent on information  technology
systems.  As a result,  the Company has put much effort in addressing  potential
problems that could exist with the turn of the century. The following paragraphs
summarize the phases of the Company's Y2K plan:

     Awareness  Phase.  The Company  formally  established  a Y2K plan and a Y2K
committee  that is  responsible  for  implementing  the  plan,  determining  the
resources (including personnel, time and expense estimates) required to complete
specific procedures, monitoring progress, establishing time lines and developing
contingency plans. This phase is substantially complete.

     Assessment  Phase.  The Company  developed a strategy to determine the size
and  complexity  of the Y2K  problem as it relates  to the  Company.  A Y2K risk
assessment was completed on each mission  critical  system to assess the ability
of hardware and software to accurately process date sensitive data,  including a
process specific rating assessing the relative risk of each of these processes.

     The Company's  primarily  lending  relationships are with borrowers for 1-4
family  residences.  As a result, the Company does not anticipate any Y2K issues
with regard to its loan portfolio.

     Renovation Phase. The Company's  assessment of each mission critical system
revealed that new hardware  purchases  and software  upgrades  could  adequately
address Y2K date sensitive  applications.  These hardware purchases and software
upgrades  have been  delivered  and  placed  into  production  and  entered  the
validation and testing phase.



                                       12
<PAGE>

     Validation  (Testing)  Phase.  The validation phase is designed to test the
ability of hardware and software to accurately  process date sensitive data. The
Company  currently is in process of validation  testing of each mission critical
system with the degree of completion  of such testing  ranging from 75% to 100%.
The  testing   environment   is  insulated  from   production  and   development
environments, therefore, assuring minimal interruption of current operations. No
significant  Y2K  problems  have been  identified  relating  to any  modified or
upgraded mission critical systems.  The Company  anticipates  completion of this
phase prior to December 31, 1998.

     Implementation  Phase.  The  Company's  plan  requires  that  all  required
hardware  purchase and software  upgrades be installed  and in  production  with
respect to all mission critical systems during the validation phase.

     The Company has  incurred  costs of  approximately  $20,000 for testing its
data processing  software.  These costs are being amortized  through March 2000.
The Company  also  anticipates  costs of  approximately  $30,000 in new hardware
purchases.  Management  anticipates  that these  costs will be  capitalized  and
depreciated over the period of time allowed by accounting guidelines.

RESULTS OF  OPERATIONS - COMPARISON  OF OPERATING  RESULTS FOR THE THREE AND SIX
MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

     General.  The Company's  results of operations  depend  primarily  upon the
level of net  interest  income,  which is the  difference  between the  interest
income earned on its interest-earning assets such as loans and investments,  and
the costs of the Company's interest-bearing liabilities,  primarily deposits and
borrowings.  Results  of  operations  are also  dependent  upon the level of the
Company's  non-interest  income,  including fee income and service charges,  and
affected by the level of its  non-interest  expenses,  including its general and
administrative  expenses.  Net  interest  income  depends  upon  the  volume  of
interest-earning assets and interest-bearing  liabilities and the interest rates
earned or paid on them, respectively.

     The Company  reported net income of $210,000  during the three months ended
September  30, 1998  compared to net income of $274,000  during the three months
ended  September  30, 1997.  The  decrease in income of $64,000  between the two
periods was primarily the result of a decrease in net interest income of $10,000
and a decrease in non-interest income of $241,000 (including a one time $330,000
gain in 1997)  partially  offset  by a  decrease  in  non-interest  expenses  of
$115,000,  a decrease in provision for loan losses of $40,000, and a decrease in
income taxes of $32,000.

     The  Company  reported  net income of  $407,000  for the six  months  ended
September  30, 1998  compared to net income of $511,000 for the six months ended
September 30, 1997.  The decrease in income of $104,000  between the two periods
was  primarily  the result of a decrease in net  interest  income of $11,000,  a
decrease  in  non-interest  income of $204,000  and an increase in  non-interest
expenses of $11,000  partially offset by a decrease in provision for loan losses
of $62,000, and a decrease in income taxes of $60,000.

     Interest Income.  Total interest income  increased  $50,000 and $95,000 for
the three and six months ended  September  30, 1998 as compared to the three and
six months ended  September  30, 1997.  The increase in interest  income for the
three-month period resulted primarily from an increase in the average balance of
interest-earning  assets of $4.6  million from $120.7  million at September  30,
1997 to $125.3  million at  September  30,  1998.  The  increase  in the average
balance


                                       13
<PAGE>

of  interest-earning  assets was due  primarily  to the  increase in the average
balance of loans, offset by a decrease in the average balance of mortgage-backed
and investment  securities and other interest earning assets.  The average yield
on interest-earning  assets was 7.6% and 7.7% for the three and six months ended
September 30, 1998 compared to 7.9% for the three and six months ended September
30,  1997.  The  decrease  was due to a decrease in the  average  rate earned on
loans.

     Interest  Expense.  Interest expense increased $59,000 and $106,000 for the
three and six months ended  September 30, 1998 as compared to the same period in
1997.  Interest expense increased for the three month period primarily due to an
increase in the average  balance of  interest-bearing  liabilities.  The average
balance  of  interest-bearing  liabilities  increased  from  $101.2  million  at
September  30, 1997 to $106.1  million at  September  30, 1998 as a result of an
increase in deposits offset by a decrease in FHLB  borrowings.  The average rate
paid on interest-bearing liabilities was 4.7% for the three and six months ended
September  30, 1998 compared to 4.8% and 4.7% for the three and six months ended
September 30, 1997.

     Provision for Loan Losses. The Company's  provision for loan losses totaled
$15,000  and  $40,000  for the three and six months  ended  September  30,  1998
compared to $55,000 and $102,500  for the three and six months  ended  September
30, 1997 based on management's  overall  assessment of the loan  portfolio.  The
decrease for the three and six month period was due to a decrease in charge-offs
and management's decision to decrease the provision as a result of an evaluation
of  the  Company's  current  portfolio.   Management  continually  monitors  its
allowance  for  loan  losses  and  makes  adjustments  as  economic  conditions,
portfolio  quality  and  portfolio  diversity  dictate.   Although  the  Company
maintains  its  allowance  for loan losses at a level which it  considers  to be
adequate to provide for potential losses,  there can be no assurance that future
losses will not exceed estimated amounts or that additional  provisions for loan
losses will not be required for future periods.

     Non-interest Income.  Non-interest income decreased  approximately $241,000
and $204,000 for the three and six months ended  September  30, 1998 compared to
the same period in 1997.  The  decrease was  primarily  the result of a one time
$330,000 gain recorded from the settlement of First  National's  pension plan in
1997  offset  by a loss on  disposal  of  assets of  $37,000  recorded  in 1997.
Non-interest  income also  decreased  due to a decrease in the gain on available
for sale  securities of $14,000 for the three and six months ended September 30,
1998.  These  decreases were offset by an increase in service  charges and other
fees on  deposits  of $21,000  and  $64,000  for the three and six months  ended
September  30, 1998 and an  increase in other  income of $45,000 and $39,000 for
the three and six months  ended  September  30,  1998.  The  increase in service
charges and other fees on deposits was due to an increased deposit base and more
aggressive pricing strategies. The increase in other income was due primarily to
an increase in real estate service fees from secondary market loans.

     Non-interest Expense. Non-interest expense decreased $115,000 for the three
months  ended   September  30,  1998  compared  to  the  same  period  in  1997.
Non-interest  expenses decreased for the three month period due to a decrease in
occupancy and equipment  expense of $11,000 as a result of  maintenance  charges
taken in 1997, a decrease in the loss on foreclosed  real estate of $50,000 as a
result of a write-down  on  foreclosed  real estate taken in 1997, a decrease in
stationary,  printing and other supplies of $44,000 due to new product offerings
and  name  and  logo  changes  in  1997,   a  decrease  in  other   general  and
administrative  expenses of $32,000 due to restructuring charges relative to the
continued consolidation of the operations of the Company's


                                       14
<PAGE>

subsidiaries  taken in 1997 partially  offset by an increase in compensation and
benefits of $22,000 due to an increase in the number of employees as a result of
the opening of two new banking offices.

     Non-interest  expense  increased $11,000 for the six months ended September
30, 1998 compared to the same period in 1997.  Non-interest  expenses  increased
for the six month  period due to an increase  in  compensation  and  benefits of
$70,000 due to an increase in the number of employees as a result of the opening
of two new banking  offices,  an increase in occupancy and equipment  expense of
$12,000 as a result of the opening of the two new banking  offices,  an increase
in federal deposit  insurance  premiums of $3,000, an increase in ATM expense of
$22,000 as the result of an  increase  in the  number of ATM  locations,  and an
increase in marketing and advertising of $15,000  partially offset by a decrease
in the loss on foreclosed  real estate of $52,000 as a result of a write-down on
foreclosed  real estate  taken in 1997, a decrease in  stationary,  printing and
other supplies of $43,000 due to new product offerings and name and logo changes
in 1997, and a decrease in other general and administrative  expenses of $16,000
due to  restructuring  charges  relative to the continued  consolidation  of the
operations of the Company's subsidiaries taken in 1997.

     Income Tax Expense.  Income tax expense  decreased  $32,000 and $60,000 for
the three and six months ended September 30, 1998 primarily due to a decrease in
income before income taxes and an increase in tax exempt income.

     Non-Performing Assets and Allowance for Loan Losses. The allowance for loan
losses is  calculated  based upon an  evaluation  and  assessment  of  pertinent
factors  underlying the types and qualities of the Company's  loans.  Management
considers such factors as the payment  status of a loan, the borrower's  ability
to repay  the loan,  the  estimated  fair  value of the  underlying  collateral,
anticipated economic conditions that may affect the borrower's repayment ability
and the  Company's  historical  charge-offs.  The  Company's  allowance for loan
losses as of  September  30, 1998 was  $848,000 or .9% of the total  loans.  The
March 31, 1998 allowance for loan loss was $831,000,  or .9% of total loans. The
allowance  for loan  losses at  September  30,  1998 was  allocated  as follows:
$201,000 to  one-to-four  family real estate loans,  $43,000 to commercial  real
estate loans,  $91,000 to commercial business loans,  $120,000 to consumer loans
and $393,000 remained unallocated.

     The ratio of  non-performing  assets to total  assets is one  indicator  of
other exposure to credit risk.  Non-performing  assets of the Company consist of
non-accruing  loans,  accruing loans  delinquent 90 days or more, and foreclosed
assets,  which have been acquired as a result of foreclosure or  deed-in-lieu of
foreclosure.  For  all  periods  presented  the  Company  had no  troubled  debt
restructurings.  The  following  table sets  forth the amount of  non-performing
assets at the periods indicated.

<TABLE>
<CAPTION>
                                                    September 30, 1998      March 31, 1998
                                                    ------------------      --------------
                                                              (Dollars in Thousands)
<S>                                                         <C>                   <C>
     Non-Accruing Loans ...............................     $225                  $308
     Accruing Loans Delinquent 90 Days or More ........      300                    25
     Foreclosed Assets ................................      273                   229
                                                            ----                  ----
     Total Non-Performing Assets ......................     $798                  $562
     Total Non-Performing Assets as a
              Percentage of Total Assets ..............       .6%                   .4%
</TABLE>

                                       15
<PAGE>

     Total  non-performing  assets  increased  $236,000  from March 31,  1998 to
September 30, 1998.  The increase in  non-performing  assets is the result of an
increase in loans  delinquent 90 days or more.  Management  continually  pursues
collection  of these  loans in order to  decrease  the  level of  non-performing
loans.

     Other Assets of Concern.  Other than the non-performing assets set forth in
the table above,  as of September 30, 1998,  there were no loans with respect to
which known  information  about the possible credit problems of the borrowers or
the  cash  flows of the  security  properties  have  caused  management  to have
concerns  as to the  ability  of the  borrowers  to  comply  with  present  loan
repayment  terms and which may result in the future  inclusion  of such items in
the non-performing asset categories.

     Liquidity and Capital Resources.  The Company's most liquid assets are cash
and cash equivalents.  The levels of these assets are dependent on the Company's
operating,  financing, and investing activities. At September 30, 1998 and March
31, 1998,  cash and cash  equivalents  totaled  $6.4  million and $3.6  million,
respectively.  The  Company's  primary  sources of funds  include  principal and
interest  payments on loans (both  scheduled  and  prepayments),  maturities  of
investment  securities and principal payments from  mortgage-backed  securities,
deposits and Federal Home Loan Bank of Cincinnati advances. While scheduled loan
repayments  and proceeds  from  maturing  investment  securities  and  principal
payments on mortgage-backed securities are relatively predictable, deposit flows
and early  repayments are more  influenced by interest rates,  general  economic
conditions and competition.

     Liquidity  management  is both a short-  and  long-term  responsibility  of
management.  The Company  adjusts its  investments  in liquid  assets based upon
management's  assessment  of  expected  loan  demand,   projected  purchases  of
investment  and  mortgage-backed  securities,  expected  deposit  flows,  yields
available on  interest-bearing  deposits,  and liquidity of its  asset/liability
management  program.  Excess liquidity is generally invested in interest-bearing
overnight  deposits  and  other  short-term  liquid  asset  funds.  If funds are
required beyond the funds generated internally,  the subsidiaries of the Company
have the ability to borrow  funds from the FHLB.  At  September  30,  1998,  the
Company had $397,000 in borrowings outstanding with the FHLB.

     Classic  Bank is required to maintain  minimum  levels of liquid  assets as
defined  by OTS  regulations.  This  requirement,  which  may be  varied  at the
direction  of  the  OTS  depending  on  economic  conditions,  is  based  upon a
percentage  of  deposits  and  short-term  borrowings.  The  required  ratio  is
currently 4.0%. The Bank's liquidity ratios have consistently been maintained at
levels in compliance with regulatory requirements.  As of September 30, 1998 and
March 31, 1998, Classic Bank's liquidity ratios was 4.43%. First National,  as a
national bank, is not subject to any prescribed liquidity requirements.

     At September 30, 1998, the Company had outstanding commitments to originate
loans of $6.9  million.  The Company  anticipates  that it will have  sufficient
funds available to meet its current  commitments  principally through the use of
current liquid assets and through its borrowing capacity with the FHLB.



                                       16
<PAGE>

     Pursuant to rules promulgated by the Office of Thrift Supervision,  savings
institutions must meet several separate minimum  capital-to-asset  requirements.
The  following  table  summarizes,   as  of  September  30,  1998,  the  capital
requirements  applicable to Classic Bank and its actual  capital  ratios.  As of
September  30,  1998,  Classic  Bank  exceeded  all current  regulatory  capital
standards.

<TABLE>
<CAPTION>
                                           Regulatory                       Actual Capital
                                       Capital Requirement                     (CB Only)
                                     -----------------------            ----------------------
                                     Amount          Percent            Amount         Percent
                                     ------          -------            ------         -------
                                                      (Dollars in Thousands)
<S>                                  <C>               <C>              <C>             <C>
Risk-Based
  (to Risk Weighted Assets)          $2,942            8.0%             $8,255          22.5%
Tier 1 (Core) Capital
  (to Risk Weighted Assets)           2,757            4.0               7,936          21.6
</TABLE>

     Pursuant to regulations promulgated by the Office of the Comptroller of the
Currency  (the  "OCC"),  national  banks must meet two minimum  capital-to-asset
requirements.  The following  table  summarizes,  as of September 30, 1998,  the
capital requirements applicable to First National and its actual capital ratios.
As of September 30, 1998, First National exceeded all current regulatory capital
standards.

<TABLE>
<CAPTION>
                                           Regulatory                       Actual Capital
                                       Capital Requirement                     (FN Only)
                                     -----------------------            ----------------------
                                     Amount          Percent            Amount         Percent
                                     ------          -------            ------         -------
                                                      (Dollars in Thousands)
<S>                                  <C>               <C>              <C>             <C>
Risk-Based Capital
  (to Risk Weighted Assets)         $3,591             8.0%             $9,162          20.4%
Tier 1 Capital
  (to Risk Weighted Assets)           1,796            4.0               8,653          19.3
</TABLE>

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.  The  primary  impact of
inflation on the  operations of the Company is reflected in increased  operating
costs.  Unlike  most  industrial  companies,  virtually  all of the  assets  and
liabilities  of a financial  institution  are  monetary in nature.  As a result,
interest  rates,  generally,  have  a more  significant  impact  on a  financial
institution's performance than does inflation. Interest rates do not necessarily
move in the same  direction  or to the same  extent  as the  prices of goods and
services.


                                       17
<PAGE>

                                   SIGNATURES

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


                                        CLASSIC BANCSHARES, INC.
                                        REGISTRANT

Date: November 12, 1998                 /s/ David B. Barbour
                                        ----------------------------------------
                                        David B. Barbour, President,
                                        Chief Executive Officer and Director
                                        (Duly Authorized Officer)

Date: November 12, 1998                 /s/ Lisah M. Frazier
                                        ----------------------------------------
                                        Lisah M. Frazier, Senior Vice President,
                                        Treasurer and Chief Financial Officer
                                        (Principal Financial Officer)





                                       18
<PAGE>


                                INDEX TO EXHIBITS



  Exhibit
   Number
   ------
     27                 Financial Data Schedule





                                       19