<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934

For the fiscal year ended December 31, 1998.

[ ]  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 0-8628
                       ------

                       FOUR CORNERS FINANCIAL CORPORATION
             ------------------------------------------------------
             (Exact Name of Registrant as specified in its charter)

           Delaware                                              22-2044086
-------------------------------                              -------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

370 East Avenue, Rochester, New York                               14604
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:             (716) 454-2263
                                                                ----------------

Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.04 par value
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES  x            NO
   -----            -----

<PAGE>

                                       -2-

Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and to the best of registrant's
knowledge, will not be contained in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [   ]

As of March 31, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $24,652.

As of March 31, 1999, the number of shares outstanding of the registrant's
common stock was 32,937.

Documents Incorporated By Reference
-----------------------------------

None.


<PAGE>


                                       -3-

                                TABLE OF CONTENTS

PART I                                                                     PAGE

Item 1:   Business                                                            4
Item 2:   Properties                                                         14
Item 3:   Legal Proceedings                                                  15
Item 4:   Submission of Matters to a Vote of Security Holders                15
          Executive Officers of Registrant                                   15

PART II

Item 5:   Market for Registrant's Common Equity and Related                  17
          Security Holder Matters
Item 6:   Selected Financial Data                                            18
Item 7:   Management's Discussion and Analysis of Financial                  19
          Condition and Results of Operations
Item 8:   Financial Statements and Supplementary Data                        23
Item 9:   Changes in and Disagreements with Accountants on                   23
          Accounting and Financial Disclosure

Part III

Item 10:  Directors and Executive Officers of Registrant                     24
Item 11:  Executive Compensation                                             25
Item 12:  Security Ownership of Certain Beneficial Owners                    26
          and Management
Item 13:  Certain Relationships and Related Transactions                     27


PART IV

Item 14:  Exhibits, Financial Statement Schedules, and                       29
              Reports on Form 8-K

<PAGE>



                                       -4-

                                     PART I

Item 1. Business

     Four Corners Financial Corporation is a Delaware corporation formed under
the name American Management Educational Corporation ("Educational Corp.") in
1974. In 1981 Educational Corp. changed its name to American Management Energy
Corporation ("AMEC") and commenced a limited oil and gas operation.
Subsequently, it discontinued the educational financial management consulting
and security investigation business which it had been conducting as well as the
oil and gas operation. Thus, AMEC was inactive and without employees from 1983
until May 12, 1987.

     On that date, AMEC sold to a former principal stockholder all of its
assets, consisting of certain oil and gas leases valued at approximately $40,000
in consideration of his assumption of all of the liabilities of AMEC and his
agreement to indemnify AMEC against specified claims.

     On May 14, 1987, control of AMEC was transferred to Frank B. Iacovangelo
and Bernard J. Iacovangelo through the acquisition of shares from certain
stockholders.

     On April 12, 1988, AMEC acquired all of the issued and outstanding stock of
Four Corners Abstract Corporation ("Abstract") which was then owned by Frank B.
Iacovangelo and Bernard J. Iacovangelo and their affiliates, in exchange for
9,293,100 shares of AMEC. Abstract was formed in 1980 and has conducted
operations since that date. At the time of the acquisition of Abstract, AMEC
changed its name to Four Corners Financial Corporation ("FCFC"). Messrs.
Iacovangelo are also officers, directors and principal stockholders of FCFC.
Since that time, the main source of FCFC's business has been conducted through
Abstract which remains a wholly owned subsidiary of FCFC.

     On October 17, 1988, FCFC acquired a controlling interest in Mid-State
Abstract Corporation ("Mid-State") for $95,000. In January 1989, FCFC made an
exchange offer to acquire the remaining shares of Mid-State, resulting in FCFC
owning approximately 84% of the outstanding voting shares being held by parties
not affiliated with FCFC. In February, 1991, Mid-State merged into Abstract and
all outstanding shares of Mid-State were changed and converted into shares of
FCFC Common Stock.

     In January, 1989, FCFC acquired all of the outstanding shares of Livingston
Abstract Corporation ("Livingston") in Geneseo, New York for a purchase price of
$8,000, the assumption and agreement to pay the balance of three notes
aggregating $17,985, and the issuance (at a later date) of 20,000 shares of the
Company's Common Stock and commenced operations at the location at that time.


<PAGE>

                                       -5-

     In January, 1990, FCFC acquired all of the outstanding shares of Picciano
Abstract Company, Inc. ("Picciano") of Binghamton, New York for a purchase price
of $15,000 and the issuance of 20,000 shares of the Company's Common Stock and
commenced operations at that location at that time.

     On July 1, 1990, Livingston and Picciano merged into Abstract.

     On December 23, 1991, the Company acquired all of the outstanding shares of
Proper Appraisal Specialists, Inc. ("Proper Appraisal") of Buffalo, New York for
a purchase price of $10,000 and the issuance of 90,000 shares of the Company's
Common Stock. Since that date, Proper Appraisal Specialists, Inc. has been
inactive while the Company operated an appraisal business begun in 1989 under
Four Corners Abstract. It is anticipated that Proper Appraisal Specialists,
Inc., a New York Corporation, will be dissolved by proclamation during 1998. In
September, 1995 the Company sold the assets of its appraisal division to Rynne,
Murphy & Associates, Inc. (See Footnote No. 9 of the accompanying audited
financial statements).

     In May, 1992, the Company opened a branch office in Goshen, New York
(Orange County) to service the Hudson Valley area.

     In February, 1993, the Company closed its Geneseo Office and consolidated
those operations with its Rochester location. The Company also consolidated its
Cheektowaga Appraisal office with its branch in downtown Buffalo, New York in
December, 1993.

     In September, 1994, the Company relocated its Goshen office to Newburgh,
New York. Subsequently, in March, 1995, the Newburgh office was closed. The
Company now provides service to the Mid-Hudson area of New York State through
independent contractors. The Company opened a satellite office in September,
1996 in Oswego, New York which was moved to a new location in Oswego as of
October 9, 1997, and closed its Lockport satellite office in February, 1997.

     On March 5, 1999 a Proxy Statement was mailed to all shareholders of the
Company's common stock as of February 24, 1999 for a special meeting which was
held on March 26, 1999 for the purpose of voting on the following:

     1. To approve the Board of Directors adoption of an Amendment to the
Company's restated Certificate of Incorporation which provides for: (a) a
reduction of the number of authorized shares of the Company's common stock from
15,000,000 authorized shares with a par value of $.04 per share to 150,000
authorized shares with a par value of $4.00 per share and (b) a 1 for 100
reverse stock split of the Company's currently issued and outstanding common
stock.

     2. To approve a cash payment in the amount of $12.00 times each fraction of
a share resulting from such reverse stock split in lieu of the issuance of any
resulting fractional shares.


<PAGE>

                                       -6-

     3. To approve the payment by the Company of the indebtedness owed to
Shareholders owning fractional shares resulting from the 1 for 4 reverse stock
split effective July 29, 1992, together with the payment of simple interest on
the amount of such indebtedness.

     The text of the proxy statement is set forth as Exhibit 99.1 to this Form
10-K.

     All three propositions set forth above were voted on and approved by the
shareholders of the Company at the Special Meeting on March 26, 1999. Following
this vote, the Company filed its Certificate of Amendment to its restated
Certificate of Incorporation with the Delaware Secretary of State on April 1,
1999, a copy of which is set forth as Exhibit 99.2 to this Form 10-K.

     As a consequence of the shareholder vote of March 26, 1999 approving the 1
for 100 reversal of the Company's common stock and the filing of a Certificate
of Amendment to the Company's restated Certificate of Incorporation with the
State of Delaware, the Company's number of shareholders has been reduced to 174.
Therefore, on April 9, 1999, the Company filed Form 15 (Exhibit 99.3) with the
Securities and Exchange Commission requesting de-registration of its common
stock. Effectively, the Company has been privatized as of that date.
Consequently, no future Annual Report on Form 10-K will be required.

     Four Corners Financial Corporation and its subsidiary, Four Corners
Abstract Corporation ("Abstract"), provide services and products that are
utilized in substantially all commercial and residential real estate
transactions. As used herein, "Company" includes Four Corners Financial
Corporation and Four Corners Abstract unless the context otherwise requires.

     These services and products are offered through offices in Buffalo,
Rochester, Syracuse, Utica, Binghamton, Albany and Oswego, all located in
central and western New York and through subcontractors in other areas of New
York State.

Services and Products

     The Company's services and products include real estate title and other
public record searching, the preparation of abstracts of title and the issuance
of title insurance as agent for certain national underwriting companies. Other
services and products include abstract storage and settlement/escrow closing
services. All of the Company's services and products may be required in
connection with the mortgaging, sale or purchase of commercial or residential
real property.

Substantially all of the Company's revenues were derived from its abstracting
and title insurance services. Although all of the Company's services and
products can be obtained from other vendors at prices comparable to those of the
Company, the Company believes that dealing


<PAGE>

                                       -7-

with a single source for all of these products is convenient for customers and
helps to reduce the time required for the performance of these services for a
particular real estate transaction. Through it's Corporate Customer Service
Department located in Rochester, New York using a statewide network of service
providers, the Company is able to perform these title services virtually
anywhere in New York State.

     Response time is important in many real estate transactions and the ability
of the Company to provide its services and products in a timely manner is
significant in the attraction and retention of customers.

     Abstracts

     The purchase, sale, leasing and financing of a parcel of real estate in New
York State outside of New York City, usually require the preparation of an
abstract of title. The abstract is a summary of each transaction affecting the
parcel which is reflected in the records of the Clerk of the County where the
subject property is located. The abstract is examined by attorneys and others to
determine prior interests in, or encumbrances on, the property which have to be
disposed of in order to have "clear" title. The information used to create or
redate an abstract is obtained by title searchers, that is, persons who search
various official records for interests which may affect the ownership interest
in, or title to, real property. Such interests may include real property taxes,
corporate franchise taxes, bankruptcies, mechanics liens, income tax or sales
tax liens, litigation liens, judgment liens, security interests in fixtures and
mortgages as well as interests of prior owners (including deceased owners) which
have not been adequately transferred. Title searchers summarize their findings
and deliver them to word processors who produce the abstract of title.

     An abstract usually exists for most properties. Thus, the Company is most
often requested merely to "redate" it. This involves examining the records only
from the date of the last transaction summarized in the abstract. However, where
no abstract is available or when newly subdivided parcels are involved, a new
abstract is created starting with a warranty deed which meets the local
standards for title certification (e.g. at least 60 years old for Rochester, New
York property).

     The information contained in abstracts which the Company creates or redates
is indexed and retained by the Company, becoming part of its "title plant".
These "back titles" are valuable assets which facilitate the preparation and
redating of future abstracts. The title plant also aids the expeditious
preparation of title insurance reports and policies.

     The Company also offers an abstract storage service. When mortgages are
placed on real property, the bank or mortgage company usually retains the
abstract of title. Thus, a large volume mortgagee would require substantial
storage space as well as numerous personnel to index, store and retrieve these
abstracts. Through its abstract storage


<PAGE>



                                       -8-

service, the Company picks up these abstracts and stores them for the lender,
redelivering them when requested. At the present time, the Company stores
approximately 15,000 abstracts. The Company does not charge for this service but
believes that it helps to generate abstract "redating" revenues, since a person
needing a redate of an abstract stored by the Company can, by ordering that
redate from the Company, avoid having to deliver the abstract elsewhere for the
redate. The Company estimates that revenues thus generated amount to
approximately $25,000 annually.

     Abstract and title companies are often asked to act as an escrow closing
agent in a real estate transaction. This practice is allowable under New York
State law. In this capacity, usually as a function of providing title insurance
on real estate, the Company is asked to hold funds in escrow bank accounts until
certain requirements are met or title defects are cured by the parties involved
in the transaction. For this service the Company charges a fee based upon the
length of time which the funds are to be held and/or the number of transactions
(deposits, checks) to be handled. Also, the Company acts as a conduit for the
sale and purchase of mortgages between financial institutions insuring that
mortgage documents are received and funds for the purchase of mortgages are
wired from buyer to seller in the correct amount and in a specified time frame.
The Company also acts as settlement agent on Home Equity loans and refinanced
mortgage loans for its title insurance underwriters and certain banks/lenders.
During 1998, escrow closing services generated approximately $255,000 as
compared to $75,000 and $31,000 in 1997 and 1996, respectively.

     Other public record searches provided by the Company include guaranteed tax
searches, foreclosure certificates of title, surrogate court searches, UCC
financing searches, franchise tax searches, judgment searches, new name
searches, back title searches, bankruptcy searches and foreclosure searches.
While these searches are most often needed by attorneys in connection with real
estate transactions, they may be useful to other customers for other purposes,
for example, to lenders extending credit.

     Due to the increasing number of residential bank foreclosures, the Company
has seen a significant increase in revenues from the sale of foreclosure related
title search products during 1998 and 1997. The Company's ability to provide
these services on a statewide basis has enhanced its market penetration in the
foreclosure area. During 1998, the Company generated approximately $821,053 in
revenues from foreclosure related products, representing 16% of total revenues
as compared to $725,000 or 19% of revenues for 1997.


<PAGE>

                                       -9-

     Title Insurance

     Title insurance policies are statements of the terms and conditions upon
which the title insurance underwriter will insure title to real estate, showing
ownership, outstanding liens, encumbrances and other matters of public record.
The beneficiaries of title insurance policies are generally buyers of real
property and secured lenders, and the policy amount is usually based upon either
the purchase price of the property or the amount of the loan secured by the
property. The title policy protects the insured against title defects, liens and
encumbrances not specifically excepted from its coverage. Most lenders require
title insurance as a condition to making loans secured by real estate.

     Title insurance is substantially different from other types of insurance.
Fire, auto, health and life insurance protect against losses due to future
events that cannot generally be eliminated. Title insurers, however, seek to
eliminate future losses by accurately performing record searches and
examinations of title to real property, and to the extent possible, requiring
that obvious defects be "cured" as a condition of and prior to issuance of the
policy.

     Among the most commonly issued title insurance policies are standard or
extended coverage policies for owners and lenders. Owners' policies insure title
to real estate against defects in or liens or encumbrances against title,
unmarketability of title and lack of access to the subject property. Lenders'
policies insure against the invalidity of the lien of the insured mortgage,
insure the priority of the lien or encumbrance as stated in the title policy,
and insure against the invalidity of any assignment of the insured mortgage
provided the assignment is shown in the policy. The terms of coverage have
generally become standardized in accordance with forms approved by industry
groups such as the American Land Title Association.

     Since title insurance premiums are based upon mortgage amounts and tend to
be higher on a per unit basis than amounts charged for abstract services, labor
costs as a percentage of revenue in title insurance are lower than in abstract
services. As a result, gross margin levels are higher. Therefore, one of the
Company's main goals has been to increase its revenues from title insurance.

     The Company's total revenue for 1998 increased by 27.3% to $5,214,743 as
compared to $3,789,864 in 1997. Revenue from title insurance increased
significantly by 51.5% during 1998 to $1,997,540, representing 38% of total
revenues, compared to 35% 1997 and 1996, respectively. Revenues from abstract
and escrow related services also increased significantly to $3,217,203 as
compared to $2,471,421 and $2,403,808 in 1997 and 1996 respectively.


<PAGE>




                                      -10-

     The title insurance premium is based upon the policy amount and the type of
coverage provided by the policy. Title insurance rates, including those of the
Company's competitors, are regulated by the State of New York Insurance
Department. The premium for title insurance is due and must be paid in full
prior to the issuance of the policy which is generally on the closing date of
the real estate transaction.

     The use of title insurance in connection with real estate transactions,
particularly residential purchases and financing, in the Company's marketing
area has been significantly increased since the early 1980's by the expanded
role of the national secondary residential mortgage market, and the growth of
nationwide lending, both residential and commercial, by banks and insurance
companies. As a result, almost all residential and commercial real estate
transfers and/or financings, except most home equity transactions, involve the
issuance of a title insurance policy. This same period of time has seen, until
recently, a general inflation of real estate prices resulting in increasing
levels of insurance coverage and related premiums. However, this expanding
market has also seen a significant increase in the number of companies providing
such insurance in the Company's marketing area, both directly and through
agents. See "Competition".

     The Company is not a title insurance underwriter. In selling title
insurance, the Company acts as agent for several national title insurance
underwriting companies. The Company has agency relationships with the following
title insurance underwriters: Old Republic National Title Insurance Company,
Albany, New York; Stewart Title Insurance Company, New York City; and Lawyers
Title Insurance Corporation, Richmond, Virginia. Generally, such relationships
are cancelable by either party upon short notice. The Company believes that in
the event of the cancellation of its existing agency relationships, it would
have no difficulty in securing similar relationships with other title insurance
underwriters.

     The choice of an underwriter by the Company is based upon such
considerations as the amount of the premium "split" offered, which varies among
underwriters, the terms under which the title underwriter will require
indemnification for policy losses attributable to errors made by the Company in
searching and examining the title, the scope of services offered to the agent by
the title underwriter, and the fact that certain underwriters will not insure
titles in certain geographical areas within New York State. Typically, the title
insurance premium "split" is approximately 80% to the Company and 20% to the
underwriter.

     The title insurance underwriters for which the Company acts as agent are
licensed by the State of New York. Currently, there is no requirement under New
York law that requires an agent such as the Company to hold a license.


<PAGE>




                                      -11-

Marketing

     Services and products provided by the Company are utilized in substantially
all commercial and residential real estate transactions. Therefore, its
marketing efforts are directed primarily toward the persons who place the orders
for such services and products in the typical real estate transaction or other
real estate related activity attorneys, mortgage brokers, lenders, builders, and
other persons and entities engaged in the real estate business generally.

     Marketing activities are conducted by a direct sales force of two
employees, in addition to the Company's five Branch Managers, under the
direction of the Company's Director of Sales and Marketing. Assistance and
technical support is provided by all of the Company's branch office managers.
Other marketing efforts include direct solicitation and advertising in
publications targeted to serve mortgage lenders and attorneys, attendance at
trade shows and conventions, and news releases.

     The Company believes that its ability to offer many of the services and
products necessary in a real estate transaction is an important factor in the
attraction and retention of business, since customers can therefore order those
items from a single source. In its marketing activities, the Company emphasizes
this factor and the equally important factors of competitive price, accuracy,
response time, excellent service and reliability, all of which the Company
believes it provides to its customers.

Significant Customers

     During 1998, there were two customers accounting for more than 10% of the
Company's gross revenues.

Industry Considerations and Seasonality

     The Company's business is related to the general real estate market and the
fluctuations which occur therein, namely prevailing interest rates. As a result
of the plan developed by Company management subsequent to year end 1994 to
significantly reduce the Company's overhead expense structure in order to
improve operations and cash flow, the Company returned to profitability in 1995.
Interest rates remained relatively stable during 1996, an election year, while
the economy continued to rebound and consumer confidence also improved. This was
evidenced by an increase of 11% in recorded deeds and mortgages for 1996 as
compared to 1995. However, due to competitive factors effecting the Company's
title insurance revenue base, the Company's total revenues for 1996 declined
slightly. Despite this decline in revenue, the Company remained profitable in
1996. Real estate activity in New York State during 1997 was comparable to 1996
levels. Recorded deeds and mortgages grew slightly by 2.2%. Company revenues
increased comparably by slightly more than 1% to $3,789,864. During 1998 as
interest rates began to fall once again, real estate mortgage activity in terms
of loan


<PAGE>



                                      -12-

originations began to heat up once again. Accordingly recorded deeds and
mortgages in New York State increased by 12% as compared to 1997 levels.

As a result of the increase in settlement/escrow closings performed by the
Company during 1998, where the Company is in control of all the title services
necessary to close a loan transaction for various lenders, all segments of
Company revenues increased substantially over 1997 levels. Total Company
revenues increased by more than $1,400,000 or 27% during 1998 as a result of
these factors. There can be no assurance that these or other factors will enable
the Company to maintain its revenue and profitability in periods of declining
real estate activity.

     The demand for the Company's services and products is directly dependent
upon the activity of the real estate market which, in turn, is closely related
to changes in interest rates. Thus, the Company's business is cyclical as well
as seasonal, with lowest volume when interest rates are high and in the winter
and early spring.

Banking Relationship

     During 1995, Company management worked closely with bank officials and its
public accounting firm to develop a plan to restructure Company expenses and
improve operations and cash flow. On December 13, 1995, the amount outstanding
on the Company's note payable to a bank, $133,333, and $185,000 of the amount
borrowed under its Line-of-Credit agreement were refinanced with the same bank.
The note payable to the bank requires the Company to meet certain financial
covenants at December 31, 1996 and 1997 (see Note 5 of the Accompanying
Consolidated Financial Statements as of December 31, 1997 and 1996).

At December 31, 1998 the Company's total indebtedness to this bank decreased to
$-0- as compared to $164,167 and $276,250 at December 31, 1997 and December 31,
1996 respectively.

The Company may borrow up to $100,000 under the terms of an unsecured
line-of-credit. Amounts borrowed bear interest at the bank's prime interest rate
plus 1%. The bank's prime rate was 7.75% at December 26, 1998. Borrowings under
this line-of-credit are personally guaranteed by the Company's principal
officers/stockholders. At December 26, 1998 and December 27, 1997, there was
$82,500 and $100,000, respectively, outstanding under the terms of this
line-of-credit.

Potential Liabilities

     Abstract companies, including the Company, certify their searches and
abstracts for accuracy. In its title insurance business, the Company relies upon
its abstracts and other information and considerations, including standards
prescribed by its principals, in determining whether title is insurable. If the
Company makes a determination of


<PAGE>

                                      -13-

insurability, it issues a policy of title insurance on behalf of its principal,
the underwriting company. As an issuer of certified searches and abstracts, the
Company may, depending on applicable law and the facts of a particular case, be
liable for money damages in the event of errors in its searches and abstracts.
As an agent issuing title policies on behalf of an underwriter, the Company may,
again depending on applicable law and the facts of a particular case, be liable
to either the underwriter or the insured in the event of errors in abstracting
or determinations of insurability, negligence, or breaches of agreements with
its principals. There are no significant claims pending against the Company
based upon any of the foregoing considerations, but the potential for such
claims, and possible liability thereon, is a risk that is inherent in the
Company's business, and such claims may be asserted at any time. During the most
recent past five years, the amount paid by the Company for such claims, in the
aggregate, is less than $35,000. The Company has errors and omissions insurance
coverage of $1,000,000, which complies with requirements of its principals and
is also deemed adequate by the Company's management.

Employees

     The Company and its subsidiaries employed approximately 80 persons at
December 31, 1998, as compared to 70 in 1997 and 66 in 1996. Certain members of
the Company's management must sign Confidentiality Agreements which prohibits
the solicitation of information or resources to existing or potential
competitors. The employees of the Company are not covered by any collective
bargaining or other agreements and management believes its employee relations to
be good.

Service Marks

     The names "Four Corners Financial Corporation" and "Four Corners Abstract"
have been registered as service marks with the U.S. Patent and Trademark Office.
While the Company considers its service marks to be important, management does
not consider any service mark to be critical to future operations of the Company
or the marketing of any of the Company's services or products.

Competition

     The Company competes with numerous providers of abstract and title
insurance services, most of which fall into two main categories. The first are
the large, integrated national or statewide companies which underwrite their own
title insurance policies either directly or through agents. Such agents include
not only independent companies, but also attorneys who sell title insurance
policies as "examining counsel" for underwriters of title insurance. The second
are the small, local companies which provide abstracts and write policies only
as agents for others. Both types of companies are found in the markets served by
the Company and offer substantial competition. Because of the relative ease of
entry into the market place, the Company may meet additional


<PAGE>

                                      -14-

competition from newly formed companies in one or more of its market
areas.

     The use of title insurance in residential real estate transactions has
grown in recent years because of the development of the national secondary
residential mortgage market which requires title insurance for virtually all
residential mortgages.

     Also, in recent years, institutional lenders have generally required title
insurance in virtually all commercial mortgages. However, during the same
period, there has been a significant increase in the number of companies
providing such insurance in the Company's market area, both directly and through
agents.

     The principal elements of competition are accuracy and speed (response
time). Prices for abstract and appraisal services are generally comparable among
vendors. However, in recent years, the Company experienced significant price
competition from new abstract companies entering its market areas. Prices for
title insurance are standardized and regulated by the New York State Insurance
Department which requires that rates be filed for approval by the New York State
Title Insurance Rate Service Association, Inc. (TIRSA). Personal relationships
are extremely important in retaining business and obtaining new business.
Excellent service and reliability, which the Company believes it provides, are
the principal means of developing and maintaining such relationships.

Year 2000 Compliance

     The Company is working to resolve the potential impact of the year 2000 on
the ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. Any of the Company's programs
that recognize a date using "00" as the year 1900 rather than the year 2000
could result in errors or system failures. The Company utilizes a number of
computer programs across its entire operation. The Company has not completed its
assessment, but currently believes that costs of addressing this issue will not
have a material financial risk to the Company. In order to assure that this does
not occur, the Company plans to devote all resources required to resolve any
significant year 2000 issues in a timely manner.

Item 2.   Properties

     Prior to July, 1995, principal offices of the Company were located at 80
West Main Street, Rochester, New York. These facilities, approximately 15,000
square feet, were leased from Wegman Building Associates, a partnership in which
Messrs. Frank B., Bernard J. and Anthony M. Iacovangelo, directors and/or
officers of the Company, are partners. Abstract had a one year lease for this
space expiring on December 31, 1995, which provided for an annual net rent of
$68,000.


<PAGE>

                                      -15-

However, effective July 31, 1995, the Company moved its Rochester facilities to
370 East Avenue. These facilities are leased from Fitch Building Associates,
another partnership in which Messrs. Frank B., Bernard J., and Anthony M.
Iacovangelo are partners.

     Abstract now leases approximately 9,000 square feet of such space at a net
annual rent of $72,000, pursuant to a lease expiring June 30, 2000. The Company
believes that the terms of its rental are at least comparable to those which it
might have obtained if dealing with a non-affiliated third party. Rent and
common charges were approximately $72,000 in 1998, 1997 and 1996, respectively.
At December 31, 1998 there were no outstanding rental payments under this lease
agreement. The Company owed approximately $15,000 and $18,100 for unpaid rent at
December 31, 1997 and 1996, respectively.

     In addition, the Company leases space for its branch offices in Buffalo
(3,993 square feet), Albany (1,410 square feet), Syracuse (2,087 square feet),
Binghamton (760 square feet), Utica (1,611 square feet) and Oswego (350 square
feet).

     The Company also leases space in the County Clerk's offices in Monroe,
Erie, Onondaga and Niagara counties, and occupies space in the County Clerk's
office in Oneida County.

     The Company believes it has adequate insurance coverage with respect to
fire and other casualty losses.

Item 3. Legal Proceedings

     There are no pending legal proceedings to which the Company is a party or
of which any of its property is the subject.

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

     There were no matters submitted to a vote of security holders during the
last quarter of the fiscal year covered by this report.

Executive Officers of Registrant

     The executive officers of the Company are as follows:

     Name                     Age    Position with the Company
     ----                     ---    -------------------------

     Frank B. Iacovangelo     59     Chairman, Treasurer and Director

     William S. Gagliano      49     President and Director

     Bernard J. Iacovangelo   51     Vice President, Secretary and
                                     Director


<PAGE>

                                      -16-

Business Background of Executive Officers

     Set forth below is a brief description of the business backgrounds of the
executive officers of the Company.

     Frank B. Iacovangelo has served as President, Treasurer, and a director of
the Company from May, 1987 to January, 1999 when he was elected Chairman of the
Board of Directors. He remains Treasurer of the Company. He is a practicing
attorney and has been a partner in the law firm of Gallo & Iacovangelo of
Rochester, New York for more than five years. Mr. Iacovangelo is also an
officer, director and principal shareholder of Faber Construction Co., Inc. and
Forest Creek Equity Corp., real estate development companies, and an owner of
numerous real estate projects. In addition, Mr. Iacovangelo is President and
director of Four Corners Abstract Corp., a wholly-owned subsidiary of the
Company, which he co-founded in 1980. From 1987 until June, 1989, Mr.
Iacovangelo was Chairman of the Board of Directors of a food service business
which filed a petition under Chapter 11 of the U.S. Bankruptcy Code on November
20, 1989.

     Bernard J. Iacovangelo has served as Vice President, Secretary, and a
director of the Company since May, 1987. He is an attorney and has had more than
five years of experience as a partner in the law firm of Gallo & Iacovangelo.
His principal activity for the last five years has been as President, director
and principal shareholder of Forest Creek Equity Corp., a real estate
development company. Mr. Iacovangelo is also a principal shareholder of Faber
Construction Co., Inc. and an owner of numerous real estate projects as well as
co-founder, officer and director of Four Corners Abstract Corp., a wholly-owned
subsidiary of the Company.

     William S. Gagliano has served as Executive Vice President of the Company
and Four Corners Abstract Corp. from June, 1990 to January, 1999. In January,
1999 he was named President of the Company. He was elected Director of the
Company in July, 1992. As President, he is responsible for day to day operations
of the Company. He joined Four Corners Abstract Corp. in 1987 as Vice President
of Finance and Administration.

     Messrs. Frank and Bernard Iacovangelo are brothers.


<PAGE>

                                      -17-

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Security Holder
          Matters

     There is a very limited trading in the Company's Common Stock. The range of
high and low bid prices and high and low asked prices for the years 1995, 1996
and 1997 is shown below, as reported by the National Quotations Bureau, Inc. and
as adjusted to reflect the Company's one for four (1 for 4) reverse stock split
which became effective July 31, 1992.

                                COMMON STOCK DATA

     1995                          BID                   ASKED
     ----                          ---                   -----

     1st Quarter                *Unpriced              *Unpriced
     2nd Quarter                *Unpriced              *Unpriced
     3rd Quarter                *Unpriced              *Unpriced
     4th Quarter                *Unpriced              *Unpriced

     1996
     ----

     1st Quarter                *Unpriced              *Unpriced
     2nd Quarter                *Unpriced              *Unpriced
     3rd Quarter                *Unpriced              *Unpriced
     4th Quarter                *Unpriced              *Unpriced

     1997
     ----

     1st Quarter                *Unpriced              *Unpriced
     2nd Quarter                *Unpriced              *Unpriced
     3rd Quarter                *Unpriced              *Unpriced
     4th Quarter                *Unpriced              *Unpriced

     February 16, 1989         $2.00  $2.00           $3.00  $3.00
     (last available)

     * = Listed in pink sheets without prices

     The above quotations represent prices between dealers and do not include
retail markup, markdown or commission. They do not represent actual transactions
and have not been adjusted for stock dividends or splits.

     The Company's agreement with its Bank places a restriction on its payment
of dividends. No dividends were declared or paid during 1995, 1996 or 1997.

     On May 25, 1999, the Company had 174 holders of record of its common stock.


<PAGE>

                                      -18-

ITEM 6 SELECTED FINANCIAL DATA

               FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARIES

                             SELECTED FINANCIAL DATA

The financial data included in this table has been selected by the Company and
has been derived from the financial statements for those years. The following
statement should be read in conjunction with the financial statements and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

<TABLE>
<CAPTION>
                                         (In Thousands, Except Per Share Data)

                                     1998      1997       1996     1995       1994
                                     ----      ----       ----     ----       ----
<S>                                <C>       <C>       <C>       <C>       <C>


STATEMENT OF OPERATIONS DATA:

     Revenue                       $ 5,214   $ 3,790   $ 3,707   $ 3,822   $ 4,780

     Income (loss) before taxes        307       189        89        99      (581)

     Net income (loss)                 172       189        86        97      (469)

     Net income (loss) per share   $  6.37   $  5.71   $  2.57   $  3.00   $   (14)

BALANCE SHEET DATA:

     Total assets                  $ 1,503   $ 1,455   $ 1,225   $ 1,240   $ 1,315

     Long-term obligations             101       100       357       202       564

     Stockholders' investment          491       319       116        56       (42)
</TABLE>


<PAGE>

                                      -19-

Item 7. Management's Discussion and Analysis of Financial Condition and Results
          of Operations

1. Liquidity and Capital Resources

     The Company's cash flow was generated from operations, bank loans and
advances made by principal stockholders.

     In 1998, the operations of the Company generated cash of $192,957. This
cash flow, along with cash reserves from 1997 of $92,623, was sufficient to fund
investments in assets of $25,316 and a net debt reduction of $126,131. In 1997,
the cash flow from operations of $197,437 funded investments in assets of
$10,906 and a net debt reduction of $130,520. In 1996, an operating cash flow of
$174,519 funded an investment in assets and a corresponding decrease in debt
financing of $58,474 and $142,224, respectively.

     Cash Flow From Operations. The cash provided by operations was slightly
lower in 1998, being $192,957 versus $197,437 in 1997. This change was primarily
due to the utilization of net operating losses in previous years resulting in
significant cash outlays for income in 1998. The positive impact arose primarily
from increased income from operations as a result of a significant revenue
increase. The cash provided by operations in 1997 of $197,437 was greater than
the 1996 amount of $174,519. This was a result of a smaller amount of net income
in 1996.

     Cash Flow from Investing Activities. The Company made capital expenditures
of $29,616, $35,407, and $16,346 in 1998, 1997 and 1996 respectively, primarily
related to computer system upgrades, furniture and fixture purchases and vehicle
purchases at various Company locations. Whereas the company made investments in
its title plant of $52,622 in 1996 to support its ongoing business, no such
commitment was made during 1997 or 1998.

     As of December 31, 1998, the Company had no material purchase commitments
pending. In the past, the company has acquired other businesses for cash, notes
and common stock.

     Cash Flow from Financing Activities. Primary cash flows from financing
activities relate to changes in financing under lines-of-credit, notes payable
and advances by principal stockholders. The Company has placed an emphasis on
debt reduction during 1998 and 1997 given the improved cash flows from
operations.

     The Company had various other notes payable outstanding at December 31,
1998 which totalled $109,380 primarily relating to the purchase of Company
vehicles and other office equipment.


<PAGE>

                                      -20-

     The Company may borrow up to $100,000 under the terms of an unsecured
line-of-credit. Amounts borrowed bear interest at the bank's prime interest rate
plus 1%. Borrowings under this line-of-credit are personally guaranteed by the
Company's principal officers/stockholders. At December 31, 1998 and 1997, there
was $82,500 and $100,000, respectively, outstanding under the terms of this
line-of-credit.

     The company repaid $189,131, $43,020 and $149,456 under its long-term debt
agreements in 1998, 1997 and 1996, respectively. At December 31, 1996,
additional borrowing activity in the amount of $10,232 was incurred. At December
31, 1998, the Company owed $177,500 to two of its principal
stockholders/directors. For the years ended 1997 and 1996, this indebtedness
amounted to $97,000 and $234,500, respectively. As of December 31, 1998, this
outstanding debt bears interest at the rate of 10.5% per annum and the repayment
of these advances is subordinated to the amounts outstanding under all other
bank debt agreements.

     The Company expects the cash flow generated from operations and bank
lines-of-credit currently available to be sufficient to meet its anticipated
working capital and fixed capital expenditure needs for the next twelve months.

     The Company believes that the impact of inflation on its results from
operations has been and will continue to be minimal due to the recent stability
of the economy.

2. Results of Operations

     (a) Percentage Comparison

     The following table presents certain financial data derived from the
consolidated statements of operations of the Company for the years ended
December 31, 1998, 1997 and 1996, expressed as a percentage of total revenues.

                                      Percentage of Total Revenues
                                        Years Ended December 31
                                    -------------------------------
                                      1998        1997        1996
                                    -------     -------     -------

Title insurance premiums              38.31%      34.79%      35.15%
Abstract/appraisal fees               61.69       65.21       64.85
                                    -------     -------     -------
Total revenues                       100.00      100.00      100.00

Direct costs of revenue              (20.00)     (21.48)     (20.80)
                                    -------     -------     -------
Gross profit                          80.00       78.52       79.20

Operating expenses:
         Personnel costs             (43.61)     (48.31)     (50.09)
         Other operating expenses    (29.85)     (23.82)     (25.10)
                                    -------     -------     -------


<PAGE>

                                      -21-


Operating income                       6.54        6.39        4.01
Other expenses                         (.65)      (1.41)      (1.64)

Income tax expense                    (1.87)         --        (.06)

Extraordinary Item                     (.72)         --          --
                                    -------     -------     -------

Net income                             3.30%       4.98%       2.31%
                                    =======     =======     =======

     (b) Operating Revenues

     Combined revenues of the Company increased 37.59% from $3,789,864 for the
year ended December 31, 1997 to $5,214,743 for the year ended December 31, 1998.
The Company experienced an increase in total revenues of $83,086 or 2.24% from
1996 to 1997.

     The revenue increase over the past three years has been a result of
positive economic conditions and a robust real estate market in the northeast.
This trend began in 1996 as the housing market rebounded from previously poor
conditions within the geographic areas where the Company does business. Whereas
a slight upturn in the industry led to a minor increase in total revenues in
1997, a significant impact was recognized in 1998. The Company expects total
revenues to increase during 1999 as consumer confidence continues and as the
volume of orders increases from those customers lost to lower-priced
non-performing competitors.

     Specifically, revenue from title insurance premiums increased by 51.50%
during 1998 to $1,997,540 versus $1,318,443 in 1997. This increase in title
insurance revenue for 1998 combined with a larger increase in revenue from
abstract and other related services were the determining factors for the
increase in total revenues for the year. These revenues from abstract services
amounted to $3,217,203 in 1998 as compared to $2,471,421 in 1997. This
difference represents an increase of $745,782 or 30.18%. A similar increase
occurred when the same revenues increased by $67,613 or 2.81% from $2,403,808 in
1996. The Company experienced an increase in title insurance revenue during 1997
of 2.81% from $2,403,808 realized in 1996.

     (c) Direct Costs of Revenue

     Direct costs of revenue consist of commissions paid to underwriters of
title insurance and subcontractor costs paid to other title companies and/or
independent contractors. Direct costs of revenue have increased by 28.19% from
$814,035 in 1997 to $1,043,507 in 1998. From 1996 to 1997, these same costs
increased in a slightly less dramatic fashion to $814,035 or 5.60% from $770,834
in 1996. As a result of the positive aspect of producing a higher percentage of
orders using its own work force, the percentage increase in direct costs has
been slightly lower than the percentage increase in revenue.


<PAGE>

                                      -22-

     (d) Operating Expenses

     Direct and indirect personnel costs and other operating expenses are
incurred in connection with producing title searches and title examinations,
title insurance policies and maintaining the Company's title plant. Total
operating expenses decreased from $2,786,219 for the year ended December 31,
1996 to $2,733,595 for the same period in 1997. Due to significantly higher
sales volumes in 1998, operating expenses increased dramatically in 1998 to
$3,829,983. These increases were primarily attributable to payroll and other
variable costs associated with the changing volume of abstract and title orders,
as well as bonuses paid to the Company's management.

     In 1997, gross payroll and benefits amounted to $1,830,769 as compared to
$1,856,772 in 1996. Office supplies, especially postage, increased from $119,249
to $142,713 during the same period. However, the Company experienced sizeable
increases in operating expenses, office supplies, postage, gross payroll and
benefits in 1998. These increases are directly attributable to the significantly
higher sales volume in 1998. The significant variances in expenses for 1998 are
shown in the table below.

       Expense Item            1998        1997        1996
       ------------            ----        ----        ----

Gross Payroll & Benefits    2,292,543   1,830,769   1,856,772

Office supplies & postage     208,685     142,713     119,249

Interest Expense               32,691      45,456      60,661

     As with any service company, the major item of expense associated with the
Company's operations is gross payroll and employee benefits. As a percentage of
revenues, personnel costs and fringe benefits represented 43% in 1998, 48% in
1997, and 50% in 1996. As a result of a continuing stabilization of company
revenues following more traditional trends during 1997 and 1996, the Company was
able to control payroll expenditures in a much more effective manner. The
Company is continuing a strategic emphasis on productivity, geographic full
service, and total quality standards. The Company's work force has increased
slightly from 66 in 1996, 70 in 1997 to 85 in 1998.

     Based on enhanced sales order volume and reduced operating expenses, income
from operations for 1998 was $341,253 versus $242,234 in 1997. Net income was
$172,165 for the 1998 calendar year whereas a corresponding net income in the
amount of $188,138 was realized for 1997. The decrease is the result of income
tax expense of $97,395 in 1998. In 1996, the Company experienced income from
operations and net income to the extent of $149,725 and $89,064, respectively.


<PAGE>

                                      -23-

Item 8. Financial Statements and Supplementary Data

     The information required by this item is incorporated herein by reference
to pages 33 to 51 of this Form 10-K and are indexed under Item 14(a)(1). See
also the Financial Statement Schedules appearing herein, as indexed under Item
14(a)(2).

Item 9. Disagreements on Accounting and Financial Disclosure

     There have been no disagreements on accounting and financial disclosure
matters.


<PAGE>

                                      -24-

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     The following table names the directors and indicates their age, their
position with the Company or their principal occupation or employment, and the
approximate number of shares of Common Stock beneficially owned by each director
and all directors and officers as a group as of December 31, 1998.

<TABLE>
<CAPTION>
                                                                                     Shares of
                          Position with the                                          Common Stock                 Percent
                          Company or Princi-                  Director               Beneficially                   of
Name            Age        pal Occupation                       Since                   Owned                      Class
---------------------------------------------                 --------               --------------               -------

<S>             <C>       <C>                                 <C>                    <C>                          <C>
Frank B.         59       Chairman and                          1987                  1,366,939 (3)               41.50%
Iacovangelo               Treasurer (1)

Bernard J.       51       Vice President                        1987                  1,376,339 (4)               41.80%
Iacovangelo               Secretary (1)

William S.       49       President and                         1992                     15,758                     .48%
Gagliano                  Director (1)

Anthony M.       58       President, director                   1987                     87,913 (5)                2.66%
Iacovangelo               and principal share-
                          holder of Faber
                          Construction Co., Inc.
                          Rochester,  NY  (2)
<S>                                                                                  <C>                          <C>
All Directors and Officers of the                                                     2,846,949                   86.44%
Company as a group (four persons)                                                     (3)(4)(5)
</TABLE>


(1)  From 1987 until June 1989, Frank B. Iacovangelo was a director, and on an
     interim basis for a period of approximately 11 months was Chairman of the
     Board of Charlie Bubbles, Ltd. food service business which filed a petition
     under Chapter 11 of the U.S. Bankruptcy Code on November 20, 1989.

(2)  During the past five years, Anthony Iacovangelo has also been an owner of
     numerous real estate projects.

(3)  Includes 300,000 shares owned by children of Frank B. Iacovangelo,
     beneficial ownership of which is disclaimed. Also includes 40% of the
     369,129 shares owned by Wegman Building Associates, a partnership in which
     Frank Iacovangelo owns a 40% interest.


<PAGE>

                                      -25-

(4)  Includes 500,000 shares owned by a Trust for the benefit of Bernard J.
     Iacovangelo's children, the Trustees of which are Mr. Iacovangelo's wife,
     Patricia, and his brother, Frank. Mr. Iacovangelo disclaims beneficial
     ownership of these shares. Also includes 40% of the 369,129 shares owned by
     Wegman Building Associates, a partnership in which Bernard Iacovangelo has
     a 40% interest.

(5)  Includes 10% of the 369,129 shares owned by Wegman Building Associates, a
     partnership in which Anthony Iacovangelo has a 10% interest. Also includes
     options to purchase 1,000 shares of Common Stock.

Messrs. Frank, Bernard and Anthony Iacovangelo are brothers.

Item 11. Executive Compensation

     Executive Compensation

     The following table sets forth the cash compensation for each of the last
three financial years awarded to or earned by the Chief Executive Officer of the
Company. No other executive officer of the Company received a total salary and
bonus in excess of $100,000 and accordingly no reporting is required under the
regulations of the Securities and Exchange Commission.

          Name and                                    Annual Compensation (1)
     Principal Position                               -----------------------
     ------------------                                     Yearly Salary
                                                            -------------

     Frank B. Iacovangelo                                1998  --  $30,000
     President, Chief                                    1997  --   - 0 -
     Executive Officer                                   1996  --   - 0 -
     and Treasurer


----------
(1)  Mr. Iacovangelo receives no other compensation or benefits from the
     Company. He neither received nor exercised any options during 1998 and he
     held no options at December 31, 1998.

     Remuneration of Directors

     During 1998, three directors of the Company received $20,000 in
remuneration for serving as directors or as members of committees.

     The Company's 1992 Stock Option Plan (the "Option Plan") provides for
automatic grants of stock options to each member of the Board of Directors who
is not also an employee of the Company. Mr. Anthony Iacovangelo is a
non-employee director.


<PAGE>

                                      -26-

     Pursuant to the Option Plan, a Non-Employee Director Stock Option ("NEDSO")
for 500 shares is granted to each non-employee director automatically every year
on the date of the Annual Meeting of Stockholders. The first such grants were
made on the date of the 1992 Annual meeting of Stockholders (July 29, 1992), and
each non-employee director received a NEDSO for 500 shares at an exercise price
of $.75 per share, the fair market value of the Company's Common Stock on the
date of grant.

     Each NEDSO is immediately exercisable in full. Each NEDSO terminated upon
the expiration of ten years from the date upon which such NEDSO was granted. A
NEDSO is not transferable other than by will or by the laws of dissent and
distribution.

     In the event a non-employee director terminates services on the Board other
than by reason of death or disability, such person's NEDSO (to the extent
exercisable upon such termination) will expire three months from the date of
termination of service, provided that in no event may a NEDSO be exercised
beyond its original expiration date.

     In the event of death or disability of a non-employee director, any
outstanding NEDSOs will expire one year from the date of death or disability,
provided that in no event may a NEDSO be exercised beyond its original
expiration date.

Employment Agreements

     Employment agreements between the Company and each of Messrs. Frank B.
Iacovangelo, Bernard J. Iacovangelo and William S. Gagliano provide for
employment terms which commenced January 1, 1992, year to year indefinite
renewal terms subject to either the Company or the employee electing not to
renew, as amended, minimum base salaries of $60,000 per year in the case of
Frank Iacovangelo, $52,000 per year in the case of Bernard J. Iacovangelo and
$75,000 in the case of Mr. Gagliano, additional salary and bonus compensation to
be determined by the Board of Directors of the Company in its sole discretion,
and restrictions against competition with the Company.

Item 12. Security Ownership of Certain Beneficial owners and Management

     On December 31, 1998, the Company had outstanding and entitled to vote with
respect to all matters to be acted upon at the Annual Meeting of Stockholders,
3,293,733 shares of Common Stock ($.04 par value). Each share of Common Stock is
entitled to one vote. The Company currently has no other outstanding class of
equity securities.

     In September, 1996, the Company purchased 50,000 shares of its common stock
from a former director.


<PAGE>

                                      -27-

     The following table sets forth information as of December 31, 1998 showing
all persons who, to the Company's knowledge, were beneficial owners of 5% or
more of any class of its shares. All persons listed below have sole voting and
investment power with respect to their shares unless otherwise indicated.

                                        Amount and Nature of         Percent of
Name and Address                       Beneficial Ownership             Class
-------------------------------------------------------------------------------
Frank B. Iacovangelo                     1,366,939 (1) (3)             41.50%
39 State Street
Rochester, NY  14614

Bernard J. Iacovangelo                   1,376,339 (2) (3)             41.80%
39 State Street
Rochester,  NY  14614

Wegman Building                           369,129 (3)                  11.21%
  Associates
39 State Street
Rochester,  NY  14614

(1)  Includes 300,000 shares owned by children of Frank B. Iacovangelo,
     beneficial ownership of which is disclaimed. Also includes 40% of the
     369,129 shares owned by Wegman Building Associates, a partnership in which
     Mr. Iacovangelo has a 40% interest.

(2)  Includes 500,000 shares owned by a Trust for the benefit of Bernard J.
     Iacovangelo's children, the Trustees of which are Mr. Iacovangelo's wife,
     Patricia, and his brother, Frank. Mr. Iacovangelo disclaims beneficial
     ownership of these shares. Also includes 40% of the 369,129 shares owned by
     Wegman Building Associates, a partnership in which Bernard Iacovangelo has
     a 40% interest.

(3)  Wegman Building Associates is a general partnership in which Messrs. Frank,
     Bernard and Anthony Iacovangelo have a 40%, 40% and 10% interest,
     respectively. They have shared voting and investment power with respect to
     the shares owned by the partnership.

Item 13. Certain Relationships and Related Transactions

     The principal offices of the Company are located at 370 East Avenue,
Rochester, New York. These facilities are leased from Fitch Building Associates,
a partnership in which Messrs. Frank B., Bernard J., and Anthony M. Iacovangelo,
directors and/or officers of the Company, are partners. Four Corners Abstract
Corporation ("FCAC"), a subsidiary of the Company, currently leases
approximately 11,500 square feet of such space, pursuant to a lease expiring on
June 30, 2000 at a monthly rent of $6,000 through January, 1999 and $7,665
through June, 2000.


<PAGE>

                                      -28-

     The Company also leases storage space in Rochester, New York from another
company controlled by one of its principal stockholders/ directors at an annual
rent of $45,000 through December, 1999.

     Annual rental payments, pursuant to the lease, including common area
charges, were approximately $117,000, in 1998 and $72,000 in 1997 and 1996,
respectively. During 1997, total unpaid rent of $18,100 was forgiven by the
related party. At December 31, 1998 there were no outstanding rental payments.
The company owed approximately $15,000 for unpaid rent at December 31, 1997.

     Messrs. Frank and Bernard Iacovangelo, officers and directors of the
Company, are members of the law firm of Gallo & Iacovangelo, general counsel to
the Company.

     During 1997 and 1996, Frank Iacovangelo, President of the Company, made
advances to the Company. As of December 26, 1998, these advances bear interest
at the rate of 10.5% per annum and repayment is subordinated to the amounts
outstanding under the Company's line of credit agreements. Mr. Iacovangelo has
agreed not to require payment of these advances through January 1, 2000. At
December 31, 1998, 1997 and 1996, this indebtedness amounted to $47,500,
$97,000, and $234,500, respectively. In 1998, the Company paid Mr. Iacovangelo
$7,948 in interest.

     In 1999, 1997 and 1996, approximately 12%, 8%, and 4%, respectively, of the
Company's revenue was derived from the law firm of Gallo and Iacovangelo, a
related party. At December 31, 1998, 1997, and 1996, the Company was owed
$76,346, $79,125, and $44,878 respectively, from Gallo and Iacovangelo. Rates
charged were comparable to those charged similar customers.


<PAGE>

                                      -29-

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)  The following documents are filed as a part of this report and as
          response to Item 8:

     (1)  Financial Statements

          -    Auditors' Report dated March 16, 1999

          -    Consolidated Balance Sheets - December 31, 1998 and 1997

          -    Consolidated Statements of Income for the Years Ended
               December 31, 1998, 1997 and 1996

          -    Consolidated Statements of Changes in Stockholders' Investment
               for the Years Ended December 31, 1998, 1997 and 1996

          -    Consolidated Statements of Cash Flows for the Years Ended
               December 31, 1998, 1997 and 1996

          -    Notes to Consolidated Financial Statements (1) through (11)

     (2)  Financial Statement Schedules

          -    Auditors' Report Dated March 16, 1999

          -    Schedule VII - Valuation and Qualifying Accounts for the Years
               Ended December 31, 1998, 1997 and 1996

     (3)  Exhibits

          (a)  22     Subsidiaries of Registrant

               27     Financial Data Schedule

               99.1   Proxy Statement

               99.2   Certificate of Amendment to Restated Certificate of
                      Incorporation

               99.3   Form 15


<PAGE>

                                      -30-

          (b)  Reports on Form 8-K.

               The Company filed no reports on Form 8-K during the fourth
               quarter of the year ended December 31, 1997.

          (c)  Exhibits

                See (a) (3) above.

          (d)  Financial Statement Schedules

                See (a) (2) above.

<PAGE>

                                      -31-

     Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:                                      FOUR CORNERS FINANCIAL CORPORATION

By: /s/ Frank B. Iacovangelo
   ---------------------------------------
       Frank B. Iacovangelo, Chairman

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capabilities on the dates indicated.

/s/ Frank B. Iacovangelo                                           June 11, 1999
---------------------------------------
Frank B. Iacovangelo
Chairman, Treasurer and Director
(Chief Executive Officer and
Chief Financial Officer

/s/ William S. Gagliano                                            June 11, 1999
---------------------------------------
William S. Gagliano
President, Chief Accounting Officer
and Director

/s/ Bernard J. Iacovangelo                                         June 11, 1999
---------------------------------------
Bernard J. Iacovangelo
Vice President, Secretary and
Director

/s/ Anthony M. Iacovangelo                                         June 11, 1999
---------------------------------------
Anthony M. Iacovangelo
Director

<PAGE>
                      FOUR CORNERS FINANCIAL CORPORATION

                                AND SUBSIDIARY

                       CONSOLIDATED FINANCIAL STATEMENTS

                 AS OF DECEMBER 26, 1998 AND DECEMBER 27, 1997

                                 TOGETHER WITH

                         INDEPENDENT AUDITORS' REPORT


<PAGE>

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                        Page
<S>                                                                                                     <C>

Independent Auditors' Reports

Consolidated Balance Sheets as of December 26, 1998 and December 27, 1997                                 1

Consolidated Statements of Income for the years ended
  December 26, 1998, December 27, 1997 and December 28, 1996                                              2

Consolidated Statements of Changes in Stockholders'  Equity for the
  years ended December 26, 1998, December 27, 1997 and December 28, 1996                                  3

Consolidated Statements of Cash Flows for the years ended
  December 26, 1998, December 27, 1997 and December 28, 1996                                              4

Notes to Consolidated Financial Statements                                                             5 to 13

</TABLE>


<PAGE>

                         INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Four Corners Financial Corporation
 and Subsidiary

         We have audited the accompanying consolidated balance sheet of Four
Corners Financial Corporation and Subsidiary as of December 26, 1998, and the
related consolidated statements of income, changes in stockholders' equity,
and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

         We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a reasonable basis
for our opinion.

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Four Corners Financial Corporation and Subsidiary as of December
26, 1998, and the results of their operations, and their cash flows for the
year then ended, in conformity with generally accepted accounting principles.


                                            FREED MAXICK SACHS & MURPHY, P.C.

March 16, 1999
Buffalo, New York

<PAGE>

                         INDEPENDENT AUDITORS' REPORT


To the Stockholders of
Four Corners Financial Corporation and Subsidiary:


        We have audited the accompanying consolidated balance sheets of Four
Corners Financial Corporation and Subsidiary as of December 27, 1997, and the
related consolidated statements of income, changes in stockholders' equity,
and cash flows for each of the two years in the period then ended. 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 audit 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 financial statements referred to above present
fairly, in all material respects, the financial position of Four Corners
Financial Corporation and Subsidiary as of December 27, 1997, and the results
of their operations and their cash flows for each of the two years in the
period then ended in conformity with generally accepted accounting principles.


                                            BONADIO & CO., LLP

November 30, 1998
Rochester, New York

<PAGE>

               FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARY
                          CONSOLIDATED BALANCE SHEETS
                    DECEMBER 26, 1998 AND DECEMBER 27, 1997





                                     ASSETS

                                                          1998           1997
                                                          ----           ----

CURRENT ASSETS:
    Cash                                           $     134,133   $      92,623
    Cash restricted- escrow deposits                     150,971         240,465
    Accounts receivable, net of allowance for
      doubtful  accounts of $174,000  and $90,000
      in 1998 and 1997, respectively                     535,747         573,623
    Prepaid expenses                                       5,890           7,819
    Deferred tax asset                                    65,000               -
    Current portion of note receivable                         -           3,750
                                                   -------------   -------------




      Total current assets                               891,741         918,280


PROPERTY AND EQUIPMENT, net                              185,776         110,240

TITLE PLANT                                              419,905         419,905


 OTHER ASSETS:
    Security deposits                                      6,077           6,627



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


                                                   $   1,503,499   $   1,455,052
                                                   =============   =============



                     LIABILITIES AND STOCKHOLDERS' EQUITY

                                                        1998           1997
                                                        ----           ----

CURRENT LIABILITIES:
    Demand note payable                          $      82,500   $     100,000
    Current portion of notes payable                    37,550         173,462
    Current  portion of  subordinated  debt due
     to officers/stockholders                          148,000          18,000

    Accounts payable and other accrued expenses        320,206         373,843
    Accounts payable - related parties                       -          19,907
    Escrow deposits                                    150,971         240,465

    Accrued income taxes                                28,927           3,296

    Accrued payroll and related taxes                  143,289         107,779
                                                 -------------   -------------

      Total current liabilities                        911,443       1,036,752



LONG-TERM LIABILITIES, net of current portion:
    Notes payable                                       71,830          20,739
    Subordinated debt due to officers/
     stockholders                                       29,500          79,000
                                                 -------------   -------------


      Total long-term liabilities                      101,330          99,739
                                                 -------------   -------------

      Total liabilities                              1,012,773       1,136,491
                                                 -------------   -------------


STOCKHOLDERS' EQUITY:
    Common stock, $4.00 par value, 150,000
      shares authorized, 33,487 issued and
      32,937 outstanding in 1998 and 1997              133,752         133,752
    Additional paid-in capital                         849,502         849,502
    Accumulated deficit                               (461,903)       (634,068)
                                                 -------------   -------------

                                                       521,351         349,186

    Less:  Treasury stock; at cost 550 shares          (30,625)        (30,625)
                                                 -------------   -------------


      Total stockholders' equity                       490,726         318,561
                                                 -------------   -------------


                                                 $   1,503,499   $   1,455,052
                                                 =============   =============





The accompanying notes are an integral part of these consolidated statements.


                                     - 1 -

<PAGE>


               FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARY

                       CONSOLIDATED STATEMENTS OF INCOME

 FOR THE YEARS ENDED DECEMBER 26, 1998, DECEMBER 27, 1997 AND DECEMBER 28, 1996


<TABLE>
<CAPTION>
                                                                    1998                       1997                      1996
                                                                    ----                       ----                      ----
<S>                                                            <C>                        <C>                       <C>
REVENUE:
   Abstract and appraisal services                             $   3,217,203              $   2,471,421             $   2,403,808
   Title insurance premiums                                        1,997,540                  1,318,443                 1,302,970
                                                               -------------              -------------             -------------

                                                                   5,214,743                  3,789,864                 3,706,778
                                                               -------------              -------------             -------------
DIRECT COSTS OF REVENUE:
   Abstract and appraisal services                                  (611,330)                  (503,421)                 (400,328)
   Title insurance premiums                                         (432,177)                  (310,614)                 (370,506)
                                                               -------------              -------------             --------------

                                                                  (1,043,507)                  (814,035)                 (770,834)
                                                               -------------              -------------             -------------

      Gross profit                                                 4,171,236                  2,975,829                 2,935,944

OPERATING EXPENSES                                                (3,829,983)                (2,733,595)               (2,786,219)
                                                               -------------              -------------             -------------

      Income from operations                                         341,253                    242,234                   149,725
                                                               -------------              -------------             -------------

OTHER EXPENSES:
   Interest                                                          (32,691)                   (45,560)                  (60,661)
   Loss on disposal of property                                       (1,462)                    (7,836)                        -
                                                               -------------              -------------             -------------

                                                                     (34,153)                   (53,396)                  (60,661)
                                                               -------------              -------------             -------------

      Income before  income taxes and  extraordinary                 307,100                    188,838                    89,064
item

PROVISION FOR INCOME TAXES                                           (97,395)                      (700)                   (3,346)
                                                               -------------              -------------             -------------

INCOME BEFORE EXTRAORDINARY ITEM                                     209,705                    188,138                    85,718

EXTRAORDINARY ITEM (NOTE 8)                                          (37,540)                    -                          -
                                                               -------------              -------------             -------------

NET INCOME                                                     $     172,165              $     188,138             $      85,718
                                                               =============              =============             =============

PER SHARE DATA - BASIC :
   NET INCOME  BEFORE EXTRAORDINARY ITEM                       $        6.37              $        5.71             $        2.57
                                                               =============              =============             =============

   EXTRAORDINARY ITEM                                          $      (1.14)              $       -                 $       -
                                                               =============              =============             =============

</TABLE>



The accompanying notes are an integral part of these consolidated statements.

                                     - 2 -


<PAGE>

               FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARY

          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

 FOR THE YEARS ENDED DECEMBER 26, 1998, DECEMBER 27, 1997 AND DECEMBER 28, 1996


<TABLE>
<CAPTION>

                                                               Common Stock
                                                               -----------
                                                                                         Additional
                                                           Shares                         Paid-in       Accumulated      Treasury
                                                        Outstanding        Amount         Capital         Deficit         Stock
                                                        -----------        ------        ---------      -----------      --------
<S>                                                     <C>            <C>             <C>             <C>            <C>
BALANCE - December 25, 1995                                3,343,733   $     133,752   $     835,402   $    (907,924) $      (5,625)

   Retroactive effect of reverse stock split              (3,310,296)              -               -               -              -

   Net income                                                      -               -               -          85,718              -

   Purchase of treasury stock                                   (500)              -               -               -        (25,000)
                                                       -------------   -------------   -------------   -------------  -------------


BALANCE - December 28, 1996                                   32,937         133,752         835,402        (822,206)       (30,625)

   Net income                                                      -               -               -         188,138              -

   Forgiveness of rent due to related party, net of
     income taxes of $4,000                                        -               -          14,100               -              -
                                                       -------------   -------------   -------------   -------------  -------------


BALANCE - December 27, 1997                                   32,937         133,752         849,502        (634,068)       (30,625)

   Net income                                                      -               -               -         172,165              -
                                                       -------------   -------------   -------------   -------------  -------------


BALANCE - December 26, 1998                                   32,937   $     133,752   $     849,502   $    (461,903) $     (30,625)
                                                       =============   =============   =============   ============== ==============

<CAPTION>



                                                           Total
                                                       Stockholders'
                                                           Equity
                                                       -------------
<S>                                                    <C>
BALANCE - December 25, 1995                            $      55,605

   Retroactive effect of reverse stock split                       -

   Net income                                                 85,718

   Purchase of treasury stock                                (25,000)
                                                       -------------


BALANCE - December 28, 1996                                  116,323

   Net income                                                188,138

   Forgiveness of rent due to related party, net of
     income taxes of $4,000                                   14,100
                                                       -------------


BALANCE - December 27, 1997                                  318,561

   Net income                                                172,165
                                                       -------------


BALANCE - December 26, 1998                            $     490,726
                                                       =============

</TABLE>



The accompanying notes are an integral part of these consolidated statements.

                                     - 3 -

<PAGE>

               FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED DECEMBER 26, 1998, DECEMBER 27, 1997 AND DECEMBER 28, 1996


<TABLE>
<CAPTION>
                                                                                         1998             1997             1996
                                                                                         ----             ----             ----

<S>                                                                               <C>               <C>              <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net income                                                                      $     172,165     $     188,138    $      85,718
  Adjustments to reconcile net income to cash flow from operating activities:
     Provision for bad debts                                                             84,000             6,000                -
     Loss on disposal of property and equipment                                           1,462             7,836                -
     Depreciation and amortization                                                       56,928            59,854           79,995
     Deferred tax benefit                                                               (65,000)                -                -
     Other                                                                                    -            (4,000)               -
     Changes in:
       Accounts receivable                                                              (46,124)          (68,861)         (45,581)
       Prepaid expenses                                                                   1,929            (1,905)           7,402
       Accounts payable and other accrued expenses                                      (73,544)          (35,247)          33,918
       Accrued income taxes                                                              25,631             1,796                -
       Accrued payroll and related taxes                                                 35,510            43,826           13,067
                                                                                  -------------     -------------    -------------

          Net cash flow from operating activities                                       192,957           197,437          174,519
                                                                                  -------------     -------------    -------------




CASH FLOW FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                                   (29,616)          (35,407)         (16,346)
  Payments received on note receivable                                                    3,750             3,750            5,000
  Change in security deposits                                                               550             2,133            6,496
  Change in cash value of officer life insurance                                              -            18,618           (1,002)
  Investment in title plant                                                                   -                 -          (52,622)
                                                                                  -------------     -------------    -------------

          Net cash flow from investing activities                                       (25,316)          (10,906)         (58,474)
                                                                                  -------------     -------------    -------------


CASH FLOW FROM FINANCING ACTIVITIES:
  Change in demand note payable                                                         (17,500)           50,000           15,000
  Borrowings on notes payable                                                                 -                 -           10,232
  Repayment of notes payable                                                           (189,131)          (43,020)        (149,456)
  Borrowings on subordinated debt due to officers/stockholders                          130,000                 -            7,000
     Repayment of subordinated debt due to officers/stockholders                        (49,500)         (137,500)               -
  Purchase of treasury stock                                                                  -                 -          (25,000)
                                                                                  -------------     -------------    -------------

          Net cash flow from financing activities                                      (126,131)         (130,520)        (142,224)
                                                                                  -------------     -------------    -------------

NET CHANGE IN CASH                                                                       41,510            56,011          (26,179)

CASH - beginning of year                                                                 92,623            36,612           62,791
                                                                                  -------------     -------------    -------------

CASH - end of year                                                                $     134,133     $      92,623    $      36,612
                                                                                  =============     =============    =============

</TABLE>


The accompanying notes are an integral part of these consolidated statements.

                                     - 4 -


<PAGE>


               FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          DECEMBER 26, 1998, DECEMBER 27, 1997, AND DECEMBER 28, 1996



(1)     The Company

        Four Corners Financial Corporation (FCFC) and its subsidiary, Four
        Corners Abstract Corporation (FCAC) provide services and products
        including real estate title searching, preparation of abstracts of
        title and issuance of title insurance as an agent for certain national
        underwriting companies primarily in Western and Central New York
        State. All of these services and products are required in connection
        with the mortgaging, sale or purchase of real property.

        Unless otherwise indicated, the term "Company" refers to Four Corners
        Financial Corporation and its subsidiary. The Company operates in one
        business segment.


(2)     Summary of Significant Accounting Policies

        Principles of Consolidation -

        The consolidated financial statements include the accounts of FCFC and
        FCAC. All significant intercompany transactions and balances have been
        eliminated.

        Fiscal Year -

        The Company uses a 52-53 week fiscal year ending on the last Saturday
        of December. There were 52 weeks in fiscal 1998, 1997 and 1996.

        Cash -

        The Company maintains its cash in accounts at financial institutions
        which, at times, may exceed federally insured limits. The Company has
        not experienced any losses in such accounts and believes it is not
        exposed to any significant credit risk with respect to these accounts.

        Escrow Deposits -

        As a service to its customers, the Company administers escrow deposits
        representing undisbursed amounts received for settlements of mortgage
        loans or property sales and indemnities against specific title risks.
        These funds are restricted for this purpose and recorded as both a
        current asset and a current liability in the accompanying consolidated
        balance sheet.


                                      5
<PAGE>

(2)     Summary of Significant Accounting Policies (Continued)

        Property and Equipment -

        Property and equipment is stated at cost and is depreciated using
        accelerated and straight-line methods over the following useful lives:

                 Furniture and equipment                         3 - 10 years
                 Vehicles                                             5 years
                 Leasehold improvements                         Term of lease

        At the time of retirement or other disposition of property, the cost
        and accumulated depreciation are removed from the accounts and any
        gain or loss is reflected in the statement of income. Repairs and
        maintenance costs are charged to expense when incurred.

        Long-lived assets to be held and used by the Company are reviewed for
        impairment whenever events or changes in circumstances indicate the
        carrying amount of the asset may not be recoverable. In performing the
        review for recoverability, the Company estimates the future cash flows
        expected to result from the use of the asset and its eventual
        disposition. An impairment loss is recognized if the sum of the
        undiscounted future cash flows is less than the carrying amount of the
        asset. As of December 26, 1998, the Company believes that no
        impairment exists.

        Title Plant -

        Title plant consists of copies of public records, maps and other
        relevant historical documents which facilitate the preparation of
        title abstract reports without the necessity of manually searching
        official public records.

        The Company has incurred identifiable costs related to the activities
        necessary to construct a title plant which are reflected as assets. A
        title plant is regarded as a tangible asset having an indefinite
        economic life; accordingly, title plant costs are not depreciated. The
        Company periodically evaluates the carrying value of the title plant
        to determine if there has been an impairment in the value due to
        effects of obsolescence, demand, competitive actions and abandonment.
        At December 26, 1998, no impairment in value has been recognized.

        Revenue Recognition -

        Title insurance is provided to purchasers or financiers of real
        property. The related revenue is recognized when policies become
        effective, generally at the property or mortgage loan closing. Under
        terms of the Company's agreements with its title insurance
        underwriters, a commission of 15 - 20% is paid to its underwriter on
        all title insurance policies written. Pricing is based on a rate
        schedule established by the Insurance Department of the State of New
        York which provides for varying rates for services rendered.
        Commission expense is reflected as a direct cost of title insurance
        revenue in the statements of income.

        The Company also performs title abstract research on real properties.
        Abstract revenue is recognized as earned when the services are
        performed. Direct costs of abstract revenue include the cost of work
        performed by subcontractors in geographical areas where the Company
        does not maintain an office, among other direct costs.


                                      6
<PAGE>

(2)     Summary of Significant Accounting Policies (Continued)

        Concentration of Credit Risk -

        The Company received approximately 11% of its revenue from one
        customer during 1998. Accounts receivable from this customer amounted
        to approximately $115,000 at December 26, 1998. The loss of this
        customer may have an adverse effect on the future results of
        operations.

        Advertising Costs -

        The Company expenses advertising costs in the year incurred.
        Advertising expense was $26,466, $21,370 and $17,248 for the fiscal
        years ended in 1998, 1997 and 1996, respectively.

        Net Income Per Share -

        The Company has adopted Statement of Financial Accounting Standards
        (SFAS) No. 128, "Earnings Per Share" (EPS), which is effective for
        both interim and annual periods ending after December 15, 1997. SFAS
        No. 128 requires dual presentation of basic EPS and diluted EPS. Basic
        EPS is computed as net income divided by the weighted-average number
        of common shares outstanding for the period. The weighted average
        number of common shares outstanding was 32,937 for 1998 and 1997 and
        33,312 for 1996. The Company had no outstanding options, warrants or
        other potential common stock equivalents in any of the three years
        ended December 26, 1998. Reported EPS in prior periods have been
        restated to conform to the provisions of SFAS 128.

        Statement of Cash Flows -

        Cash paid for interest in 1998, 1997 and 1996 was $32,691, $45,560 and
        $58,394 respectively. Cash paid for income taxes in 1998, 1997 and
        1996 were $136,764, $1,404 and $3,346, respectively. During 1998, the
        Company entered into direct financing transactions for the acquisition
        of vehicles and equipment in the amount of $104,308.

        Estimates -

        In preparing financial statements in conformity with generally
        accepted accounting principles, management is required 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 revenue and expenses during
        the reporting period. Actual results could differ from these
        estimates.

        Fair Value of Financial Instruments -

        The Company's financial instruments consist of cash, accounts and
        notes receivable, accounts payable and debt. The carrying amounts
        approximate their fair value due to their short term maturity, or in
        the case of long term debt, such amounts bear rates of interest which
        approximate the Company's current borrowing rate for instruments with
        similar terms.


                                      7
<PAGE>

(3)     Property and Equipment

        Property and equipment consisted of the following at December 26, 1998
        and December 27, 1997:

<TABLE>
<CAPTION>
                                                                                      1998              1997
                                                                                      ----              ----
<S>                                                                               <C>              <C>
             Furniture and equipment                                              $     971,407    $     900,979
             Vehicles                                                                   129,795           87,685
             Leasehold improvements                                                      49,564           49,564
                                                                                  -------------    -------------

                                                                                      1,150,766        1,038,228

             Less:  Accumulated depreciation and amortization                          (964,990)        (927,988)
                                                                                  -------------    -------------

                                                                                  $     185,776    $     110,240
                                                                                  =============    =============

</TABLE>


        Depreciation and amortization expense for 1998, 1997 and 1996 was
$56,928, $59,854 and $79,995, respectively.


(4)     401(k) Plan

        The Company sponsors a 401(k) plan for its employees. Under the plan,
        each eligible participant may contribute a percentage, up to 15% of
        compensation, to the plan. Participants' accounts are credited for
        their contributions upon disbursement of payroll. Discretionary
        employer matching contributions are provided for in the plan.

        The 401(k) plan discretionary matching expense was $8,832, $7,665 and
        $7,348 for the fiscal years ended in 1998, 1997 and 1996,
        respectively.


(5)     Income Taxes

        Income taxes are provided for the tax effects of transactions reported
        in the financial statements and consist of taxes currently due plus
        deferred taxes related primarily to differences between the basis of
        property and certain expenses for financial and income tax reporting
        purposes. Deferred tax assets and liabilities represent the future tax
        return consequences of those differences, which will either be taxable
        or deductible when the assets and liabilities are recovered or
        settled.

        The provision for income taxes consisted of the following for the
        fiscal years ended in 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                                                       1998             1997              1996
                                                                       ----             ----              ----
<S>                                                             <C>               <C>              <C>

             Federal:
                 Current                                        $     120,951     $           -    $           -
                 Deferred                                             (48,000)                -                -
             State:
                 Current                                               41,444               700            3,346
                 Deferred                                             (17,000)                -                -
                                                                --------------    -------------    -------------

                                                                $      97,395     $         700    $       3,346
                                                                =============     =============    =============
</TABLE>


                                      8
<PAGE>

(5)     Income Taxes (Continued)

        Income tax expense for 1998, 1997 and 1996 differs from the expected
        tax expense computed by applying the U.S. Federal corporate income tax
        rate of 34% to income before income taxes as follows:

<TABLE>
<CAPTION>
                                                                       1998             1997              1996
                                                                       ----             ----              ----
<S>                                                             <C>               <C>              <C>
        Expected tax expense                                    $      91,800     $      68,400    $      30,300
             Effect of graduated Federal rates                         (3,100)           (6,100)          (3,400)
             State income taxes, net of Federal
               income tax benefit                                      23,600            11,200            5,300
             Change of valuation allowance
               related to loss carryforwards                          (27,000)          (74,300)         (27,800)
             Other, net                                                12,095             1,500           (1,054)
                                                                -------------     -------------    --------------

                                                                $      97,395     $         700    $       3,346
                                                                =============     =============    =============

        The tax effects of temporary differences that give rise to deferred
        taxes are as follows at December 26, 1998, December 27, 1997 and
        December 28, 1996:

<CAPTION>
                                                                     1998             1997              1996
                                                                     ----             ----              ----
<S>                                                             <C>               <C>              <C>
             Deferred tax asset:
                 Accounts receivable allowance                  $      52,200     $      27,000    $      25,200
                 Accrued liabilities                                   12,800                 -                -
                 Net operating loss carryforward                            -                 -           76,100
                 Valuation allowance                                        -           (27,000)        (101,300)
                                                                -------------     --------------   --------------

                                                                $      65,000     $           -    $           -
                                                                =============     =============    =============

</TABLE>


        A valuation allowance was provided for the deferred tax asset in 1997
and 1996 due to the uncertainty of realization.

(6)     Demand Note Payable

        The Company may borrow up to $100,000 under the terms of an unsecured
        line-of-credit. Amounts borrowed bear interest at the bank's prime
        interest rate plus 1%. The bank's prime rate was 7.75% at December 26,
        1998. Borrowings under this line-of-credit are personally guaranteed
        by the Company's principal officers/stockholders. At December 26, 1998
        and December 27, 1997, there was $82,500 and $100,000, respectively,
        outstanding under the terms of this line-of-credit.


                                      9
<PAGE>

(7)     Notes Payable

        Notes payable consisted of the following at December 26, 1998 and
        December 27, 1997:

<TABLE>
<CAPTION>
                                                                                           1998              1997
                                                                                           ----              ----
<S>                                                                                  <C>              <C>
      Various notes payable with aggregate monthly installments of $3,737
      ($1,116 - 1997), including interest at rates ranging from .9% to 12.2%.
      These notes mature through October, 2002 and are collateralized by the
      related equipment.
                                                                                     $     109,380    $      30,034

      Note payable to a bank with monthly principal payments of $6,230 through
      October, 1999, plus interest at the bank's prime rate plus 1.25%. This
      note was guaranteed by the officers/stockholders of the Company and was
      collateralized by substantially all of the Company's assets. The note
      was paid in full in 1998.
                                                                                                 -          134,167

      Term note payable to a bank with monthly principal payments of $1,542
      through October, 1999, plus interest at the bank's prime rate plus 1%.
      This note was also guaranteed by the officers/stockholders of the
      Company and was collateralized by substantially all of the Company's
      assets. The note was paid in full in 1998.

                                                                                                 -           30,000
                                                                                     -------------    -------------
                                                                                           109,380          194,201

                Less:  Current portion                                                     (37,550)        (173,462)
                                                                                     -------------    -------------

                                                                                     $      71,830    $      20,739
                                                                                     =============    =============

</TABLE>


        The notes payable to a bank required the Company to meet certain
        financial covenants. At December 27, 1997 and December 28, 1996, the
        Company was not in compliance with all of the financial covenants. The
        Company obtained a waiver from the bank for these covenants through
        December, 1997 and 1996. At December 27, 1997, $70,903 of long-term
        notes payable had been classified as current due to the covenant
        violation.

        Future maturities of long-term debt are as follows at December 26,
1998:

                 1999.............................................$      32,586
                 2000.............................................       29,428
                 2001.............................................       20,438
                 2002.............................................        8,461
                                                                  -------------

                                                                  $      90,913
                                                                  =============

                                      10
<PAGE>

(8)     Stockholders' Investment

        Reverse Stock Split -

        On March 26, 1999 the Company's Board of Directors authorized a
        1-for-100 reverse stock split. In conjunction with the reverse stock
        split, the number of authorized shares will be reduced from 15,000,000
        to 150,000 and the par value increased from $.04 to $4.00 per share.
        This transaction was given retroactive effect in the accompanying
        financial statements and related footnotes. The Board intends to have
        the Company purchase the stock of all fractional shareholders after
        the reverse split. The purchase price per share after the reverse
        stock split will be $12. The total amount to be paid to fractional
        shareholders to purchase their fractional shares is approximately
        $2,500. The costs incurred relating to this transaction during the
        year ended December 26, 1998 amounted to $37,540 and have been
        reported as an extraordinary item in the accompanying statement of
        income. The Company also intends to pay shareholders who hold
        fractional shares as a result of a 1992 1-for-4 reverse stock split.
        The total amount to be paid to these shareholders is approximately
        $1,700.

        Stock Options -

        In July, 1992, the Company's Board of Directors adopted and the
        stockholders approved the 1992 Stock Option Plan (1992 Plan) which
        replaced the 1988 Stock Incentive Plan (1988 Plan).

        Under the 1992 Plan, the Company may issue incentive stock options,
        non-statutory options, non-employee director options and reload
        options. The Company has reserved 6,475 common shares for issuance
        under the 1992 plan. The exercise price of incentive, non-statutory
        and reload options will not be less than fair market value at date of
        grant. Incentive and non-statutory options will generally expire ten
        years from date of grant. Reload options will have a term equal to the
        remaining option term of the underlying option.

        The 1992 Plan also provides for annual grants of stock options to
        purchase 5 shares of the Company's common stock to non-employee
        directors of the Company with an exercise price not less than fair
        market value at date of grant. These options will expire ten years
        from date of grant.

        The Company did not have any outstanding options under the 1992 plan
        as of December 26, 1998, December 27, 1997 and December 28, 1996.
        There were no options issued during the three years ended December 26,
        1998.


(9)     Related Party Transactions

        Subordinated Debt Due to Officers/Principal Stockholders -

        During 1997 and 1996, one of the Company's officers/stockholders made
        advances to the Company. The outstanding amount of these advances was
        $177,500 and $97,000 at December 26, 1998 and December 27, 1997,
        respectively. Amounts borrowed bear interest at the prime rate plus
        3%. The prime rate was 7.75% at December 26, 1998. Interest expense
        was $7,948, $18,149 and $21,292 during 1998, 1997 and 1996,
        respectively. Repayment of these advances is subordinated to the
        amounts outstanding under all other bank debt agreements. Principal
        repayment in future years is scheduled for $18,000 per year.


                                      11
<PAGE>

(9)     Related Party Transactions (Continued)

        On December 26, 1998, two of the Company's officers/stockholders made
        additional advances to the Company for $65,000 each. Amounts borrowed
        bear interest at 10.5% due monthly. These advances are due and payable
        on December 25, 1999.

     Future maturities of total debt due to officers/principal stockholders
are as follows at December 26, 1998:

                 1999...............................................$    148,000
                 2000...............................................      18,000
                 2001...............................................      11,500
                                                                    ------------
                                                                    $    177,500
                                                                    ============

        Office Lease Commitment -

        The Company leases its Rochester facility through June 2000 from a
        company controlled by FCAC's principal stockholder at a monthly rent
        of $6,000 through January, 1999, and $7,665 through June, 2000. The
        Company also leases storage space in Rochester from another company
        controlled by FCAC's principal stockholder at an annual rent of
        $45,000 through December, 1999. Rent and common area charges were
        approximately $117,000 in 1998 and $72,000 in 1997 and 1996. At
        December 26, 1998, there were no outstanding rental payments. The
        Company owed approximately $15,000 for unpaid rent at December 27,
        1997, which is included in accounts payable to related parties in the
        accompanying balance sheet.

        Minimum future lease payments under lease agreements with related
        parties are as follows at December 26, 1998:

                 1999...............................................$    135,315
                 2000...............................................      45,990
                                                                    ------------

                                                                    $    181,305
                                                                    ============

        During 1997, total unpaid rent of $18,100 was forgiven by another
        related party. This amount has been reflected as a capital
        contribution, net of income taxes of $4,000 in the financial
        statements for the year ended December 27, 1997.

        Revenue and Accounts Receivable -

        In each of 1998, 1997 and 1996, approximately 12%, 8%, and 4%,
        respectively, of abstract revenue was derived from a law firm in which
        an officer/stockholder is a partner in. At December 26, 1998, December
        27, 1997 and December 28, 1996, the Company was owed $76,346, $79,125
        and $44,878, respectively, related to this revenue.


                                      12
<PAGE>

(10)    Lease Commitments

        The Company leases other office facilities under operating lease
        agreements with unrelated parties expiring through June, 2003.

        Minimum future lease payments under non-cancelable lease agreements
        with unrelated parties are as follows at December 26, 1998:

                 1999...............................................$     76,502
                 2000...............................................      33,732
                 2001...............................................      30,482
                 2002...............................................      25,932
                 2003...............................................      12,966
                                                                    ------------
                                                                    $    179,614
                                                                    ============

        Rent expense related to these operating leases was approximately
        $113,000, $126,000 and $121,000 for the fiscal years ended in 1998,
        1997 and 1996, respectively.

(12)    Litigation

        The Company is involved in various legal actions in the normal course
        of its business. In the opinion of management, the eventual outcome of
        these actions will not have a material adverse effect on the financial
        statements of the Company.


                                      13
<PAGE>

                        INDEPENDENT AUDITORS' REPORT ON

                         FINANCIAL STATEMENT SCHEDULES


To the Stockholders of

      Four Corners Financial Corporation and Subsidiary:


Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated
supplemental schedule is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a part of the basic
consolidated financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.

                                            FREED MAXICK SACHS & MURPHY, P.C.

March 16, 1999
Buffalo, New York

<PAGE>

                        INDEPENDENT AUDITORS' REPORT ON

                         FINANCIAL STATEMENT SCHEDULES



To the Stockholders of

      Four Corners Financial Corporation and Subsidiary:


Our report on our audit of the basic financial statements of Four Corners
Financial Corporation and Subsidiary as of December 27, 1997 and December 28,
1996, and for each of the two years in the period ended December 31, 1997,
appears elsewhere in this Registration Statement. Those audits were made for
the purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The supplemental schedules are presented for the
purpose of complying with the Securities and Exchange Commission's rules and
regulations and are not a required part of the basic financial statements. The
supplemental schedules have been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial
statements taken as a whole.


                                            BONADIO & CO., LLP

November 30, 1998
Rochester, New York


<PAGE>


               FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARY

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

 FOR THE YEARS ENDED DECEMBER 26, 1998, DECEMBER 27, 1997 AND DECEMBER 28, 1996


<TABLE>
<CAPTION>
                                                                        Additions
                                                                        ---------
                                             Balance at                         Charges to                              Balance at
                                             Beginning         Charges to         Other                                   End of
                                             of Period          Expenses         Accounts           Deductions            Period
                                             ---------         ----------        --------           ----------          ----------
<S>                                          <C>               <C>              <C>                <C>                 <C>
FOR THE YEAR ENDED DECEMBER 26, 1998:

   Allowance for doubtful accounts           $   90,000        $   274,547       $        -        $   (190,547)       $   174,000
                                             ==========        ===========       ==========        ============        ===========

FOR THE YEAR ENDED DECEMBER 27, 1997:

   Allowance for doubtful accounts           $   84,000        $   112,329       $        -        $   (106,329)       $    90,000
                                             ==========        ===========       ==========        ============        ===========

FOR THE YEAR ENDED DECEMBER 28, 1996:

   Allowance for doubtful accounts           $   84,000        $   114,175       $       -         $   (114,175)       $    84,000
                                             ==========        ===========       =========         ============        ===========

</TABLE>