<PAGE>


================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A


(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, 1997.

[   ]  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 25, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $24,652.

As of March 25, 1998, the number of shares outstanding of the registrant's
common stock was 3,293,733.

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

None.

<PAGE>


                                       -3-


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                                                             PAGE
<S>                                                                                                                <C>
Item 1:   Business                                                                                                    4
Item 2:   Properties                                                                                                 15
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                                                                24
Item 9:   Changes in and Disagreements with Accountants on                                                           24
              Accounting and Financial Disclosure

Part III

Item 10:  Directors and Executive Officers of Registrant                                                             25
Item 11:  Executive Compensation                                                                                     26
Item 12:  Security Ownership of Certain Beneficial Owners                                                            27
              and Management
Item 13:  Certain Relationships and Related Transactions                                                             28

PART IV

Item 14:  Exhibits, Financial Statement Schedules, and                                                               30
              Reports on Form 8-K
</TABLE>

<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.

     Four Corners Financial Corporation and its subsidiaries, Four Corners
Abstract Corporation ("Abstract") and Proper Appraisal, 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, Abstract and Proper Appraisal 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

<PAGE>

                                       -6-


Services and Products    (cont)
---------------------

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 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).

<PAGE>
                                       -7-


     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 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 1997, escrow closing services generated approximately $75,000 as compared
to $31,000 and $90,000 in 1996 and 1995, 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.

<PAGE>
                                       -8-


     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 1997. The Company's ability to provide these
services on a statewide basis has enhanced its market penetration in the
foreclosure area. During 1997, the Company generated approximately $725,000 in
revenues from foreclosure related products, representing 19% of total revenues.

     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 1997 increased by 2.2% to $3,789,864 as
compared to $3,706,778 in 1996. Revenue from title insurance increased slightly
during 1997 to $1,318,443, representing 35% of total

<PAGE>
                                       -9-


revenues, compared to 35% and 42% in 1996 and 1995, respectively. Revenues from
abstract and escrow related services also increased slightly to $2,471,421 as
compared to $2,403,808 and $2,212,068 in 1996 and 1995 respectively.

     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

<PAGE>
                                      -10-


requirement under New York law that requires an agent such as the Company to
hold a license.

     Appraisals
     ----------

     In 1989, the Company added to its services the furnishing of residential
real estate appraisals. With the purchase of Proper Appraisal Specialists, Inc.
in 1991, the Company added the appraisal of commercial properties to its product
line.

      Since that time, appraisals were performed by certified and/or licensed
appraisers under the guidance of either a Senior Residential Appraiser (SRA) or
an individual with a General Appraisal License from New York State. In areas
where the Company did not have a direct branch operation, the Company procured
the services of licensed appraisers on a subcontractor basis. As a result of an
agreement dated September 27, 1995, the company sold the assets of its appraisal
division to Rynne, Murphy and Associates, Inc., a well-known, professional
residential/ commercial real estate appraisal company located in Rochester, N.
Y. for $125,000, allocated as follows:

     Fixed Assets                       $ 12,500
     Customer lists and goodwill         100,000
     Covenant not-to-compete              12,500
                                        --------
                                        $125,000
                                        ========

     The purchase price of the fixed assets is in the form of a $12,500
non-interest bearing note receivable in ten quarterly installments of $1,250
beginning May 1, 1996.

     The purchase price of the customer lists, goodwill, and covenant
not-to-compete is in the form of a $112,500 note receivable in quarterly
installments, plus interest at 9%, beginning May 1, 1996.

     Payment for these assets is contingent based upon 19% of the buyer's gross
margin on sales attributable to the Company's customers. These payments are to
be applied by the Company in the following order: the $1,250 guaranteed payment,
interest and principal. Any unpaid interest is forgiven on a quarterly basis.

     It is anticipated that 19% of the buyer's gross margin will not exceed the
$1,250 guaranteed payment and interest for future quarters. As a result, the
buyer would not be required to make any principal payments for the contingent
portion of the note. No portion of the contingent note receivable was recorded
as income through December 31, 1997.

     Under this strategic partnership arrangement with Rynne, Murphy and
Associates, Inc., the Company will continue to market and sell appraisals to its
customers. However, since the appraisal reports will be prepared by Rynne,
Murphy and Associates staff appraisers, the Company has and will continue to
realize a substantial savings in

<PAGE>
                                      -11-


Appraisals   (cont)
----------

payroll and other overhead expenses associated with running its appraisal
operation.

     Appraisal services provide an estimated value for a particular property.
Appraisals are required in a variety of situations including transfer of
ownership, financing, tax matters, relocation services, insurance purposes,
estimation of liquidation value and divorce. The Company's customers for
appraisals have included lending institutions, banks, attorneys, municipalities,
relocation companies, government agencies, corporations and private individuals.
The Company's errors and omissions insurance coverage also covers appraisal
services. Since the signing of this agreement, all of the Company's appraisals
were performed by Rynne, Murphy & Associates, Inc. for which the Company was
paid a commission for the placement of orders. However, since the Company's
marketing efforts have de-emphasized appraisal products in favor of more
profitable product lines, associated appraisal orders and revenues have
decreased significantly. As a result, the company is currently only receiving
the guaranteed payment of $1,250 per quarter payable under the agreement with
Rynne, Murphy and Associates.

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
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.

<PAGE>

                                      -12-


Significant Customers
---------------------

     During 1997, there were no 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. Real estate
activity continued to be sluggish during 1995, when recorded deeds and mortgages
fell by an average 11.50% from 1994 levels. Company revenues declined during
1995 by nearly 20% as a result of these factors. 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 inreased
comparably by slightly more than 1% to $3,789,864. 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, 1997 the Company's total indebtedness to its bank decreased
to $164,167 as compared to $276,250 and $401,213 at December 31, 1996 and
December 31, 1995 respectively.

<PAGE>
                                      -13-


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 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 70 persons at
December 31, 1997, as compared to 66 in 1996 and 1995 respectively. 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.

<PAGE>

                                      -14-


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 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.

<PAGE>

                                      -15-


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. 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 1997, 1996 and 1995, respectively.
During 1995, unpaid rent of $18,100 was forgiven by the related parties. The
Company owed approximately $15,000, $18,100 and $20,000 for unpaid rent at
December 31, 1997, 1996 and 1995, 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:

<PAGE>

                                      -16-


     Name                     Age    Position with the Company
     ----                     ---    -------------------------
     Frank B. Iacovangelo     58     President, Treasurer and Director

     Bernard J. Iacovangelo   50     Vice President, Secretary and
                                     Director

     William S. Gagliano      48     Executive Vice President and
                                     Director

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 since May, 1987. 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. since June, 1990. He was elected Director of the
Company in July, 1992. As Executive Vice 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 March 25, 1998, the Company had 1,205 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".


                      (In Thousands, Except Per Share Data)

<TABLE>
<CAPTION>
                                         1997      1996      1995      1994       1993
                                         ----      ----      ----      ----       ----
<S>                                    <C>       <C>       <C>       <C>        <C>
STATEMENT OF OPERATIONS DATA:
     Revenue                           $ 3,790   $ 3,707   $ 3,822   $ 4,780    $ 5,828
     Income (loss) before taxes            189        89        99      (581)        66
     Net income (loss)                     188        86        97      (469)        56
     Net income (loss) per share (1)   $   .05   $   .03   $   .03   $  (.14)   $   .02

BALANCE SHEET DATA:
     Total assets                      $ 1,455   $ 1,225   $ 1,240   $ 1,315    $ 1,804
     Long-term obligations                 100       357       202       564        507
     Stockholders' investment              319       116        56       (42)       427
</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 resulted from operations, bank loans and
advances made by principal stockholders.

         In 1997, the operations of the Company generated cash of $197,437. This
cash flow, along with cash reserves of $36,612, was sufficient to fund
investments in assets of $10,906 and a net debt reduction of $130,520. The cash
flow from operations of $174,519 funded investments in assets of $58,474 and a
net debt reduction of $142,224 in 1996. During the calendar year 1995, an
operating cash flow of $210,839 funded an investment in assets and a
corresponding decrease in debt financing of $38,881 and $138,099, respectively.

         Cash Flow From Operations. The cash provided by operations was greater
in 1997, being $197,437 versus $174,519 in 1996. This change was primarily due
to a greater net profit of $188,138 for 1997 as compared to that of $85,718 in
the previous year. The positive impact arose primarily from non-cash
depreciation and amortization expense, as well as an increase in other accrued
expenses of $43,826. The cash provided by operations in 1996 of $174,519 was
lower than the 1995 amount of $210,839. This was attributable to a smaller
amount of net income and a reduced bad debt provision in 1996.

         Cash Flow from Investing Activities. The Company made capital
expenditures of $35,407, $16,346, and $39,325 in 1997, 1996 and 1995
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 in 1996 of $52,622 to support
its ongoing business. No such commitment was made during 1997 or 1995 based on
management's operating philosophy.

         As of December 31, 1997, 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. On December 13, 1995, the amount
outstanding on the note payable to a bank of $133,333, and $185,000 of the
amount borrowed under its line-of-credit agreement were refinanced with the same
bank.

<PAGE>

                                      -20-


         As of December 31, 1997, the note payable and line-of-credit have been
classified in accordance with the new agreement. The terms of the bank note
require the Company to meet certain financial covenants at December 31, 1997.
These ratios are adjusted on a quarterly or semi-annual basis during 1997 and
thereafter until the indebtedness is fully paid. The covenants, ratios and terms
of the agreement can be found in note #5 of the accompanying financial
statements. The agreement also limits the Company's ability to make
acquisitions, pay dividends, and make capital expenditures. In addition, the
company is required to submit certain financial information on a periodic basis.

         At December 31, 1997, the Company was not in compliance with all of the
financial covenants. Subsequent to year end, the Company obtained a waiver from
the bank for these covenants as of December 31, 1997. At December 31, 1997,
$70,903 of long-term notes payable has been classified as current due to the
covenant violation.

         Future maturities of the debt described above are as follows:

                  1998..............................$173,462
                  1999..............................  13,252
                  2000..............................   7,196
                  2001..............................     291
                                                    --------
                                                    $194,201
                                                    ========

         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, 1997 and 1996, there
was $100,000 and $0, respectively, outstanding under the terms of this
line-of-credit.

         During 1997, the Company had a second line-of-credit for $50,000 with
another bank. The $37,000 outstanding principal balance was restructured during
November, 1997 into a term note payable with monthly principal payments of
$1,542 through October, 1999, plus interest at the bank's prime rate plus 1.25%
(Note 5, Notes Payable). There was $50,000 outstanding under the terms of the
line-of-credit agreement at December 31, 1996.

         The company repaid $43,020, $149,456, and $150,599 under its long-term
debt agreements in 1997, 1996 and 1995, respectively. At December 31, 1996,
additional borrowing activity in the amount of $10,232 was incurred. At December
31, 1997, the Company owed $97,000 to a principal stockholder/director. For the
years ended 1996 and 1995, this indebtedness amounted to $234,500 and $227,500,
respectively. This debt bears interest at the prime rate plus three percent (3%)
and the repayment of these advances is subordinated to the amounts outstanding
under all other bank debt agreements. Principal repayment is scheduled for
$18,000 per year.

<PAGE>

                                      -21-


         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, 1997, 1996 and 1995, expressed as a percentage of total revenues.

                                              Percentage of Total Revenues
                                                 Years Ended December 31  
                                              ----------------------------

                                           1997          1996          1995
                                           ----          ----          ----

Title insurance premiums                   34.79%         35.15%        42.13%
Abstract/appraisal fees                    65.21          64.85         57.87
                                          ------         ------        ------
Total revenues                            100.00         100.00        100.00

Direct costs of revenue                   (21.48)        (20.80)       (20.90)
                                          ------         ------        ------
Gross profit                               78.52          79.20         79.10

Operating expenses:
         Personnel costs                  (48.31)        (50.09)       (51.18)
         Other operating expenses         (23.82)        (25.10)       (22.18)
                                          ------         ------        ------

Operating income/(loss)                     6.39           4.01          5.54
Other expenses                             (1.41)         (1.64)        (2.94)

Income tax expense                           ---           (.06)         (.05)

Net income/(loss)                           4.98%          2.31%         2.55%
                                          ======         ======        ======

<PAGE>

                                      -22-


         (b)  Operating Revenues

         Combined revenues of the Company increased 2.24% from $3,706,778 for
the year ended December 31, 1996 to $3,789,864 for the year ended December 31,
1997. The Company experienced a decrease in total revenues of $115,437 or 3.02%
from 1995 to 1996.

         The revenue decrease in 1995 was due to strong competition within the
abstract and title insurance industry, a weaker demand for home equity (second
mortgage) loans, and the continuance of a sluggish real estate market in the
northeast. This trend continued in a slightly less dramatic fashion in 1996 as
the housing market began to rebound in the areas where the Company does
business. A slight upturn in the industry led to a minor increase in total
revenues in 1997. The Company expects total revenues to increase during 1998 as
consumer confidence continues to increase 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 1.19%
during 1997 to $1,318,443 versus $1,302,970 in 1996. This minimal increase in
title insurance revenue for 1997 combined with a larger increase in abstract and
appraisal services were the determining factors for the increase in total
revenues for the year. These revenues from abstract and appraisal services
amounted to $2,471,421 in 1997 as compared to $2,403,808 in 1996. This
difference represents an increase of $67,613 or 2.81%. A similar increase
occurred when the same revenues increased by $191,740 or 8.67% from $2,212,068
in 1995. The Company experienced a decrease in title insurance revenue during
1996 of 19.08% from $1,610,147 realized in 1995. As stated earlier, the decline
in this segment of the Company's revenues during the years ended 1995 and 1996
resulted from more intense competition within the industry in addition to a
lower volume of home equity (second mortgages) loans. In 1998, the Company is
anticipating a greater increase in the demand for real estate services than was
demonstrated in 1997.

         (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. As a result of an increase in the volume of orders in
the geographic areas where the company does not have a direct operation, as well
as, the positive aspect of producing a higher percentage of orders using its own
work force, direct costs of revenue have increased slightly by 5.60% from
$770,834 in 1996 to $814,035 in 1997. From 1995 to 1996, these same costs
decreased to a limited degree by $28,063 or 3.51% from $798,897 in 1995.

<PAGE>

                                      -23-


         (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 $2,811,810 for the year ended December 31,
1995 to $2,786,219 for the same period in 1996. Operating expenses further
declined in 1997 to $2,733,595. These decreases were primarily attributable to
declining payroll costs associated with a reduction in staffing requirements and
a changing geographical mix of business along with continued concentrated
cost-cutting elements.

         In 1996, gross payroll and benefits amounted to $1,856,772 as compared
to $1,956,156 in 1995. Office supplies, especially postage, increased from
$97,612 to $119,249 during the same period. However, the Company experienced
sizeable decreases in operating expenses in 1996 and 1997. These decreases are
directly attributable to a cost containment and downsizing program that was
previously implemented as a result of a lower than anticipated sales volume
initiated in 1994. The significant variances in expenses for 1997 are shown in
the table below.


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

         Depreciation & Amortization               59,854             79,995

         Office supplies & postage                142,713            119,249

         Interest Expense                          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 48% in 1997, 50% in
1996, and 51% in 1995. As a result of a continuing stabilization of company
revenues following more traditional trends during 1996 and 1995, 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 both 1995 and 1996 to 70 in 1997.

<PAGE>

                                      -24-


         Based on a stable sales order volume and reduced operating expenses,
income from operations for 1997 was $242,234 versus $149,725 in 1996. Net income
was $188,138 for the 1997 calendar year whereas a corresponding net income in
the amount of $85,718 was realized for 1996. In 1995, the Company experienced a
similar amount of income from operations and net income to the extent of
$211,508 and $97,384, respectively. In 1995, the Company fully implemented cost
cutting measures to ensure the profitability of the business. As a result,
income from normal operations and net income represented sizable improvements
from the previous years figures. Throughout 1996 and 1997, similar business
strategies and operating philosophies were used to contain payroll costs, direct
costs and other overhead costs, thereby creating similar revenue, cost and
profit levels.


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/A 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>

                                      -25-


                                    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, 1997.

<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.        58      President and                 1987           1,366,339 (3)         40.92%
Iacovangelo             Treasurer (1)

Bernard J.      50      Vice President                1987           1,376,339 (4)          41.22%
Iacovangelo             Secretary (1)

William S.      48      Executive Vice                1992             140,758 (5)           4.22%
Gagliano                President and
                        Director (1)

Anthony M.      57      President, director           1987              87,913 (6)           2.64%
Iacovangelo             and principal share-
                        holder of Faber
                        Construction Co., Inc.
                        Rochester,  NY  (2)


All Directors and Officers of the                                    2,971,349             88.99%
Company as a group (four persons)                                    (3)(4)(5)(6)
</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 368,879 shares owned by Wegman Building Associates, a
            partnership in which Frank Iacovangelo owns a 40% interest.

<PAGE>

                                      -26-


(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 368,879 shares owned by Wegman Building
            Associates, a partnership in which Bernard Iacovangelo has a 40%
            interest.

(5)         Includes an option to purchase 125,000 shares of Common Stock.

(6)         Includes 10% of the 368,869 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                                1997  --   - 0 -
     President, Chief                                    1996  --   - 0 -
     Executive Officer                                   1995  --   - 0 -
     and Treasurer

--------------
(1)         Mr. Iacovangelo receives no other compensation or benefits from the
            Company. He neither received nor exercised any options during 1997
            and he held no options at December 31, 1997.

     Remuneration of Directors
     -------------------------

     During 1997, directors of the Company received no cash 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.  Messr. Anthony
Iacovangelo is a non-employee director.

<PAGE>

                                      -27-


     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. Messrs. Frank B.
Iacovangelo, Bernard J. Iacovangelo and William S. Gagliano received $ -0- ,
$ -0- and $76,120 respectively during 1997.

Item 12.  Security Ownership of Certain Beneficial owners and Management
--------  --------------------------------------------------------------

     On December 31, 1997, 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>

                                      -28-


     The following table sets forth information as of December 31, 1997 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                 1,366,339 (1) (3)                 40.92%
39 State Street
Rochester, NY  14614

Bernard J. Iacovangelo               1,376,339 (2) (3)                 41.22%
39 State Street
Rochester,  NY  14614

Wegman Building                        368,879 (3)                      11.05%
    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 368,879 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 368,879 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 9,000 square feet of such space, pursuant to a lease expiring on
June 30, 2000. Effective July 1, 1995, the lease agreement requires annual
rental payments of $72,000.

<PAGE>

                                      -29-


     Annual rental payments, pursuant to the lease, including common area
charges, were approximately $72,000, in 1997, 1996, and 1995, respectively.
During 1997, total unpaid rent of $18,100 was forgiven by the related party. The
Company owed approximately $15,000, 18,100 and $20,000 at December 31, 1997,
1996 and 1995, respectively.

     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, 1996 and 1995, Frank Iacovangelo, President of the Company,
made advances to the Company. These advances bear interest at the prime rate
plus 3% 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, 1999. At December 31, 1997, 1996
and 1995, this indebtedness amounted to $97,000, $234,500, and $227,500,
respectively. In 1997, the Company paid Mr. Iacovangelo $18,149 in interest.

     In 1997, 1996 and 1995, approximately 8%, 4% and 4%, respectively, of the
Company's revenue was derived from the law firm of Gallo and Iacovangelo, a
related party. At December 31, 1997, 1996, and 1995, the Company was owed
$79,125, $44,878, and $36,742 respectively, from Gallo and Iacovangelo. Rates
charged were comparable to those charged similar customers.

<PAGE>

                                      -30-


                                     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 12, 1998

                - Consolidated Balance Sheets - December 31, 1997 and 1996

                - Consolidated Statements of Income for the Years Ended
                  December 31, 1997, 1996 and 1995

                - Consolidated Statements of Changes in Stockholders'
                  Investment for the Years Ended December 31, 1997, 1996
                  and 1995

                - Consolidated Statements of Cash Flows for the Years
                  Ended December 31, 1997, 1996 and 1995

                - Notes to Consolidated Financial Statements (1) through
                  (9)



     (2)        Financial Statement Schedules


                - Auditors' Report Dated March 12, 1998

                - Schedule IV - Indebtedness to Related Parties for the Years
                  Ended December 31, 1997, 1996 and 1995

                - Schedule VIII - Valuation and Qualifying Accounts for the
                  Years Ended December 31, 1997, 1996 and 1995

                - Schedule IX - Short-Term Borrowings for the Years Ended
                  December 31, 1997, 1996 and 1995

<PAGE>

                                      -31-

(3)   Exhibits

     (a)

            10.1     Waiver of Covenant(s) Letter from Marine Midland Bank
                     dated March 27, 1998.


            22       Subsidiaries of Registrant



     (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>

                                      -32-


     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:  December 17, 1998                   FOUR CORNERS FINANCIAL CORPORATION


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

     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
---------------------------------------                       December 17, 1998
Frank B. Iacovangelo
President, Treasurer and Director
(Chief Executive Officer and
Chief Financial Officer



/s/ William S. Gagliano
---------------------------------------                       December 17, 1998
William S. Gagliano
Executive Vice President, Chief
Accounting Officer and Director



/s/ Bernard J. Iacovangelo
---------------------------------------                       December 17, 1998
Bernard J. Iacovangelo
Vice President, Secretary and
Director



/s/ Anthony M. Iacovangelo
---------------------------------------                       December 17, 1998
Anthony M. Iacovangelo
Director

<PAGE>


                       FOUR CORNERS FINANCIAL CORPORATION

                                 AND SUBSIDIARY


                        CONSOLIDATED FINANCIAL STATEMENTS

                        AS OF DECEMBER 31, 1997 AND 1996

                                  TOGETHER WITH

                          INDEPENDENT AUDITORS' REPORT


<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                    <C>
Independent Auditors' Report

Consolidated Balance Sheets at December 31, 1997 and 1996                                                 1

Consolidated Statements of Income for the years
  ended December 31, 1997 and 1996                                                                        2

Consolidated Statements of Changes in Stockholders' Investment
  for the years ended December 31, 1997, 1996 and 1995                                                    3

Consolidated Statements of Cash Flows for the years ended
  December 31, 1997, 1996 and 1995                                                                        4

Notes to Consolidated Financial Statements                                                             5 to 12
</TABLE>


<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 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' investment,
and cash flows for each of the three years in the period ended December 31,
1997. 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 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.


March 12, 1998 (except Note 11 as to which the date is November 30, 1998)
Rochester, New York


<PAGE>

                FOUR CORNERS FINANCIAL CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1996

                                     ASSETS

                                                            1997           1996
                                                            ----           ----
CURRENT ASSETS:
    Cash                                                 $   92,623   $   36,612
    Cash - escrow deposits                                  240,465       74,540
    Accounts receivable, net of allowance for
      doubtful accounts of $90,000 and $84,000
      in 1997 and 1996, respectively                        573,623      510,762
    Prepaid expenses                                          7,819        5,914
    Current portion of note receivable                        3,750        7,500
                                                         ----------   ----------
      Total current assets                                  918,280      635,328
                                                         ----------   ----------

PROPERTY AND EQUIPMENT, net                                 110,240      142,523
                                                         ----------   ----------

OTHER ASSETS:
    Cash value of officer life insurance                          -       18,618
    Security deposits                                         6,627        8,760
                                                         ----------   ----------
                                                              6,627       27,378
                                                         ----------   ----------

TITLE PLANT                                                 419,905      419,905
                                                         ----------   ----------
                                                         $1,455,052   $1,225,134
                                                         ==========   ==========

                    LIABILITIES AND STOCKHOLDERS' INVESTMENT

                                                          1997           1996
                                                          ----           ----
CURRENT LIABILITIES:
    Line-of-credit                                   $   100,000    $    50,000
    Current portion of notes payable                     173,462         97,050
    Current portion of subordinated debt due
      to officer/principal stockholder                    18,000         18,000
    Accounts payable                                     373,843        425,697
    Accounts payable - related parties                    19,907         21,400
    Escrow deposits                                      240,465         74,540
    Accrued income taxes                                   3,296          1,500
    Other accrued expenses                               107,779         63,953
                                                     -----------    -----------
      Total current liabilities                        1,036,752        752,140
                                                     -----------    -----------

LONG-TERM LIABILITIES, net of current portion:
    Notes payable                                         20,739        140,171
    Subordinated debt due to officer/principal
     stockholder                                          79,000        216,500
                                                     -----------    -----------
      Total long-term liabilities                         99,739        356,671
                                                     -----------    -----------
      Total liabilities                                1,136,491      1,108,811
                                                     -----------    -----------

STOCKHOLDERS' INVESTMENT:
    Common stock, $.04 par value, 15,000,000
      shares authorized, 3,293,733 issued and
      outstanding in 1997 and 1996                       133,752        133,752
    Additional paid-in capital                           849,502        835,402
    Accumulated deficit                                 (634,068)      (822,206)
                                                     -----------    -----------
                                                         349,186        146,948
    Less: Treasury stock; at cost 55,000
      shares in 1997 and 1996                            (30,625)       (30,625)
                                                     -----------    -----------
      Total stockholders' investment                     318,561        116,323

                                                     $ 1,455,052    $ 1,225,134
                                                     ===========    ===========

 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 31, 1997, 1996 AND 1995

                                         1997            1996          1995
                                         ----            ----          ----
REVENUE:
   Title insurance premiums          $ 1,318,443    $ 1,302,970    $ 1,610,147
   Abstract and appraisal services     2,471,421      2,403,808      2,212,068
                                     -----------    -----------    -----------
                                       3,789,864      3,706,778      3,822,215
                                     -----------    -----------    -----------

DIRECT COSTS OF REVENUE:
   Title insurance premiums             (310,614)      (370,506)      (508,784)
   Abstract and appraisal services      (503,421)      (400,328)      (290,113)
                                     -----------    -----------    -----------
                                        (814,035)      (770,834)      (798,897)
                                     -----------    -----------    -----------

      Gross profit                     2,975,829      2,935,944      3,023,318

OPERATING EXPENSES                    (2,733,595)    (2,786,219)    (2,811,810)
                                     -----------    -----------    -----------

      Income from operations             242,234        149,725        211,508
                                     -----------    -----------    -----------

OTHER EXPENSES:
   Interest                              (45,560)       (60,661)       (72,028)
   Loss on disposal of property           (7,836)             -        (40,596)
                                     -----------    -----------    -----------
                                         (53,396)       (60,661)      (112,624)
                                     -----------    -----------    -----------
      Income before income taxes         188,838         89,064         98,884

PROVISION FOR INCOME TAXES                  (700)        (3,346)        (1,500)
                                     -----------    -----------    -----------

NET INCOME                           $   188,138    $    85,718    $    97,384
                                     ===========    ===========    ===========
NET INCOME PER SHARE                 $       .05    $       .03    $       .03
                                     ===========    ===========    ===========


 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' INVESTMENT
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                         Common Stock        Additional                                   Total
                                                      -------------------     Paid-in      Accumulated    Treasury     Stockholders'
                                                      Shares       Amount     Capital        Deficit       Stock        Investment
                                                      ------       ------     -------        -------       -----        ----------
<S>                                                   <C>         <C>         <C>          <C>            <C>          <C>      
BALANCE - December 31, 1994                           3,343,733   $133,752    $835,402     $(1,005,308)   $ (5,625)    $(41,779)
   Net income                                                 -          -           -          97,384           -       97,384
                                                      ---------   --------    --------     -----------    --------     --------

BALANCE - December 31, 1995                           3,343,733    133,752     835,402        (907,924)     (5,625)      55,605
   Net income                                                 -          -           -          85,718           -       85,718
   Purchase of treasury stock                           (50,000)         -           -               -     (25,000)     (25,000)
                                                      ---------   --------    --------     -----------    --------     --------

BALANCE - December 31, 1996                           3,293,733    133,752     835,402        (822,206)    (30,625)     116,323
   Net income                                                 -          -           -         188,138           -      188,138
   Forgiveness of rent due to related party,
     net of income taxes of $4,000                            -          -      14,100               -           -       14,100

BALANCE - December 31, 1997                           3,293,733   $133,752    $849,502     $  (634,068)   $(30,625)    $318,561
                                                      =========   ========    ========     ===========    ========     ========
                                                                                                               
</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 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                                                               1997           1996           1995
                                                                                               ----           ----           ----
<S>                                                                                         <C>            <C>            <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net income                                                                                $ 188,138      $  85,718      $  97,384
  Adjustments to reconcile net income to cash flow from operating activities:
     Provision for bad debts                                                                    6,000              -         75,675
     Loss on disposal of property                                                               7,836              -         40,596
     Depreciation and amortization                                                             59,854         79,995        110,302
     Other                                                                                     (4,000)             -              -
     Changes in:
       Accounts receivable                                                                    (68,861)       (45,581)       (61,677)
       Prepaid expenses                                                                        (1,905)         7,402         (4,226)
       Income tax receivable                                                                        -              -          6,725
       Accounts payable and accounts payable - related parties                                (35,247)        33,918        (42,687)
       Other accrued expenses                                                                  43,826         13,067        (12,753)
       Accrued income taxes                                                                     1,796              -          1,500
                                                                                            ---------      ---------      ---------
          Net cash flow from operating activities                                             197,437        174,519        210,839
                                                                                            ---------      ---------      ---------

CASH FLOW FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                                                         (35,407)       (16,346)       (39,325)
  Payments received on note receivable                                                          3,750          5,000              -
  Change in security deposits                                                                   2,133          6,496         (2,010)
  Change in cash value of officer life insurance                                               18,618         (1,002)         2,454
  Investment in title plant                                                                         -        (52,622)             -
                                                                                            ---------      ---------      ---------
          Net cash flow from investing activities                                             (10,906)       (58,474)       (38,881)
                                                                                            ---------      ---------      ---------

CASH FLOW FROM FINANCING ACTIVITIES:
  Change in line-of-credit                                                                     50,000         15,000        (15,000)
  Borrowings on notes payable                                                                       -         10,232              -
  Repayment of notes payable                                                                  (43,020)      (149,456)      (150,599)
  Increase (decrease) in subordinated debt due to officer/principal stockholder              (137,500)         7,000         27,500
  Purchase of treasury stock                                                                        -        (25,000)             -
                                                                                            ---------      ---------      ---------
          Net cash flow from financing activities                                            (130,520)      (142,224)      (138,099)
                                                                                            ---------      ---------      ---------

NET INCREASE (DECREASE) IN CASH                                                                56,011        (26,179)        33,859

CASH - beginning of year                                                                       36,612         62,791         28,932
                                                                                            ---------      ---------      ---------
CASH - end of year                                                                          $  92,623      $  36,612      $  62,791
                                                                                            =========      =========      =========
</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 31, 1997 AND 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, 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.

        Cash -

        The Company maintains its cash in demand deposit and money market
        accounts 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 recorded as both a current asset and a current liability
        in the accompanying consolidated balance sheet.

        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 operations. Repairs and
        maintenance costs are charged to expense when incurred.


                                      - 5 -

<PAGE>


(2)     Summary of Significant Accounting Policies (Continued)
        ------------------------------------------

        Property and Equipment - (Continued)

        In March, 1995, the FASB issued Statement of Financial Accounting
        Standards No. 121 entitled "Accounting for the Impairment of Long-Lived
        Assets and for Long-Lived Assets to be Disposed Of." The statement
        requires that long-lived assets and certain identifiable intangibles to
        be held and used by a company be 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,
        companies are required to estimate the future cash flows expected to
        result from the use of the asset and its eventual disposition. Under
        Statement 121, an impairment loss is recognized if the sum of the
        undiscounted future cash flows is less than the carrying amount of the
        asset. The Statement also established standards for recording an
        impairment loss for certain assets subject to disposal. Excluded from
        the scope of the statement are financial instruments and deferred tax
        assets. As required, the Company adopted Statement 121 effective January
        1, 1996 with no material effect on the Company's consolidated financial
        statements on the date of adoption.

        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.

        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.

        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. Diluted EPS reflects dilution that
       could occur from common shares issuable through stock options. Reported
       EPS in prior periods have been restated to conform to the provisions of
       SFAS 128.


                                      - 6 -

<PAGE>


(2)     Summary of Significant Accounting Policies (Continued)
        ------------------------------------------

        Net Income Per Share - (Continued)

                                               1997          1996         1995
                                               ----          ----         ----

Net income applicable to common stock       $  188,138   $   85,718   $   97,384
                                            ==========   ==========   ==========

Weighted average number of common
  shares outstanding                         3,293,733    3,331,223    3,343,733
                                            ==========   ==========   ==========

Income per share - Basic                           0.5          .03          0.3
                                            ==========   ==========   ==========

Income per share - Diluted                  $      N/A   $      N/A   $      N/A
                                            ==========   ==========   ==========

        The exercise of outstanding stock options were not included in the
        calculations of diluted EPS, as their effect would be antidilutive.

        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.

        Reclassifications -

        Certain reclassifications have been made to the 1997 statements to
        conform to the current year presentation.


(3)     Property and Equipment
        ----------------------

        Property and equipment consisted of the following at December 31:

                                                        1997           1996
                                                        ----           ----

        Furniture and equipment                    $   900,979    $   899,925
        Vehicles                                        87,685         97,627
        Leasehold improvements                          49,564         49,564
                                                   -----------    -----------

                                                     1,038,228      1,047,116

        Less:  Accumulated depreciation 
               and amortization                       (927,988)      (904,593)
                                                   -----------    -----------

                                                   $   110,240    $   142,523
                                                   ===========    ===========

        Depreciation and amortization expense for 1997, 1996 and 1995 were
        $59,854, 79,995 and 110,302, respectively.


                                      - 7 -

<PAGE>


(4)     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 years
        ended December 31:

                                   1997            1996          1995
                                   ----            ----          ----
 
             Federal:
                 Current           $   -         $     -        $     -
                 Deferred              -               -              -

             State:
                 Current            (700)         (3,346)        (1,500)
                 Deferred              -               -              -
                                   -----         -------        -------
                                   $(700)        $(3,346)       $(1,500)
                                   =====         =======        =======

        Income tax expense for 1997, 1996 and 1995 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>
                                                                   1997         1996        1995
                                                                   ----         ----        ----
<S>                                                             <C>          <C>         <C>
             Expected tax expense                               $ 68,400     $ 30,300    $  33,000
             Effect of graduated Federal rates                    (6,100)      (3,400)      (3,100)
             State income taxes, net of Federal
               income tax benefit                                 11,200        5,300        1,000
             Change of valuation allowance,
               related to loss carryforwards                     (76,100)     (27,800)     (25,900)
             Other, net                                            3,300       (1,054)      (3,500)
                                                                --------     --------    ---------

                                                                $    700     $  3,346    $   1,500
                                                                ========     ========    =========
</TABLE>

        Taxes paid in 1997, 1996 and 1995 were $1,404, $3,346 and $1,102,
        respectively.

        The tax effects of temporary differences that give rise to deferred
        taxes are as follows at December 31:

<TABLE>
<CAPTION>
                                                                1997        1996        1995
                                                                ----        ----        ----
<S>                                                             <C>      <C>         <C>
             Deferred tax asset:
                 Net operating loss carryforward                $  -     $ 76,100    $ 103,900
                 Valuation allowance                               -      (76,100)    (103,900)
                                                                ----     --------    ---------

                                                                $  -     $      -    $       -
                                                                ====     ========    =========
</TABLE>

        A valuation allowance was provided for the deferred tax asset related to
        the net operating loss carryforward due to the uncertainty of
        realization.


                                      - 8 -

<PAGE>


(5)     Financing Arrangements
        ----------------------

        Notes Payable -

        Notes payable consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                                     1998           1997
                                                                                     ----           ----
<S>                                                                                  <C>           <C>
        Note payable to a bank with monthly principal payments of $7,674 through
        October, 1997 and $6,230 through October, 1999, plus interest at the
        bank's prime rate plus 1.25%. This note is guaranteed by the
        officers/stockholders of the Company and is collateralized by
        substantially all of the Company's assets.
                                                                                     $ 134,167     $226,250

        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 is also guaranteed by the officers/stockholders of the Company
        and is collateralized by substantially all of the Company's assets.
                                                                                        30,000            -

        Various notes payable with aggregate monthly installments of $1,116,
        including interest at rates ranging from 9.5% to 10.5%. These notes
        mature through October, 2000 and are collateralized by the related
        equipment.                                                                      30,034       10,971
                                                                                     ---------     --------

                                                                                       194,201      237,221

        Less:  Current portion                                                        (173,462)     (97,050)
                                                                                     ---------     --------

                                                                                     $  20,739     $140,171
                                                                                     =========     ========
</TABLE>

        The note payable to the bank requires the Company to meet certain
        financial covenants at December 31, 1997 as follows:

        o Working capital of at least $20,000,
        o Current ratio of at least 1.1 to 1,
        o Minimum tangible net worth of at least $400,000,
        o Total liabilities to tangible net worth of not more than 1.9 to 1,
        o Net income before taxes of $110,000, and
        o Debt service ratio of not less than 1.75 to 1.

        The agreement also limits the Company's ability to make acquisitions,
        pay dividends and make capital expenditures, and requires the Company to
        submit certain financial information.

        At December 31, 1997 and 1996, the Company was not in compliance with
        all of the financial covenants. Subsequent to year end, the Company
        obtained a waiver from the bank for these covenants through December 31,
        1997 and 1996. At December 31, 1997, $70,903 of long-term notes payable
        has been classified as current due to the covenant violation.


                                      - 9 -

<PAGE>


(5)     Financing Arrangements, (Continued)
        -----------------------

        Future maturities of long-term debt are as follows at December 31, 1998:

                 1998........................................$173,462
                 1999........................................  13,252
                 2000........................................   7,196
                 2001........................................     291
                                                             --------
                                                             $194,201

        Lines-of-Credit -

        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 8.5% at December 31,
        1997. Borrowings under this line-of-credit are personally guaranteed by
        the Company's principal officers/stockholders. At December 31, 1997,
        there was $100,000 outstanding under the terms of this line-of-credit.

        During 1997, the Company had a second line-of-credit for $50,000 with
        another bank. The $37,000 outstanding principal balance was restructured
        during November, 1997 into a term note payable. There was $50,000
        outstanding under the terms of the line-of-credit agreement at December
        31, 1996.

        Interest -

        Interest paid in 1997, 1996 and 1995 on all notes payable, obligations
        under capital leases and lines-of-credit was$45,561, $58,394 and
        $76,337, respectively.


(6)     Stockholders' Investment
        ------------------------

        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 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 500 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.

        Options issued under the 1992 and 1988 Plans expired in 1995. No further
        options will be granted under the 1988 Plan.

        The Company has reserved 647,500 common shares for issuance under the
        1992 plan.

        The Company did not have any outstanding options under the 1992 plan as
        of December 31, 1997 and 1996.


                                     - 10 -

<PAGE>


(7)     Related Party Transactions
        --------------------------

        Subordinated Debt Due to Officer/Principal Stockholder -

        During 1997, 1996 and 1995, one of the Company's officers/principal
        stockholders made advances to the Company. These advances were $97,000,
        $234,500 and $227,500 at December 31, 1997, 1996 and 1995, respectively.
        Amounts borrowed bear interest at the prime rate plus 3%. The prime rate
        was 8.5% at December 31, 1997. 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.

        Note Payable to Officers/Principal Stockholder -

        At December 31, 1997 and 1996, the Company owed approximately $4,907 and
        $3,300, respectively, to a law firm in which the Company's principal
        stockholder is a partner for legal fees. These amounts were included in
        the accounts payable to related parties balance at December 31, 1997 and
        1996 in the accompanying balance sheet.

        Office Lease Commitment -

        The Company leases its Rochester facility through June 2000 from a
        company controlled by FCAC's principal stockholder at an annual rental
        of $72,000. Rent and common area charges were approximately $72,000 in
        1997 and 1996, respectively. The Company owed approximately $15,000 and
        $18,100 for unpaid rent at December 31, 1997 and 1996, respectively.

        During 1997, total unpaid rent of $18,100 was forgiven by another
        related party. This amount has been reflected as an extraordinary item,
        net of income taxes of $4,000 in the financial statements for the year
        ended December 31, 1997.

        Revenue and Accounts Receivable -

        In each of 1997, 1996 and 1995, approximately 8%, 4% and 4%,
        respectively, of revenue was derived from a related party. At December
        31, 1997, 1996 and 1995, the Company was owed $79,125, $44,878 and
        $36,742, respectively, related to this revenue.


(8)     Lease Commitments
        -----------------

        The Company leases other office facilities under operating lease
        agreements expiring through December, 2002.

        Minimum future lease payments under non-cancelable lease agreements with
        unrelated parties are as follows at December 31, 1997:

                 1998.......................................$103,101
                 1999.......................................  42,771
                 2000.......................................  28,046
                 2001.......................................  28,046
                 2002.......................................  28,046
                                                            --------
                                                            $230,010
                                                            ========

        Rent expense related to these operating leases was approximately
        $126,101, $121,000 and $124,000 for the years ended December 31, 1997,
        1996 and 1995, respectively.


                                     - 11 -

<PAGE>


(9)     Sale of Appraisal Operations
        ----------------------------

        During 1996, the Company sold the assets of its real estate appraisal
        operations for $125,000, allocated as follows:

             Fixed assets                                      $ 12,500
             Customer lists and goodwill                        100,000
             Covenant not-to-compete                             12,500
                                                               --------
                                                               $125,000
                                                               ========

        In exchange for the fixed assets, the Company received a non-contingent
        $12,500 non-interest bearing note receivable in ten quarterly
        installments of $1,250 beginning May 1, 1996. The $1,250 quarterly
        payment on the non-contingent note receivable is not dependent on the
        purchaser's operating results. The quarterly payments of $1,250 due
        April 1, July 1, and October 1, 1997 were received by the Company. The
        Company recorded the $12,500 non-contingent note receivable as income in
        1996.

        In exchange for the customer lists and goodwill and covenant
        not-to-compete the Company received a $112,500 contingent note
        receivable payable in quarterly installments, plus interest at 9%,
        beginning May 1, 1996. Payment on the contingent note receivable is
        required only by the amount that 19% of the purchaser's quarterly gross
        margin on sales to the Company's former customers exceeds $1,250. No
        portion of the contingent note receivable was recorded as income through
        December, 1997. The Company does not intend on recording or collecting
        any of the outstanding interest and/or principal balance on the
        contingent note receivable as current sales levels to the Company's
        former customers are not sufficient to achieve the desired operating
        results.


(10)    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, or in this case of debt, it is impracticable to
        estimate the fair value.


(11)    Revision of Financial Statements
        --------------------------------
        The 1997 financial statements have been revised to reclassify $70,903
        owed to a bank as a current liability and forgiveness of prior rent
        obligations due to a related party ($14,100, net of income tax of
        $4,000) which had been reflected as an extraordinary gain as a
        contribution to capital. The effect of these revisions was to decrease
        1997 net income by $14,100 and earnings per share by $.01.


                                     - 12 -