U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                       OR
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                        COMMISSION FILE NUMBER 005-55641

                         UNITED FINANCIAL HOLDINGS, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
            FLORIDA                                             59-2156002
   (State or Other Jurisdiction of                            (IRS Employer
    Incorporation or Organization)                          Identification No.)
        333 THIRD AVENUE NORTH,
        SUITE 200                                               33701-3346
        ST. PETERSBURG, FLORIDA                                 (Zip Code)
   (Address of Principal Executive Offices)
                                 (727) 898-2265
                (Issuer's Telephone Number, Including Area Code)
                             ----------------------
      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                                        Name of Each Exchange
         Title of each Class                             on Which Registered
         -------------------                            ---------------------
              None                                               None

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                     Common Shares, par value $.01 per share

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendments to this Form 10-KSB. [ ]

The issuer's gross revenues for its most recent fiscal year was $19,831,356.

The  aggregate  market  value  of  the  Common  Stock  of  the  issuer  held  by
non-affiliates as of March 1, 2000, was approximately  $16,146,417,  as computed
by  reference  to the closing  price of the Common Stock as quoted on the Nasdaq
National  Market System on such date. As of March 1, 2000,  there were 4,244,598
issued and outstanding Common Stock of the issuer.

Transitional Small Business Disclosure Format (check one): Yes ___ No _X_

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the  definitive  Proxy  Statement  of the issuer for the 2000 Annual
Meeting of Shareholders to be filed with the Securities and Exchange  Commission
no later  than 120 days  after  the end of the  issuer's  1999  fiscal  year are
incorporated by reference into Part III of this Form 10-KSB.

<PAGE>

                         UNITED FINANCIAL HOLDINGS, INC.

                                   FORM 10-KSB

                       Fiscal Year Ended December 31, 1999


Item Number in
FORM 10-KSB                                                              Page
================================================================================
                                     PART I

 1.  Description of Business                                               3

 2.  Description of Property                                              21

 3.  Legal Proceedings                                                    22

 4.  Submission of Matters to a Vote of Security-Holders                  22

                                     PART II

 5.  Market for Common Equity and Related Stockholder Matters             22

 6.  Management's Discussion and Analysis of Financial Condition and
     Results of Operations                                                24

 7.  Consolidated Financial Statements                                    49

 8.  Changes in and Disagreements with Accountants on Accounting
     and Financial Disclosure                                             50

                                     PART III

 9.  Directors, Executive Officers, Promoters and Control Persons
                     Compliance with Section 16(a) of the Exchange Act    50

10.  Executive Compensation                                               50

11.  Security Ownership of Certain Beneficial
     Owners and Management                                                50

12.  Certain Relationships and Related Transactions                       50

13.  Exhibits and Reports on Form 8-K                                     50












                                      -2-
<PAGE>
                                      PART I
ITEM 1.  DESCRIPTION OF BUSINESS

General

      United  Financial  Holdings,  Inc. (the  "Company")  is a registered  bank
holding company formed in 1982, the principal subsidiary of which is United Bank
and  Trust   Company  (the  "Bank"),   a   Florida-chartered   commercial   bank
headquartered in St. Petersburg,  Florida. The Bank was founded in 1979 and is a
community-oriented,  full  service  commercial  bank  with five  branch  offices
serving the  southern  Pinellas  County  area of the State of Florida.  The Bank
provides  a broad  range  of  traditional  banking  services  with  emphasis  on
commercial  loans and loans under the lending program of the U.S. Small Business
Administration  (the "SBA").  The Company's  operations  include three  business
segments:  commercial banking, trust services, and investment advisory services,
which constituted  84.6%,  15.3% and 0.1%,  respectively,  of the Company's 1999
pre-tax income before corporate overhead.  At December 31, 1999, the Company had
consolidated  total  assets of  $209.5  million,  net  loans of $153.5  million,
deposits of $175.1 million and stockholders' equity of $16.8 million.

      The  Bank  is a  community-oriented  full  service,  commercial  bank  and
currently  operating  from five branch  offices  serving the  southern  Pinellas
County area of the State of Florida.  It offers  consumer and commercial  loans,
ATM cards,  credit cards,  and a full range of deposit  account types  including
demand deposits,  NOW accounts,  money market accounts,  savings  accounts,  and
certificates of deposit.  Additionally,  the Bank offers internet  banking and a
bill  payment  service.  The  primary  focus of the  Bank's  commercial  lending
activities  is on loans to small and medium sized  businesses  and  professional
firms. The Bank's commercial loans include loans secured by real estate or other
assets,  loans made under the SBA's  lending  program and secured and  unsecured
loans to small  businesses.  The Company believes the Bank is one of the largest
originators,  among similarly sized financial institutions,  of SBA loans in the
State of Florida (measured by dollar volume of loans originated).

      The  Company's  other  operating  subsidiaries  are  Eickhoff,  Pieper,  &
Willoughby,  Inc., an investment  advisory firm registered  under the Investment
Advisers Act of 1940 ("EPW")  headquartered in Tampa, Florida, with an office in
Jacksonville,  Florida,  and United Trust  Company,  a  Florida-chartered  trust
company ("United Trust")  registered with the Florida  Department of Banking and
Finance and located in St. Petersburg, Florida. EPW offers investment management
services  to  corporate,   municipal  and  high  net  worth  individual  clients
throughout the State of Florida. As of December 31, 1999, EPW had $334.9 million
in  assets  under  management.  United  Trust is a  wholesale  provider  of data
processing,  administrative and accounting support and asset custody services to
professionals  holding assets in trust (primarily  legal and accounting  firms).
United Trust also provides  retail trust and investment  management  services to
individual  and  corporate  clients.  As of December 31, 1999,  United Trust had
$317.7 million in assets under trust.

Background

      In 1986 a group of  investors,  headed by Neil W.  Savage,  the  Company's
President  and  Chief  Executive  Officer  and the  Bank's  Chairman  and  Chief
Executive  Officer,  acquired  control of the  Company,  then known as  Pinellas
Bancshares  Corporation.  The Company's  name was changed to its present name in
1995 and the Bank's name was changed from United Bank of Pinellas to its present
name that same year.

                                      -3-
<PAGE>
      In September 1995 the Company  purchased FSC, a trust data  processing and
accounting service for  professionals,  and merged this entity into the Company.
In January  1996,  the Company  acquired  EPW. The Company  formed  United Trust
during the fourth  quarter of 1997 and effective  December 31, 1997  transferred
all of the Bank's trust assets to United Trust.

Business Strategy

      The principal  elements of the Company's business strategy are to increase
its  market  share in its  existing  business  segments  and to seek  out  niche
business  segments  in which the Company  can  compete  effectively  in order to
create new sources of  non-interest  income and  increase  traditional  interest
income from new lending  opportunities.  The Company has sought to implement its
strategy of  increasing  its market share in its existing  business  segments by
expanding the Bank's market coverage  through de novo branching,  increasing the
Bank's emphasis on originating loans secured by real estate and other assets for
its own portfolio, pursuing small business secured and unsecured lending for its
own portfolio,  and continuing to originate a high volume of SBA loans, both for
its own portfolio and for sale in the secondary market. A primary element of the
Company's  business strategy as a community  banking  organization is to seek to
provide  customers with a level of personalized  service exceeding that provided
by its competitors, including the local banking operations of large regional and
national banking companies.

      The Company has sought to add new sources of  non-interest  income through
the  creation of United  Trust,  which  receives  fees for the  wholesale  trust
services  it offers  to legal and  accounting  firms  and the  retail  trust and
investment  management services it offers to other clients,  and the acquisition
of EPW, which  generates fee income from the investment  management  services it
offers  to  corporate,  municipal  and high net  worth  individual  clients.  By
expanding the range of trust and investment  management  services it offers, the
Company  seeks to  differentiate  itself from other  similarly  sized  community
banking  organizations  operating in the Company's market.  While pursuing these
strategies,  management  remains committed to improving asset quality,  managing
interest rate risk,  enhancing  profitability  and  maintaining  its status as a
well-capitalized institution for regulatory capital purposes.

      As a result of this business  strategy,  the  Company's  total assets have
increased  from  approximately  $122.7  million at  December  31, 1996 to $209.5
million at December 31, 1999. The Company's  consolidated net revenues increased
from $10.7 million for the year ended December 31, 1996 to $13.2 million for the
year ended  December 31, 1999.  During this period of asset and revenue  growth,
the Company's net income increased from $1.5 million for the year ended December
31, 1996 to $2.3 million for the year ended December 31, 1999.

      The Company intends to continue  selectively adding branches in its market
area., and completed its purchase and opening of a new branch in April 1999. The
Company has no current plans to add Bank branches outside of the Pinellas County
market.  The  Company's  current  goal is to  open  one new  branch  each  year.
Accordingly,  in the future, the Company may consider strategic expansion though
the acquisition of other banks or bank branches or by de novo branching. Similar
to the Company's previous efforts that resulted in it establishing  United Trust
and  acquiring  EPW,  the  Company  may  consider  from  time to time  expansion
opportunities  into  other  business  lines  that  might  add to  the  Company's
non-interest  income and the acquisition or development of other businesses that
the Company considers  complementary to its existing business.  For example, the
Company recently completed the creation of a new property and casualty insurance
company and made a minority  investment in the company.  From time to time,  the
                                      -4-
<PAGE>
Company may commence similar  exploratory efforts to evaluate the possibility of
acquiring or establishing similar or additional lines of business.

Market Area

      Currently,  the Bank has five offices located in southern Pinellas County,
Florida,  which is the Bank's  primary  market area.  The population of Pinellas
County  was  estimated  to be  899,000  on April 1,  1999 by the  University  of
Florida's  Bureau of  Economic  and  Business  Research.  This  compares  with a
population  of  852,000  at the 1990  census  and  729,000  at the 1980  census.
Pinellas  County has been a retirement and tourism  destination  for many years,
and  over  25% of its  population  is over 65  years  of  age,  compared  with a
state-wide average of 18%.

      According to information published by the Florida Bankers Association,  as
of December 31, 1998,  Pinellas  County was the fourth largest county in Florida
in terms of bank and thrift deposits,  with total deposits of $13.3 billion,  or
6.58% of the state's total deposits.  There is a significant seasonal population
increase during the months of November to April of each year; seasonal residents
are not included in the cited population  statistics.  The Company believes that
while the  population  of  Pinellas  County will  continue to grow,  the rate of
growth is likely to be lower  than the  population  growth  rate of the State of
Florida as a whole,  and is likely to slow due to the nature of the market area.
As a peninsula surrounded on the south, east and west by water,  Pinellas County
has limited room for future  development.  The local  economy is dependent  upon
service industries,  manufacturing, tourism, and medical facilities as its major
sources of employment and commerce.

      United Trust's primary market for retail business is also Pinellas County.
Its  wholesale  services  are  marketed  more  widely  to the  Tampa  Bay  Area,
consisting of Pinellas,  Hillsborough,  Pasco and Manatee Counties.  EPW markets
its services to high net worth  individuals  and to commercial and  governmental
clients  throughout  the State of Florida and  secondarily  in the  Southeastern
United States.

      Pinellas County is a highly  competitive  market for financial,  trust and
investment  services.  The  Bank  faces  competition  for  deposits  from  other
commercial  banks,  thrift  institutions,  money market funds and credit unions.
Competition  for  loans of the  types  originated  by the  Bank is also  strong.
Management  believes that Pinellas County is considered an attractive  market by
financial  institutions  seeking to obtain  deposits,  as  evidenced  by the 282
offices of commercial banks and thrift institutions  existing in Pinellas County
at December 31, 1999.

Operating Strategy

      Management believes that the consolidation of the banking industry and the
emergence  of large  regional and national  bank holding  companies  has created
opportunities  for  locally-owned   and  operated   financial   institutions  to
effectively  compete for  customers who desire a level of  personalized  banking
services that the large banking organizations may not be able to offer. The Bank
was organized as a community  financial  institution owned and managed by people
who are actively  involved in the Bank's local market area and  committed to the
area's economic growth and development. With local ownership and management, the
Company  believes  that the Bank can be more  responsive to the banking needs of
the community it serves and can tailor its services to meet its customers' needs
rather than  providing  the  standardized  services  that  larger  bank  holding
companies tend to offer.
                                      -5-
<PAGE>
      Local ownership and operation allows the Bank faster,  more responsive and
flexible decision-making which may not be available at the branch offices of the
large bank holding  companies  that  constitute  the  majority of the  financial
institution offices located in the Bank's market area.

      The principal business of the Bank is to attract deposits from the general
public  and  to  invest  those  funds  in  various  types  of  loans  and  other
interest-earning   assets.   The  Bank's  earnings  depend  primarily  upon  the
difference  between (i) the interest  and fees  received by the Bank from loans,
the securities held in its investment portfolio and other investments;  and (ii)
expenses  incurred by the Bank in connection  with  obtaining  funds for lending
(including interest paid on deposits and other borrowings) and expenses relating
to day-to-day operations.

      The  Bank's  customers  are  primarily  individuals   (including  seasonal
residents),   professionals  and  small  and  medium  size  businesses,  located
predominantly  in  Pinellas  County,  Florida.  The Bank  seeks to  develop  new
business  through  an ongoing  program of  personal  calls on both  present  and
potential customers.  As a local independent bank, the Bank utilizes traditional
local  advertising  media as well as direct mailings,  telephone  contacts,  and
brochures to promote the Bank and develop loans and deposits.  In addition,  the
Bank's  directors all have worked or lived in or near the Bank's market area for
a number  of  years,  contributing  to the  Bank's  image as a  locally-oriented
independent institution, which management believes is an important factor to its
targeted customer base.

Sources of Funds

      The primary  source of funds for  lending,  investment  and other  general
business  purposes  is  deposit  accounts.  Other  sources  of  funds  are  loan
repayments,  proceeds  from the sale of loans  and  investment  securities,  and
borrowings.  The Bank expects that loan repayments  will be a relatively  stable
source  of  funds,  while  levels  of  deposits  maintained  at the Bank will be
significantly  influenced by general interest rate and money market  conditions.
Generally,   the  Company  may  use  short-term  borrowings  to  compensate  for
reductions in sources of funds normally available,  while longer term borrowings
may be used to support expanded lending activities. Management believes that the
Company's  funding  requirements  can  be met  through  retail  deposits  in the
Company's  local  market  area  without  reliance  on  brokered  deposits.   For
additional discussion of asset and liability management policies and strategies,
see "Liquidity and Asset/Liability Management."

As of December 31, 1999, the scheduled  maturities of deposits of $100,000
or more were as follows (dollars in thousands):

     Three months or less...................................  $  4,214
     Over three  through  six  months.......................     3,793
     Six through twelve months..............................     4,413
     Over twelve months.....................................     4,259
                                                              ---------
                                                              $ 16,679

      The Bank offers a full range of deposit services,  including  checking and
other transaction  accounts,  savings accounts and time deposits.  The following
table  sets  forth the  principal  types of  deposit  accounts  offered  and the
aggregate amounts of such accounts at December 31, 1999 (dollars in thousands):


                                      -6-
<PAGE>
                                         Weighted                     Percent
                                         Average                      of Total
                                         Interest Rate     Amount     Deposits
                                         -------------     --------   ----------
      Non-interest bearing..............    0.00%          $ 32,936     18.8%
      NOW and Money Market accounts.....    2.85             67,914     38.8
      Savings...........................    2.05              4,873      2.8
      Time deposits with original
         maturities of:
         One year or less...............    4.93             51,016     29.1
         Over 1 year through 5 years....    5.71             18,359     10.5
                                                           --------    ---------
           Total time deposits..........    5.20             69,375     39.6
                                                           --------    ---------
           Total deposits...............    3.13%          $175,098    100.0%
                                                           ========    =========

      At December  31,  1999,  scheduled  maturities  of time  deposits  were as
follows (dollars in thousands):

Period Ended December 31,                                  Percent of
                                          Time             Time
                                          Deposits         Deposits
                                          ----------       -----------
      2000..............................  $ 51,016            73.5%
      2001..............................    13,552            19.5
      2002..............................     3,447             5.0
      2003..............................       704             1.0
      2004..............................       656             1.0
                                          ----------       ------------

        Total time deposits.............  $ 69,375           100.0%
                                          ==========       ============

Lending Activities

      The primary source of income  generated by the Bank is interest  earned on
loans held in the Bank's loan portfolio.  The Bank's lending  activities include
commercial,  real estate and consumer  loans.  During 1999, the Bank's net loans
increased $37.0 million.

      Commercial  Loans.  The Bank offers  commercial  loans for working capital
purposes,  business  expansion,  seasonal needs,  acquisition of equipment,  and
other  business  needs.  Collateral  pledged to secure  these  loans may include
equipment,  accounts  receivable,  or  other  assets.  The Bank  often  requires
personal guarantees of these loans.

      SBA Loans.  The SBA lending program was established by Congress in 1953 to
assist new and  established  small  businesses in obtaining  necessary  capital.
Under this program, the SBA guarantees up to 90% of the principal balance of the
loan,  subject to a maximum  guarantee per loan of $750,000,  thereby removing a
portion of the credit risk to the lending  financial  institution  and generally
enabling  lenders to offer loans under this program at more attractive  interest
rates for borrowers than other available financing.  The SBA loans originated by
the  Company  typically  have  SBA  guarantees  for 60% to 90% of the  principal
balance of the loan.  The  existence  of a secondary  market for the  guaranteed
portion of the SBA loans provides the Bank an opportunity to sell the guaranteed

                                      -7-
<PAGE>
portion  of the loans and  obtain  additional  liquidity  and  income.  The Bank
typically  services such loans and receives  servicing fees with respect to such
loans.

      The only loans sold by the Bank during 1999, 1998 and 1997 were SBA loans.
When  the Bank  sells an SBA loan and  retains  the  servicing  of the  loan,  a
servicing  asset is recorded.  The book value of such assets,  which the Company
believes  approximates  the fair value of such  assets,  at December  31,  1999,
December 31, 1998, and December 31, 1997 was $408 thousand,  $141 thousand,  and
$78 thousand,  respectively.  Amortization  expense  relating to such  servicing
assets of $25 thousand, $13 thousand and $2 thousand was recorded for 1999, 1998
and 1997,  respectively.  The  Company  periodically  reviews  these  assets for
impairment. No valuation for impairment of these assets was deemed necessary for
the periods presented.

      At December  31, 1997,  the Bank had $5.7  million of SBA loans,  of which
approximately  19.0%  was  guaranteed  by the SBA.  During  1997,  the Bank sold
guaranteed  portions of its SBA loans  totaling  $3.7  million.  At December 31,
1998, the Bank had $6.6 million of SBA loans, of which  approximately  22.0% was
guaranteed by the SBA. During 1998, the Bank sold guaranteed portions of its SBA
loans totaling $2.9 million. At December 31, 1999, the Bank had $10.6 million of
SBA loans, of which  approximately 27.4% was guaranteed by the SBA. During 1999,
the Bank sold  guaranteed  portions of its SBA loans totaling $8.1 million.  The
Bank  recognized  gains on the sale of SBA loans during  1997,  1998 and 1999 of
$290  thousand,  $239  thousand and $442  thousand,  respectively,  and had loan
servicing fees on SBA loans during 1997,  1998 and 1999 of $164  thousand,  $148
thousand and $166 thousand, respectively.

      Real Estate Loans.  The Bank offers  commercial  and, on a limited  basis,
residential real estate loans. Commercial real estate loans are made for general
corporate purposes, construction and expansion of facilities.  Residential loans
are made in the form of fixed and variable rate mortgages and home equity loans.


























                                      -8-
<PAGE>
      The following tables set forth information  concerning the loan portfolio,
based on total  dollars and percent of portfolio,  by collateral  type as of the
dates indicated (dollars in thousands):

                                               At December 31,
                                        1999            1998            1997
                                      ---------       ---------       ---------
Real estate mortgage loans:
  Commercial real estate..............$ 82,622        $ 60,693        $ 44,547
  One-to-four family residential......   7,933           7,075           7,482
  Multifamily residential.............  13,603           6,673           5,485
  Construction and land development...   4,585           3,572           3,071
                                      ---------       ---------       ---------
    Total real estate mortgage loans.. 108,743          78,013          60,585

Commercial loans......................  41,358          34,904          30,536
Consumer loans........................   5,930           4,438           3,998
Other loans...........................     839           1,803           1,871
                                      ---------       ---------       ---------
  Gross loans......................... 156,870         119,158          96,990
Allowances for loan losses............  (2,341)         (1,984)         (1,648)
Unearned fees                           (1,032)           (628)           (521)
                                      ---------       ---------       ---------
Total loans net of allowance and
   unearned fees......................$153,497        $116,546        $ 94,821
                                      =========       =========       =========

                                               At December 31,
                                        1999            1998            1997
                                      ---------       ---------       ---------
Real estate mortgage loans:
  Commercial real estate..............  52.7%           50.9%           45.9%
  One-to-four family residential......   5.1             5.9             7.7
  Multifamily residential.............   8.7             5.6             5.7
  Construction and land development...   2.9             3.1             3.2
                                      ---------       ---------       ---------
    Total real estate mortgage loans..  69.4            65.5            62.5

Commercial loans......................  26.4            29.3            31.5
Consumer loans........................   3.7             3.7             4.1
Other Loans...........................   0.5             1.5             1.9
                                      ---------       ---------       ---------
  Gross loans......................... 100.0%          100.0%          100.0 %















                                      -9-
<PAGE>
     The following table sets forth the contractual  amortization of real estate
and commercial loans at December 31, 1999 and December 31, 1998. Loans having no
stated  schedule of repayments and no stated maturity are reported as due in one
year or less. The table also sets forth the dollar amount of loans  scheduled to
mature after one year, according to their interest rate characteristics (dollars
in thousands):
                                 December 31, 1999         December 31, 1998
                                -------------------       -------------------
                                Real                      Real
                                Estate    Commercial      Estate      Commercial
Amounts due:

  One year or less............  $ 38,999  $  29,181      $  27,448    $ 24,751
  After one through 5 yrs.....     54,665     8,578         40,433       9,722
  More than five years........     15,079     3,599         10,132         431
                                --------- ---------      ----------   ---------
      Total...................  $ 108,743 $  41,358      $  78,013    $ 34,904
                                ========= =========      =========    ========

Interest rate terms on amounts
 due after one year:
  Adjustable..................  $  40,533 $     701      $  29,195    $  3,042
  Fixed.......................     29,208    11,476         21,370       7,111
                                --------- ---------      ---------    --------
      Total...................  $  69,741 $  12,177      $  50,565    $ 10,153
                                ========= =========      =========    ========

Investment Management Services

      EPW offers investment  management  services to high net worth individuals,
corporate pension and profit sharing plans,  charitable entities,  and state and
local  government  pension plans.  EPW receives fees for its services which vary
according to the amount of assets in the account under  management.  EPW markets
its services throughout the State of Florida.

Trust Services

      United Trust offers  wholesale  trust services that include  on-line trust
account information  processing,  asset custody and investment support services.
These  services  are  offered  to  legal  and  accounting  firms  and  to  other
custodians.  United Trust also offers retail trust services including investment
management,  probate and custodian  services  which are marketed  principally to
customers of the Bank and EPW and clients of local attorneys and accountants.

Credit Administration

      The loan  approval  process  consists of a combination  of individual  and
committee loan authority.  Individual lending authority is based upon experience
and is broken down into  secured and  unsecured  requests.  The  Officers'  Loan
Committee (the "Officers' Loan Committee") is made up of commercial  lenders and
credit  administration  personnel.  The Officers' Loan  Committee  currently has
final  approval on all unsecured  credit for $50,000 to  $1,000,000  and secured
credits for $250,000 to  $1,000,000.  The General Loan  Committee  (the "General
Loan Committee") is made up of four non-employee directors,  the Chairman of the
Board of Directors of the Company  ("Board of  Directors")  and the President of
the Bank. The General Loan Committee has final approval  authority for all loans
over  $1,000,000  to the  legal  lending  limit of the  Bank,  except  for loans

                                      -10-
<PAGE>
involving  directors of the Company which must be approved by a vote of the full
Board of Directors  with the  interested  director  not present  during the loan
discussion and vote.

      The Company  has a policies  and  procedures  manual  that  addresses  the
specific  underwriting  guidelines for specific types of credits.  Any deviation
from  these  guidelines  is  considered  to be a policy  exception  that must be
outlined during the approval process and voted upon by the appropriate committee
or approved by a loan officer with sufficient lending authority.  The guidelines
are reviewed and approved by the Board of Directors on an annual basis.

      The  Company's  lending  philosophy  is to extend  credit to businesses or
individuals in the Bank's market area who  demonstrate  sufficient  cash flow to
repay the debt and whose track record  indicate they are borrowers with whom the
Bank desires to establish an ongoing lending relationship.

      The loan portfolio is under continued review in order to monitor potential
credit deterioration.  Loans are graded at their inception by the loan officers.
Credit administration reviews existing credits on an on-going basis. The Company
also  employs an  independent  third-party  loan  review  company  that  reviews
specific  larger size credits on a quarterly  basis.  This  quarterly  review is
presented to the General Loan Committee for its further review.

Asset Quality

      Allowance/Provision  for  Loan  Losses.  The  allowance  for  loan  losses
represents  management's estimate of an amount adequate to provide for potential
losses  within the  existing  loan  portfolio.  The  allowance  is based upon an
ongoing  quarterly  assessment of the probable  estimated losses inherent in the
loan portfolio, and to a lesser extent, unused commitments to provide financing.

      The  methodologies  for  assessing  the  appropriateness  of the allowance
consists of several key elements,  which include:  1) the formula allowance;  2)
review of the underlying  collateral on specific  loans;  and 3) historical loan
losses.  The  formula  allowance  is  calculated  by  applying  loss  factors to
outstanding  loans and unused  commitments,  in each case based on the  internal
risk  grade of those  loans.  Changes  in risk  grades  of both  performing  and
non-performing  loans affect the amount of the formula allowance.  On the larger
criticized  or  classified  credits,  a review is  conducted  of the  underlying
collateral  that secures each credit.  A worse case scenario review is conducted
on  those  loans to  calculate  the  amount,  if any,  of  potential  loss.  The
historical  loan loss method is a review of the last six years of actual losses.
The loss percentage is calculated and applied to the current  outstanding  loans
in total.

     Various conditions that would affect the loan portfolio are also evaluated.
General economic and business conditions that affect the portfolio are reviewed,
including:  1)  credit  quality  trends,   including  trends  in  past  due  and
non-performing  loans;  2)  collateral  values in general;  3) loan  volumes and
concentration;   4)  recent  loss  experience  in  particular  segments  of  the
portfolio;  5) duration  and  strength of the current  business  cycle;  6) bank
regulatory  examination  results;  and 7) findings of the  external  loan review
process.  Senior  management  and the Directors'  General Loan Committee  review
these conditions quarterly. If any of these conditions presents a problem to the
loan portfolio, an additional allocation may be recommended.



                                       -11-
<PAGE>
      The following table sets forth information  concerning the activity in the
allowance for loan losses during the periods indicated (dollars in thousands):

                                                      At December 31,
                                                1999        1998       1997
                                              ---------   ---------  ---------
Allowance at beginning of period............. $  1,984    $  1,647   $  1,610
Charge-offs:
  Real estate loans..........................      144         195          -
  Commercial loans...........................      274         212         52
  Consumer loans.............................       42          19         39
                                              ---------- ----------  ---------
      Total charge-offs......................      460         426         91
Recoveries:
  Real estate loans..........................        -           -          -
  Commercial loans...........................       31           9         38
  Consumer loans.............................        1           2          -
                                              ---------- ----------  ---------
      Total recoveries.......................       32          11         38
Net charge-offs..............................      428         415         53
Provision for loan losses....................      785         752         90
                                              ---------- ----------  ---------
Allowance at end of period................... $  2,341   $   1,984   $  1,647
                                              ========== ==========  =========

      The following  table presents  information  regarding the Company's  total
allowance  for loan losses as well as its general  allocation  of such amount to
the  various  loan  categories  based upon  management's  estimates  (dollars in
thousands):
                              Dec. 31, 1999    Dec. 31, 1998     Dec. 31, 1997
                            ---------------- ----------------- -----------------
Allowance Allocation               Percentage       Percentage       Percentage
                                   of Loan          of Loan          of Loan
                            Amount Portfolio Amount Portfolio Amount Portfolio
                            ------ --------- ------ --------- ------ ---------
Performing/not classified:
Commercial Loans..........  $  448     24%   $  485     27%   $  368     31%
Real Estate Loans.........   1,063     64       607     59       459     53
Consumer Loans............      78      7       121      7        92      9
                            ------  ------   ------  ------   ------  ------
Subtotal..................   1,589     95     1,213     93       919     93

Non-performing/ classified:
Marginal..................     112      3        29      3         2      5
Substandard...............     362      2       677      4       483      2
Doubtful..................       -      0        51      0         -      0
Loss......................       -      0         -      0         -      0
                            ------  ------   ------  ------   ------  ------
Subtotal..................     474      5       757      8       485      7
Unallocated...............     278      0        14      0       243      0
                            ------  ------   ------  ------   ------  ------
Total.....................  $2,341    100%   $1,984    100%   $1,647    100%
                            ======  ======   ======  ======   ======  ======





                                      -12-
<PAGE>
      Nonperforming Assets.  Nonperforming assets include (i) loans which are 90
days or more  past  due and have  been  placed  into  non-accrual  status,  (ii)
accruing loans that are 90 days or more delinquent that are deemed by management
to be adequately secured and in the process of collection,  and (iii) ORE (i.e.,
real estate acquired through  foreclosure or deed in lieu of  foreclosure).  All
delinquent  loans are reviewed on a regular basis and are placed on  non-accrual
status  when,  in the  opinion of  management,  the  possibility  of  collecting
additional  interest is deemed  insufficient  to warrant further  accrual.  As a
matter of  policy,  interest  is not  accrued  on loans past due 90 days or more
unless the loan is both well secured and in process of  collection.  When a loan
is placed in non-accrual status, interest accruals cease and uncollected accrued
interest is reversed and charged  against current  income.  Additional  interest
income on such loans is recognized only when received.

      The following  table sets forth  information  regarding the  components of
nonperforming assets at the dates indicated (dollars in thousands):

                                                  At December 31,
                                           1999          1998           1997
                                       ------------  ------------   ------------
Real estate loans..................    $    1,462    $    2,820     $      374
Commercial loans...................           453         1,181             26
Consumer loans.....................             -             -              -
                                       ------------  ------------   ------------
   Total non-accrual loans.........         1,915         4,001            400
Other Real Estate..................         1,528         1,015              -
Accruing Loans 90 days past due               441           449            251
                                       ------------  ------------   ------------
   Total nonperforming assets......    $    3,884    $    5,465     $      651
                                       ============  ============   ============

      The  amount of gross  interest  income  that  would  have  been  earned on
nonperforming loans was $43 thousand at December 31, 1999.

Competition

      The banking industry in general, and the Bank's market area in particular,
are  characterized  by  significant  competition  for both  deposits and lending
opportunities.  In its market  area,  the Bank  competes  with other  commercial
banks,  thrift  institutions,  credit unions,  finance companies,  mutual funds,
insurance  companies,  brokerage and investment banking firms, and various other
non-bank providers of financial services.  Competition for deposits may have the
effect of increasing the rates of interest the Bank will pay on deposits,  which
would  increase the Bank's cost of funds and possibly  reduce its net  earnings.
Competition  for loans may have the effect of lowering  the rate of interest the
Bank will receive on its loans,  which would lower the Bank's return on invested
assets and possibly reduce its net earnings. Many of the Bank's competitors have
been in existence for a  significantly  longer period of time than the Bank, are
larger and have greater  financial and other  resources and lending  limits than
the Bank, and may offer certain services that the Bank does not provide.

      There are  approximately 282 branch offices of commercial banks and thrift
institutions operating in Pinellas County. In order to compete effectively,  the
Bank  seeks  to  differentiate   its  services  from  those  offered  by  larger
institutions,  including the branch  offices of large regional and national bank
holding companies.  The Bank seeks to provide banking products and services that
are customized to its market area and target customers on a personalized  basis,

                                      -13-
<PAGE>
which management  believes cannot be matched by many of the larger  institutions
that tend to offer many banking  products and services on an  impersonal  basis.
Management  believes  that,  as  the  banking  industry  has  undergone  further
consolidation, the opportunity to attract customers seeking personalized service
has been  enhanced.  The Bank seeks to tailor its  products  and services to its
specific  geographic market and targeted  customers,  and to thereby attract the
business of professionals,  entrepreneurs,  and small to medium sized commercial
businesses  while continuing to provide  exceptional  banking services to all of
its customers. The profitability of the Bank depends upon its ability to compete
effectively in its market area. While management  believes that the Bank's local
ownership,  community  oriented  operating  philosophy and personalized  service
enhances  the Bank's  ability to  compete  in its market  area,  there can be no
assurance that the Bank will be able to continue to compete  effectively or that
competitive  factors  will not have an adverse  effect on the  Bank's  operating
results or financial condition.

Employees

      At  December  31,  1999,  the  Company  had 87  full-time  and 7 part-time
employees,  none of whom were  represented by a union or subject to a collective
bargaining  agreement.  The Company believes its relations with its employees to
be good.

Supervision and Regulation

      The Company and the Bank are extensively  regulated under both federal and
state law.  The  following  is a brief  summary of certain  statutes,  rules and
regulations affecting the Company and the Bank. This summary is qualified in its
entirety by reference to the  particular  statutory  and  regulatory  provisions
referenced  below and is not  intended to be an  exhaustive  description  of the
statutes or  regulations  applicable  to the  Company's  business.  Supervision,
regulation and  examination  of the Company and the Bank by the bank  regulatory
agencies are intended  primarily  for the  protection  of  depositors  and other
customers rather than shareholders.

      Regulation  of  the  Company.  The  Company  is  a  bank  holding  company
registered  with the Federal Reserve under the Bank Holding Company Act of 1956,
as amended  ("BHC  Act").  As such,  the Company is subject to the  supervision,
examination and reporting requirements of the BHC Act and the regulations of the
Federal Reserve.

      The BHC Act  requires  every  bank  holding  company  to obtain  the prior
approval of the Federal  Reserve  before:  (i) it may acquire direct or indirect
ownership  or  control  of  any  voting  shares  of  any  bank  if,  after  such
acquisition, the bank holding company will directly or indirectly own or control
more  than  5% of  the  voting  shares  of  the  bank;  (ii)  it or  any  of its
subsidiaries,  other than a bank,  may acquire all or  substantially  all of the
assets of the bank;  or (iii) it may merge or  consolidate  with any other  bank
holding company.  Similar federal  statutes  require bank holding  companies and
other companies to obtain the prior approval of the Office of Thrift Supervision
("OTS") before acquiring ownership or control of a federal savings association.

      The BHC Act further  provides that the Federal Reserve may not approve any
transaction  that would result in a monopoly or would be in  furtherance  of any
combination or conspiracy to monopolize or attempt to monopolize the business of
banking  in any  section  of the  United  States,  or the effect of which may be
substantially  to  lessen  competition  or to tend to create a  monopoly  in any

                                      -14-
<PAGE>
section of the  country,  or that in any other  manner  would be in restraint of
trade,  unless the  anti-competitive  effects of the  proposed  transaction  are
clearly  outweighed by the public  interest in meeting the convenience and needs
of the community  served.  The Federal  Reserve is also required to consider the
financial  and  managerial  resources  and future  prospects of the bank holding
companies and banks  concerned and the  convenience and needs of the communities
to be served.  Consideration of financial resources generally focuses on capital
adequacy,  and  consideration  of  convenience  and needs  issues  includes  the
parties'  performance  under the Community  Reinvestment Act of 1977, as amended
(the "CRA").

      The BHC Act,  as  amended  by the  interstate  banking  provisions  of the
Riegle-Neal  Interstate  Banking  and  Branching  Efficiency  Act of  1994  (the
"Interstate  Banking  Act"),  authorizes  (i) the  Company,  and any other  bank
holding company located in Florida to acquire a bank located in any other state,
and (ii) any bank  holding  company  located  outside  Florida  to  acquire  any
Florida-based  bank,  regardless  of state law to the  contrary,  in either case
subject   to  certain   deposit-percentage,   aging   requirements,   and  other
restrictions.  The Interstate  Banking Act also generally provides that national
and state-chartered banks may branch interstate through acquisitions of banks in
other  states,  unless  a state  has  "opted  out" of the  interstate  branching
provisions of the Interstate  Banking Act prior to June 1, 1997. Neither Florida
nor  any  other  state  in the  southeastern  United  States  has  "opted  out".
Accordingly,  the Company would have the ability to acquire a bank in a state in
the Southeast and thereafter  consolidate  all of its bank  subsidiaries  into a
single bank with interstate branches.

      The BHC Act  generally  prohibits  the Company from engaging in activities
other  than  banking  or  managing  or  controlling  banks or other  permissible
subsidiaries  and from acquiring or retaining  direct or indirect control of any
company engaged in any activities other than those activities  determined by the
Federal  Reserve to be so closely  related to banking or managing or controlling
banks as to be a proper incident thereto.

      In determining whether a particular  activity is permissible,  the Federal
Reserve must consider whether the performance of such an activity reasonably can
be expected to produce  benefits  to the  public,  such as greater  convenience,
increased  competition,  or gains in efficiency,  that outweigh possible adverse
effects,  such  as  undue  concentration  of  resources,   decreased  or  unfair
competition, conflicts of interest, or unsound banking practices. The investment
management,  data processing,  administrative  and accounting  support and asset
custody  services  offered by EPW and United Trust have been  determined  by the
Federal Reserve to be permissible activities of bank holding companies.  The BHC
Act does not place territorial  limitations on permissible nonbanking activities
of bank holding companies.  Despite prior approval,  the Federal Reserve has the
power to order a bank holding company or its non-bank  subsidiaries to terminate
any activity or to terminate its ownership or control of any subsidiary  when it
has  reasonable  cause to believe  that  continuation  of such  activity or such
ownership  or  control  constitutes  a  serious  risk to the  financial  safety,
soundness, or stability of any bank subsidiary of the holding company.

      Under Federal Reserve policy,  bank holding  companies are expected to act
as a source of financial  strength and support to their subsidiary  banks.  This
support may be required at times when,  absent such Federal Reserve policy,  the
holding  company may not be inclined  to provide  it. In  addition,  any capital
loans by a bank holding  company to any bank subsidiary are subordinate in right
of payment to deposits  and to certain  other  indebtedness  of such  subsidiary

                                    -15-
<PAGE>
bank. In the event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to maintain the capital
of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority payment.

      Financial  Services  Modernization  Legislation.  On November 12, 1999 the
President signed into law the  Gramm-Leach-Bliley  Act ("Act"), a sweeping piece
of financial  services  reform  legislation  that for the first time will permit
commercial  banks to affiliate  with  investment  banks and insurance  companies
through  a  holding  company  structure  and will  greatly  expand  the range of
activities in which bank affiliates and subsidiaries may engage. The Act repeals
key provisions of the Glass-Steagall Act of 1933 that have heretofore prohibited
banks  from  affiliating   with  entities  engaged   principally  in  securities
underwriting   activities   and   overrides   those  state  laws  that  prohibit
affiliations of banks and insurance companies or either discriminate  against or
have a substantially adverse effect on banks selling insurance.

      The Act amends the BHC Act to authorize new "financial  holding companies"
("FHCs").  Under the FHC  provisions  of the Act, a BHC can qualify to become an
FHC if all of its bank and thrift  subsidiaries  are well  capitalized  and well
managed and have a Community  Reinvestment Act ("CRA") rating of  "satisfactory"
or better.  Once a BHC become an FHC, it is permitted to conduct any securities,
insurance and merchant banking activities,  as well as any other activities that
are  "financial  in  nature"  or  incidental  or  complementary  to a  financial
activity,  such as developing  financial  software,  hosting  internet web sites
relating  to  financial  matters  and  operating  a  travel  agency.  Under  the
regulatory  structure prescribed by the Act, the Federal Reserve will act as the
"umbrella   regulator"  for  the  FHC,  with  each  FHC  subsidiary  subject  to
supervision and regulation by its own functional regulator or agency.

      The Act also gives banks the option of conducting certain  newly-permitted
financial  activities  in a  subsidiary  rather  than  using an FHC.  Banks that
satisfy the well  capitalized,  well managed and CRA requirements  applicable to
FHCs will be able to establish  "financial  subsidiaries"  that are permitted to
conduct all  financial  activities  as agency and some  financial  activities as
principal  such  as  securities  underwriting.  The  main  activities  in  which
financial subsidiaries are prohibited from engaging are insurance  underwriting,
real estate development and, at least for the next five years, merchant banking.

      In addition to enabling  banks and their  holding  companies  to conduct a
wide range of financial  activities,  the Act also  contains a number of privacy
requirements  with which banks and other  financial  institutions  must  comply.
Under the Act, all financial  institutions  must adopt a privacy policy and make
its policy known to those who become new customers and provide annual disclosure
of its policy to all of its customers.  They must also give their  customers the
right to "opt out" whenever they want to disclose nonpublic customer information
to  non-affiliates.  An exception to this opt out  requirement is made where the
third party is  performing  services on behalf of the financial  institution  or
pursuant to a joint agreement.  Financial institutions are also required to take
such  steps as are  necessary  to insure the  security  and  confidentiality  of
customer records and information and to protect against  unauthorized  access to
or use of such records or information.

      Regulation  of the  Bank.  The Bank is  organized  as a  Florida-chartered
commercial  bank and is regulated and  supervised  by the Florida  Department of
Banking and Finance (the "Department").  In addition,  the Bank is regulated and
supervised by the Federal Reserve, which serves as its primary federal regulator

                                      -16-
<PAGE>
and, to a lesser extent, by the Federal Deposit Insurance  Corporation  ("FDIC")
as the administrator of the fund that insures the Bank's deposits.  Accordingly,
the Department and the Federal Reserve conduct regular examinations of the Bank,
reviewing  the  adequacy  of the  loan  loss  reserves,  quality  of  loans  and
investments,  propriety  of  management  practices,  compliance  with  laws  and
regulations,  and other aspects of the Bank's  operations.  In addition to these
regular  examinations,  the Bank must furnish to the Federal  Reserve  quarterly
reports  containing  detailed  financial  statements and schedules.  The capital
ratios of the Bank at  December  31,  1999 all  exceed  the  current  regulatory
minimum guidelines for a "well capitalized" bank.

      Federal and Florida banking laws and  regulations  govern all areas of the
operations of the Bank, including reserves, loans, mortgages, capital, issuances
of  securities,  payment of dividends,  and  establishment  of branches.  As its
primary  federal  regulator,   the  Federal  Reserve  has  authority  to  impose
penalties,  initiate  civil and  administrative  actions  and take  other  steps
intended to prevent the Bank from engaging in unsafe or unsound  practices.  The
Bank is a member of the Bank  Insurance  Fund ("BIF") and, as such,  deposits in
the Bank are insured by the FDIC to the maximum extent permissible by law.

      The Bank is subject to the  provisions of the CRA. Under the CRA, the Bank
has a continuing and affirmative  obligation  consistent with its safe and sound
operation  to help meet the credit  needs of its entire  communities,  including
low- and  moderate-income  neighborhoods.  The CRA does not  establish  specific
lending  requirements or programs for financial  institutions  nor does it limit
the Bank's  discretion  to develop the types of products  and  services  that it
believes are best suited to their  particular  communities,  consistent with the
CRA. The CRA requires the  appropriate  federal bank  regulatory  agency (in the
case of the Bank,  the  Federal  Reserve),  in  connection  with  their  regular
examinations,  to assess a financial  institution's record in meeting the credit
needs of the  community  serviced  by it,  including  low-  and  moderate-income
neighborhoods.   A  federal   banking   agency's   assessment   of  a  financial
institution's  CRA  record  is  made  available  to the  public.  Further,  such
assessment is required whenever the institution  applies to, among other things,
establish a new branch that will accept deposits, relocate an existing office or
merge or  consolidate  with, or acquire the assets of or assume the  liabilities
of, a federally-regulated  financial institution.  In the case where the Company
applies  for  approval  to acquire a bank or other  bank  holding  company,  the
federal regulator  approving the transaction will also assess the CRA records of
the Bank.  The Bank  received a  "Satisfactory"  CRA  rating in its most  recent
examination.

      In April 1995, the federal banking  agencies adopted  amendments  revising
their  CRA  regulations,   with  a  phase-in  schedule   applicable  to  various
provisions. Among other things, the amended CRA regulations,  which became fully
effective on July 1, 1997,  substitute  for the prior  process-based  assessment
factors a new  evaluation  system  that will  rate an  institution  based on its
actual  performance in meeting  community  needs. In particular,  the system now
focuses on three tests: (i) a lending test, to evaluate the institution's record
of making loans in its service areas;  (ii) an investment  test, to evaluate the
institution's record of investing in community development projects; and (iii) a
service test,  to evaluate the  institution's  delivery of services  through its
branches  and other  offices.  The amended CRA  regulations  also clarify how an
institution's CRA performance will be considered in the application process. The
Company  does not  anticipate  that the  revised CRA  regulations  will have any
material impact on the Bank's operations or its CRA rating.


                                      -17-
<PAGE>
      Deposit  Insurance.   The  Bank  is  subject  to  FDIC  deposit  insurance
assessments.  The Bank is also  subject to a  risk-based  assessment  system for
insured  depository  institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The system
assigns an institution to one of three capital categories: (i) well capitalized,
(ii) adequately capitalized, and (iii) undercapitalized.  An institution is also
assigned, by the FDIC, to one of three supervisory subgroups within each capital
group. The supervisory  subgroup to which an institution is assigned is based on
a  supervisory  evaluation  provided  to the FDIC by the  institution's  primary
federal  regulator  and  information  the FDIC  determines to be relevant to the
institution's  financial  condition and the risk posed to the deposit  insurance
funds  (which  may  include,   if  applicable,   information   provided  by  the
institution's state supervisor).  An institution's  insurance assessment rate is
then determined based on the capital category and supervisory  category to which
it  is  assigned.  Under  the  risk-based  assessment  system,  there  are  nine
assessment  risk  classifications  (i.e.,  combinations  of  capital  groups and
supervisory   subgroups)  to  which  different  assessment  rates  are  applied.
Assessment  rates on deposits for an institution in the highest  category (i.e.,
"well capitalized" and "healthy") are less than assessment rates on deposits for
an institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern").

      In addition to FDIC  insurance  assessments,  the Bank is also  subject to
assessments  used to pay interest on bonds issued by the  Financing  Corporation
(the "FICO") under the Deposit  Insurance Funds Act (the "Funds Act").  Prior to
enactment of the Funds Act, only insurance payments by SAIF-member  institutions
were available to satisfy FICO's interest payment  obligations.  Through the end
of 1999, the FICO assessment rate on BIF-assessable  deposits is required by the
statute to be one-fifth of the SAIF rate. Thereafter,  FICO assessment rates for
members of both insurance funds will presumably be equalized.

      Currently,  the FICO assessment rate for BIF-assessable  deposits is 0.013
percent (or 1.3 basis points) and the FICO  assessment  rate for SAIF assessable
deposits is 0.0648  percent (or 6.48 basis  points).  In 1999,  the Bank's total
FICO  payment  obligation  was  $16,935,  all of which was  attributable  to the
BIF-assessable deposits. The Bank has no SAIF assessable deposits.

      Capital Requirements. The Company and the Bank are required to comply with
the capital adequacy  standards  established by the Federal  Reserve.  There are
three basic measures of capital adequacy for banks that have been promulgated by
the  Federal  Reserve;  two  risk-based  measures  and a leverage  measure.  All
applicable  capital standards must be satisfied for a bank holding company and a
bank to be considered in compliance.

      The risk-based  capital standards are designed to make regulatory  capital
requirements  more sensitive to differences in risk profile among banks and bank
holding companies,  to account for off-balance-sheet  exposure,  and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet  items are
assigned to broad risk categories,  each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total  risk-weighted  assets
and off-balance-sheet items.

      The minimum guidelines for the ratio of total capital ("Total Capital") to
risk-weighted assets (including certain off-balance-sheet items, such as standby
letters  of  credit)  is 8.0%.  At  least  half of Total  Capital  (i.e.,  4% of
risk-weighted  assets) must  comprise  common stock,  minority  interests in the
                                      -18-


<PAGE>
equity accounts of consolidated subsidiaries,  noncumulative perpetual preferred
stock,  and a limited  amount of  cumulative  perpetual  preferred  stock,  less
goodwill and certain other intangible  assets ("Tier 1 Capital").  The remainder
may consist of subordinated debt, other preferred stock, and a limited amount of
loan loss  reserves  ("Tier 2 Capital").  In addition,  the Federal  Reserve has
established minimum leverage ratio guidelines for bank holding companies.  These
guidelines provide for a minimum ratio of Tier 1 Capital to average assets, less
goodwill and certain other intangible  assets, of 3% for banks that meet certain
specified  criteria,  including having the highest  regulatory rating. All other
bank holding companies generally are required to maintain a leverage ratio of at
least 3%, plus an additional  cushion of 100 to 200 basis points. The guidelines
also provide that bank holding companies  experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels, without significant reliance on intangible
assets.  Furthermore,  the Federal Reserve has indicated that it will consider a
"tangible Tier 1 Capital  leverage ratio"  (deducting all intangibles) and other
indicators  of capital  strength in  evaluating  proposals  for expansion or new
activities. As of December 31, 1999 the Company's leverage ratio was 10.65%.

      The FDIC Improvement Act of 1991 ("FDICIA")  contains  "prompt  corrective
action" provisions  pursuant to which banks are to be classified into one of the
five categories based upon capital adequacy,  ranging from "well capitalized" to
"critically undercapitalized", and which require (subject to certain exceptions)
the  appropriate  federal banking agency to take prompt  corrective  action with
respect to an  institution  that  becomes  "significantly  undercapitalized"  or
"critically undercapitalized".

      The Federal Reserve has issued final  regulations to implement the "prompt
corrective action" provisions of the FDICIA. In general,  the regulations define
the five capital categories as follows: (i) an institution is "well capitalized"
if it has a total  risk-based  capital  ratio  of 10% or  greater,  has a Tier 1
risk-based capital ratio of 6% or greater, has a leverage ratio of 5% or greater
and is not  subject  to any  written  capital  order  or  directive  to meet and
maintain a specific capital level for any capital measures;  (ii) an institution
is "adequately  capitalized" if it has a total risk-based capital ratio of 8% or
greater,  has a Tier 1  risk-based  capital  ratio of 4% or  greater,  and has a
leverage ratio of 4% or greater;  (iii) an institution is  "undercapitalized" if
it has a total risk-based capital ratio of less than 8%, has a Tier 1 risk-based
capital ratio that is less than 4% or has a leverage ratio that is less than 4%;
(iv)  an  institution  is  "significantly  undercapitalized"  if it has a  total
risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital ratio
that is less  than 3% or a  leverage  ratio  that is less  than  3%;  and (v) an
institution is "critically  undercapitalized"  if its "tangible equity" is equal
to or less than 2% of its total  assets.  The  Federal  Reserve  also,  after an
opportunity for a hearing,  has authority to downgrade an institution from "well
capitalized"   to  "adequately   capitalized"   or  to  subject  an  "adequately
capitalized"  or  "undercapitalized"  institution  to  the  supervisory  actions
applicable to the next lower category,  for supervisory concerns.  The degree of
regulatory  scrutiny  of  a  financial   institution  will  increase,   and  the
permissible  activities of the institution  will decrease,  as it moves downward
through the  capital  categories.  Institutions  that fall into one of the three
undercapitalized  categories may be required to (i) submit a capital restoration
plan;  (ii) raise  additional  capital;  (iii)  restrict  their growth,  deposit
interest  rates,  and other  activities;  (iv) improve  their  management;  (iv)
eliminate  management  fees;  or (vi) divest  themselves of all or part of their
operations.  Bank holding companies  controlling  financial  institutions can be
called upon to boost the  institutions'  capital and to partially  guarantee the

                                      -19-
<PAGE>
institutions'  performance under their capital restoration plans. As of December
31, 1999, the Company met the criteria to be considered well  capitalized,  with
Tier 1 and total  capital  equal to 12.9% and  14.15%  of its  respective  total
risk-weighted  assets. While the Company's capital levels have been in excess of
those required to be maintained by a "well capitalized"  financial  institution,
rapid growth, poor loan portfolio performance,  or poor earnings performance, or
a combination of these factors, could change the Company's capital position in a
relative short period of time, making an additional capital infusion necessary.

      Dividends. As a Florida-chartered  commercial bank, the Bank is subject to
the laws of Florida as to the payment of dividends.  Under the Florida Financial
Institutions  Code,  the prior  approval  of the  Department  is required if the
dividend  declared by a bank in any quarter or  semiannual or annual period will
exceed the sum of the bank's net profits for that  period and its  retained  net
profits for the preceding two years.

      Under Federal law, if, in the opinion of the federal banking regulator,  a
bank or thrift under its  jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which,  depending on the financial  condition of the
depository institution,  could include the payment of dividends), such regulator
may require,  after notice and hearing,  that such institution  cease and desist
from such  practice.  The federal  banking  agencies have  indicated that paying
dividends that deplete a depository  institution's capital base to an inadequate
level  would be an  unsafe  and  unsound  banking  practice.  Under  the  Prompt
Corrective  Action  regulations  adopted  by the  federal  banking  agencies,  a
depository  institution  may not pay any  dividend  to its  holding  company  if
payment  would  cause  it  to  become  undercapitalized  or  if  it  already  is
undercapitalized.

      Federal Reserve System. The Federal Reserve  regulations  require banks to
maintain   non-interest-earning  reserves  against  their  transaction  accounts
(primarily NOW and regular checking accounts).  The Federal Reserve regulations,
effective  November 30, 1999,  generally  require  that  reserves be  maintained
against aggregate  transaction accounts as follows: (i) for accounts aggregating
$44.3  million or less the  reserve  requirement  is 3%;  and (ii) for  accounts
greater than $44.3 million, the reserve requirement is $1.329 million plus 10.0%
against that portion of total  transaction  accounts in excess of $44.3 million.
The first $5.0 million of otherwise  reservable  balances are exempted  from the
reserve  requirements.  As of December 31, 1999, the Bank was in compliance with
the  foregoing  requirements.  The  balances  maintained  to  meet  the  reserve
requirements  imposed by the Federal  Reserve  may be used to satisfy  liquidity
requirements  imposed by the Department.  These reserve requirements are subject
to annual adjustments by the Federal Reserve and higher reserve requirements may
be imposed in the future.  Because  required  reserves must be maintained in the
form of either vault cash, a  noninterest-bearing  account at a Federal  Reserve
Bank or a pass-through  account as defined by the Federal Reserve, the effect of
this reserve requirement is to reduce the Bank's interest-earning assets.

      Liquidity.  Under  Florida  banking  regulations,  the Bank is required to
maintain  a  daily  liquidity  position  equal  to at  least  15% of  its  total
transaction  accounts and 8% of its total  nontransaction  accounts,  less those
deposits of public funds for which security has been pledged as provided by law.
The Bank may satisfy its  liquidity  requirements  with cash on hand  (including
cash items in process of  collection),  deposits held with the Federal  Reserve,
demand   deposits   due  from   correspondent   banks,   Federal   funds   sold,
interest-bearing  deposits  maturing in 31 days or less and the market  value of
certain unencumbered,  rated,  investment-grade securities and securities issued

                                      -20-
<PAGE>
by Florida or any county, municipality or other political subdivision within the
State. The Federal Reserve also reviews the Bank's liquidity position as part of
its   examination   and  imposes   similar   requirements   on  the  Bank.   Any
Florida-chartered  commercial  bank  that  fails to  comply  with its  liquidity
requirements  generally may not further diminish  liquidity either by making any
new loans (other than by discounting or purchasing  bills of exchange payable at
sight) or by paying  dividends.  At  December  31,  1999,  the Bank's net liquid
assets  exceeded  the  minimum  amount  required  under the  applicable  Florida
regulations.

      Monetary Policy and Economic  Controls.  The banking  business is affected
not only by general economic  conditions,  but also by the monetary  policies of
the Federal  Reserve.  Changes in the  discount  rate on member bank  borrowing,
availability of borrowing at the "discount window", open market operations,  the
imposition  of changes in reserve  requirements  against  bank  deposits and the
imposition of and changes in reserve  requirements against certain borrowings by
banks  and their  affiliates  are some of the  instruments  of  monetary  policy
available to the Federal Reserve.  The monetary  policies have had a significant
effect on the operating results of commercial banks and are expected to continue
to do so in the  future.  The  monetary  policies  of the  Federal  Reserve  are
influenced by various factors, including inflation,  unemployment and short- and
long-term changes in the international  trade balance and in the fiscal policies
of the United States Government. Future monetary policies and the effect of such
policies on the future business and earnings of the Bank cannot be predicted.

      Future Legislation. Various legislation is from time to time introduced in
Congress.  Such  legislation  may  change  banking  statutes  and the  operating
environment of the Company and its bank and non-bank subsidiaries in substantial
and  unpredictable  ways.  There is no assurance  that any  legislation  will be
enacted and, if enacted, the ultimate effect that any such potential legislation
or implementing  regulations would have upon the financial  condition or results
of operations of the Company.

Changes in Accounting Standards

      The Financial  Accounting  Standards  Board ("FASB")  recently  adopted or
issued  proposals  and  guidelines  that may have a  significant  impact  on the
accounting  practices  of  commercial   enterprises  in  general  and  financial
institutions in particular.

     In June,  1998 the FASB  issued  SFAS No. 133,  Accounting  for  Derivative
Instruments and Hedging Activities.  SFAS No. 133 requires entities to recognize
all  derivatives in their  financial  statements as either assets or liabilities
measured at fair value.  SFAS No. 133 also  specified  new methods of accounting
for hedging  transactions,  prescribes  the items and  transactions  that may be
hedged,  and  specifies  detailed  criteria  to be  met  to  qualify  for  hedge
accounting.  On adoption,  entities are  permitted to transfer  held-to-maturity
debt securities to the  available-for-sale or trading category.  SFAS No. 133 is
effective for fiscal years  beginning  after June 15, 1999. The adoption of SFAS
No. 133 for the year ended  December 31, 2000 is not expected to have a material
impact on the results of operations for the Company.

ITEM 2.    DESCRIPTION OF PROPERTY

      The principal executive offices of the Company,  the Bank and United Trust
are located in an office  building at 333 Third Avenue  North,  St.  Petersburg,
Florida 33701.  This facility was renovated in 1997, is owned by the Company and

                                      -21-
<PAGE>
has a total of five floors and approximately 47,400 square feet of usable space.
The Company and its subsidiaries  occupy a total of approximately  25,000 square
feet on the first two floors and a portion of the third  floor of the  building.
As of December  31,  1999,  the balance of the  building  was leased to tenants.
Adequate  parking,  lobby,  safe deposit boxes,  and  drive-thru  facilities are
provided to customers of the Bank at this location.

      The Bank has additional  branch locations at 5801 North 49th Street (North
Office),  5601 North Park Street (Five Towns  Office),  6500 Gulf Boulevard (St.
Pete Beach  Office),  and 7490 Bryan Dairy Road (Bryan  Dairy),  all in Pinellas
county Florida.  Except for the Five Towns Office, these facilities are owned by
the Company and offer both lobby and drive-thru banking facilities to the Bank's
customers. The Five Towns Office is leased for a term expiring October 31, 2001,
with four renewal options.

      EPW's main office is located in an office  building  in Tampa,  Florida in
which EPW leases  approximately  3,190 square feet of space  pursuant to a lease
expiring February 28, 2003, with no renewal option. EPW's Jacksonville,  Florida
office operates out of a private home owned by an officer of EPW.

ITEM 3.    LEGAL PROCEEDINGS

      The Company is a party to various legal proceedings in the ordinary course
of its business.  Based on information presently available,  management does not
believe that the ultimate outcome of such proceedings,  in the aggregate,  would
have a material adverse effect on the Company's financial  position,  results of
operations or liquidity.

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

         There  were  no  matters   submitted   to  a  vote  of  the   Company's
security-holders during the fourth quarter of its fiscal year ended December 31,
1999.

                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's  Common Shares are quoted on the Nasdaq SmallCap Market under
the  symbol  UFHI.  At the  close  of  business  on March 1,  2000,  there  were
outstanding  4,244,598 Common Shares which were held by approximately 325 record
and beneficial shareholders.

     The  following  table sets forth the high and low closing  sales prices for
the Common Shares as quoted by Nasdaq for the period indicated:

                                             High          Low
Year Ended December 31, 1998:
Fourth Quarter (from December 11, 1998)      $7.63        $7.25

Year Ended December 31, 1999:
First Quarter                                $7.75        $6.50
Second Quarter                               $7.50        $6.38
Third Quarter                                $7.25        $6.63
Fourth Quarter                               $7.19        $6.69



                                      -22-
<PAGE>
     Since 1995,  the Company has declared and paid  quarterly cash dividends on
the Common Stock to record holders of the Common Stock at each calendar  quarter
end,  payable  on the last day of the  following  month.  Starting  in the first
quarter of 1997,  such dividends were paid at the rate of $0.03 1/3 per share of
Common Stock until the third quarter of 1998, when a dividend of $0.04 per share
was declared.  These regular  quarterly cash dividends were declared  throughout
1999. The Company  currently has no plans to modify the amount or timing of such
dividends.

     The  Company is  primarily  a holding  company  with no  material  business
operations,  sources of income or assets of its own other than the shares of its
subsidiaries.   Because  substantially  all  of  the  Company's  operations  are
conducted through subsidiaries,  the Company's cash flow and, consequently,  its
ability to pay dividends or make other  distributions  is dependent  upon either
third-party  borrowings made by the Company or the cash flow of its subsidiaries
and the  payment  of funds by those  subsidiaries,  including  the Bank,  to the
Company  in the form of  loans,  dividends,  fees or  otherwise.  The  Company's
subsidiaries  are  separate  and  distinct  legal  entities  and  will  have  no
obligation, contingent or otherwise, to make any funds available, whether in the
form of  loans,  dividends  or  otherwise.  Regulatory  limitations  on the Bank
restrict its ability to make loans or distributions to the Company.

Use of Proceeds

     On December  10,  1998,  UFH Capital  Trust I ("UFH  Capital"),  a Delaware
statutory  business trust, all of the common equity interests of which are owned
by the Company,  and the  Company's  joint  Registration  Statement on Form SB-2
(Nos.   333-60431  and  333-60431-01)  (the  "Registration   Statement")  became
effective,  registering  the initial  public  offering by the Company of 450,000
shares of the  Company's  common  stock,  par value  $.01 per  share,  and up to
1,200,000  shares  of  9.4%  Cumulative   Trust  Preferred   Securities  with  a
liquidation  amount of $5 per share (the "Preferred  Securities"),  representing
preferred  undivided   beneficial  interests  in  the  assets  of  UFH  Capital.
Furthermore,  pursuant to such Registration Statement, the Company registered up
to an additional 67,500 shares of its common stock and UFH Capital registered up
to an additional  180,000  shares of Preferred  Securities in the event that the
managing   underwriter   for  the   offering,   William  R.  Hough  &  Co.  (the
"Underwriter"),   exercised   its  option  to  purchase  such  shares  to  cover
over-allotments.

     All of the gross proceeds  received by UFH Capital from the offering of the
Preferred  Securities and certain other funds of UFH Capital were invested in an
equivalent  amount of the Company's  9.4% Junior  Subordinated  Debentures  (the
"Junior Subordinated Debentures") totaling $6,959,200,  which were issued by the
Company  to  UFH  Capital.  All  of  the  Junior  Subordinated  Debentures  were
registered as part of the Registration  Statement.  In addition,  a guarantee of
the Company relating to the Preferred  Securities was also registered as part of
the  Registration  Statement.  The Company's and UFH  Capital's  initial  public
offerings  terminated on January 8, 1999, upon the exercise of the Underwriter's
over-allotment  option  with  respect  to the  Common  Stock  and the  Preferred
Securities.

     From  December 10, 1998,  through  December  31, 1998,  approximately  $2.7
million of the  estimated net offering  proceeds of $9,528,446  were used by the
Company to repay debt to the lender under the Company's  senior credit  facility
and $1.5 million was contributed to the capital of the Bank.


                                      -23-
<PAGE>
     In March  1999,  the  Company  purchased  a $250,000  equity  position,  or
approximately  5  percent,   in  United  Insurance   Holdings,   LC  ("Insurance
Holdings").  Insurance  Holdings  is  the  parent  company  of  United  Property
Insurance and Casualty Company,  Inc. The Company has the option to acquire,  at
its election, up to an aggregate of 20 percent of the common equity of Insurance
Holdings,   if  and  when  bank  holding  company  regulations  permit  such  an
investment.  Additionally, the Company originally made a $1 million loan advance
to  Insurance  Holdings  with a  maturity  date of June 8,  1999.  The  loan was
subsequently  renewed  for  another  60 day  term and a $0.5  million  principal
repayment  was made in July.  One  director  of the  Company  also  serves  as a
director of Insurance Holdings.

     In April  1999,  the  Company  purchased  a $500,000  equity  position,  or
approximately  2.2%  of the  outstanding  capital  stock,  in  Nexity  Financial
Corporation  ("Nexity").  Nexity  acquired an Alabama state  chartered  bank and
intends to pursue an internet  banking  business  strategy and ultimately  raise
additional capital in an initial public offering.

     The  remaining  net  offering  proceeds  are on deposit  in a  non-interest
bearing demand  deposit  account of the Company  established  with the Bank. The
Bank in turn is  using  those  funds  to fund  its  assets,  such as  loans  and
overnight investments.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1999 AND 1998

Comparison of Balance Sheets at December 31, 1999 and December 31, 1998

Overview

      Total  assets of the Company  were $209.5  million at December  31,  1999,
compared to $171.9 million at December 31, 1998, an increase of $37.6 million or
21.9%.  This increase was primarily the result of the Company's  internal growth
of earning assets (primarily loans) funded by an increase in deposits.

Investment Securities

      Investment  securities,  consisting  of U.S.  Treasury and federal  agency
securities,  obligations of state and political subdivisions and mortgage-backed
and corporate debt securities, were $24.4 million at December 31, 1999, compared
to $25.7  million at December 31,  1998, a decrease of $1.3 million or 5.1%.  At
December 31, 1999, the Company held certain securities  totaling $9.9 million as
available for sale. These securities have been recorded at market value.

Loans

      Total loans were $156.9  million at December 31, 1999,  compared to $119.2
million at December 31,  1998,  an increase of $37.7  million or 31.6%.  For the
same period,  real estate  mortgage  loans  increased by $30.7 million or 39.4%,
commercial  loans  increased  by $6.5  million  or 18.6%,  and all  other  loans
including  consumer  loans  increased  by $0.5  million or 8.4%.  Net loans were
$153.5 million at December 31, 1999,  compared to $116.5 million at December 31,
1998.



                                      -24-
<PAGE>
Asset Quality and Allowance for Loan Losses

      The  allowance  for loan losses  amounted to $2.3  million at December 31,
1999, compared to $2.0 million at December 31, 1998, an increase of $0.3 million
or 15.0%.  During 1999,  $460  thousand in loans were charged off, $785 thousand
was  added to the  allowance  for loan  losses  through a  provision,  which was
accounted for as an expense, reducing net income, and $33 thousand was recovered
from loans previously charged off.

Nonperforming Assets

      Nonperforming  assets were $3.9 million at December 31, 1999,  compared to
$5.5  million at December 31,  1998.  Nonperforming  assets at December 31, 1999
consisted  of  nonperforming  loans of $2.4  million and other real estate owned
(ORE) of $1.5 million. ORE owned consists of three properties, all of which have
been listed for sale.  Management  believes that these properties are carried at
values that are equal to their current market value.

Bank Premises and Equipment

      Bank  premises  and  equipment  were $9.6  million at December  31,  1999,
compared to $9.3  million at December  31,  1998,  an increase of $.3 million or
3.2%.  This increase was primarily due to the  acquisition  of a new branch site
and related  equipment,  less the  depreciation  of buildings  and equipment and
amortization of leasehold improvements

Deposits

      Total  deposits  were $175.1  million at December  31,  1999,  compared to
$139.1 million at December 31, 1998, an increase of $36.0 million or 25.9%. From
December 31, 1998 to December 31, 1999, demand deposits  increased $5.2 million,
NOW  and  money  market  deposits  increased  $19.3  million,  savings  deposits
increased $0.2 million, time deposits of $100 thousand or greater increased $5.2
million, and other time deposits increased $6.0 million.

Long-term Debt and Convertible Subordinated Debentures

      Long-term debt outstanding (excluding convertible subordinated debentures)
was $0 at December  31,  1999,  compared to $34 thousand at December 31, 1998, a
decrease of $34 thousand. The decrease was due to the repayment of the debt of a
subsidiary  of  the  Company.   In  addition,   $630  thousand  in   convertible
subordinated debentures were outstanding during both periods.

Mandatory Redeemable Capital Securities of Subsidiary Trust

      In December 1998, the Company,  through a statutory business trust created
and owned by the Company,  issued  $6,749,600  (including  an  overallotment  of
$749,600 that closed on January 14, 1999) of 9.40%  Cumulative  Trust  Preferred
Securities  that will mature on December 10, 2028.  The principal  assets of the
statutory  buiness  trust are  debentures  issued to the Company in an aggregate
amount of $6.96  million,  with an interest rate of 9.40% and a maturity date of
December 10,  2028.  See Note D of the  Consolidated  Financial  Statements  for
additional information.

Stockholders' Equity

      Stockholders'  equity was $16.8  million at December 31, 1999, or 8.02% of

                                      -25-
<PAGE>
total assets,  compared to $14.8  million,  or 8.61% of total assets at December
31,  1998.  At December  31, 1999,  the Bank's Tier I (core)  Capital  ratio was
7.16%,  its Tier I Risk-based  Capital ratio was 9.16%, and its Total Risk-based
Capital  ratio  was  10.41%.  The  capital  ratios  of the Bank at that date all
exceeded the minimum  regulatory  guidelines for an institution to be considered
"well  capitalized".  The  increase  in  stockholders'  equity  was  due  to the
Company's 1999 net income, less dividends declared.

Comparison of Results of Operations for the Years Ended December 31, 1999 and
1998

Overview

      Net income for the year ended  December 31, 1999 was $2.3 million or $0.54
per share  diluted,  compared to $1.8 million or $0.46 per share diluted for the
same period in 1998.  On a pre-tax  basis,  United Trust earned $679 thousand in
1999 versus $176  thousand in 1998,  EPW's  pre-tax  operating  profits  (before
deducting  $297  thousand  of costs  associated  with the  issuance  of  certain
performance  shares issued pursuant to the acquisition of EPW) increased to $302
thousand from $210 thousand  during this period and the Bank's  pre-tax  profits
increased to $3.8 million from $2.7 million during this same period.

Business Segment Information

      The Company's  operations  include  three  business  segments:  commercial
banking,   trust  services   (operated  through  United  Trust)  and  investment
management  services  (operated  through EPW).  The following are the results of
operations  for these three  segments for the years ended  December 31, 1999 and
1998 (dollars in thousands):

                                             Year Ended December 31, 1999
                                        Commercial United            Company
                                        Banking    Trust     EPW     Total
                                        ---------  -------  ------  ---------
Interest income.................        $  14,580  $   196  $    0  $  14,776
Interest expense................            5,264        0       0      5,264
                                        ---------  -------  ------  ---------
Net interest income.............            9,316      196       0      9,512
Loan loss provision.............              785        0       0        785
                                        ---------  -------  ------  ---------
Net interest income after
  loan loss provision...........            8,531      196       0      8,727
Noninterest income..............            2,001    1,630   1,593      5,224
General and Administrative
  ("G&A") expenses..............            6,760    1,108   1,588      9,456
Amortization of goodwill........               15       39       0         54
                                        ---------  -------  ------  ---------
Total noninterest expense.......            6,775    1,147   1,588      9,510
                                        ---------  -------  ------  ---------
Net income before taxes.........        $   3,757  $   679  $    5      4,441
                                        =========  ======== ======
Net corporate overhead expense..                                          786
Income tax expense..............                                        1,322
                                                                    ---------
Net income......................                                    $   2,333
                                                                    =========


                                      -26-
<PAGE>
                                           Year Ended December 31, 1998
                                        Commercial United            Company
                                        Banking    Trust     EPW     Total
                                        ---------  -------  ------   ---------
Interest income.................        $  12,561  $  171  $      0  $  12,732
Interest expense................            5,066       0         4      5,070
                                        ---------  ------   -------  ---------
Net interest income.............            7,495     171        (4)     7,662
Loan loss provision.............              752       0         0        752
                                        ---------  ------   -------  ---------
Net interest income after
  loan loss provision...........            6,743     171        (4)     6,910
Noninterest income..............            1,646     956     1,447      4,049
General and Administrative
  ("G&A") expenses..............            5,637     926     1,356      7,919
Amortization of goodwill........               15      25         1         41
                                        ---------  ------  --------  ---------
Total noninterest expense.......            5,652     951     1,357      7,960
                                        ---------  ------  --------  ---------
Net income before taxes.........        $   2,737  $  176  $     86      2,999
                                        =========  ======  ========
Net corporate overhead expense..                                           232
Income tax expense..............                                         1,010
                                                                     ---------
Net income......................                                     $   1,757
                                                                     =========

      Commercial Banking Activities. The Company's commercial banking activities
are  conducted  through the Bank.  Net interest  income of the Bank for the year
ended December 31, 1999 was $9.3 million,  compared to $7.5 million for the same
period  in 1998,  a $1.8  million  or  24.0%  increase.  Based on the  Company's
analysis of its loan  portfolio and loan loss reserve,  the loan loss  provision
was  increased to $785  thousand for 1999,  compared to $752  thousand for 1998.
Non-interest  income for 1999 was $2.0  million,  compared  to $1.6  million for
1998, an increase of $0.4 million or 25.0%. Total non-interest  expense was $6.8
million for 1999,  compared  to $5.7  million for 1998,  a 19.3%  increase.  Net
income  before  taxes was $3.8  million for 1999,  compared to $2.7  million for
1998, a 40.7% increase.

      Trust  Activities.  United Trust  reported net income before taxes of $679
thousand for the year ended  December 31,  1999,  compared to $176  thousand for
1998,  an   improvement  of  $503  thousand.   This   improvement   includes  an
extraordinary fee of $350 thousand from a trust account for services provided in
conjunction  with the sale of a closely  held  company as well as an increase in
the volume of trust accounts.

      Investment  Advisory  Activities.  Net income  before taxes for EPW was $5
thousand for the year ended December 31, 1999,  compared to $86 thousand for the
same  period  of 1998,  an $81  thousand  decrease.  In 1999,  expenses  of $297
thousand were incurred due to the issuance of "performance  shares"  pursuant to
the acquisition of EPW as compared to expenses of $124 thousand in 1998.  Income
before taxes without this expense would have been $302 thousand,  an increase of
$92  thousand  over 1998.  This  increase  would have been  primarily  due to an
increase in the volume of assets under management by EPW, resulting in part from
higher market values of the assets under management.



                                     -27-
<PAGE>
Analysis of Net Interest Income

      Net interest income for the year ended December 31, 1999 was $8.9 million,
compared to $7.4  million for the same period in 1998,  a $1.5  million or 20.3%
increase.  Interest  income was $14.7  million for the year ended  December  31,
1999,  compared to $12.7  million for the same period in 1998, a $2.0 million or
15.7%  increase.  Interest  expense was $5.8 million for the year ended December
31,  1999,  compared to $5.3 million for the same period in 1998, a $0.5 million
or 9.4% increase.

      The   following   tables   summarize   the   average   yields   earned  on
interest-earning   assets  and  the  average  rates  paid  on   interest-bearing
liabilities  for the  years  ended  December  31,  1999  and  1998  (dollars  in
thousands):
                                                Year Ended December 31, 1999
                                             ----------------------------------
                                              Average                   Average
                                              Balance      Interest     Rate
                                             ---------     ---------    -------
Summary of average rates/
  interest earning assets:
Interest earning assets:
  Loans, net(1)......................        $ 133,243     $  12,784     9.59%
  Securities:
  Investment securities - taxable....           25,344         1,613     6.36
  Investment securities - non-taxable              854            43     7.99
  Federal funds sold.................            5,454           270     4.95
                                             ---------     ---------
  Total earning assets...............          164,895        14,710     8.94%
  Non-earning assets.................           26,534
                                             ---------
Total average assets.................        $ 191,429
                                             =========
Interest bearing liabilities:
  NOW & money market.................        $  57,058     $   1,628     2.85%
  Savings............................            5,230           107     2.05
  Time, $100,000 & over..............           13,437         7,004     5.21
  Time other.........................           50,911         2,527     4.96
  Convertible subordinated
    Debentures.......................              630            50     8.00
  Long-term debt.....................               11             1     9.09
  Trust preferred securities.........            6,750           633     9.40
  Other borrowings...................            7,296           193     2.65
                                             ---------     ---------
Total interest bearing liabilities...          141,323         5,839     4.13

Non-Interest bearing liabilities:
  Deposits...........................           31,779
  Other..............................            2,354
  Stockholders' equity...............           15,973
                                             ---------
  Total liabilities and stockholders'        $ 191,429
   Equity............................        =========
  Net interest & net interest spread.                      $   8,871     4.80%
                                                           =========     ====
  Net interest margin................                                    5.40%
(1)   Includes non-accrual loans.                                        ====

                                      -28-
<PAGE>
                                                Year Ended December 31, 1998
                                             ----------------------------------
                                              Average                   Average
                                              Balance      Interest     Rate
                                             ---------     ---------    -------
Summary of average rates/
  interest earning assets:
Interest earning assets:
  Loans, net(1)......................        $ 102,197     $  10,382     10.16%
  Securities:
  Investment securities - taxable....           26,325         1,714      6.51
  Investment securities - non-taxable              570            31      8.63
  Federal funds sold.................            9,821           532      5.42
                                             ---------     ---------
  Total earning assets...............          138,913        12,659      9.13%
  Non-earning assets.................           22,711
                                             ---------
Total average assets.................        $ 161,624
                                             =========
Interest bearing liabilities:
  NOW & money market.................        $  50,328     $   1,564      3.11%
  Savings............................            4,742            97      2.05
  Time, $100,000 & over..............            9,850           534      5.42
  Time other.........................           49,455         2,669      5.40
  Convertible subordinated
    Debentures.......................              630            50      8.00
  Long-term debt.....................            2,329           200      8.59
  Trust preferred securities.........              300            28      9.40
  Other borrowings...................            4,736           126      2.66
                                             ---------     ---------
Total interest bearing liabilities...          122,370         5,268      4.30

Non-Interest bearing liabilities:
  Deposits...........................           25,276
  Other..............................            2,152
  Stockholders' equity...............           11,826
                                             ---------
  Total liabilities and stockholders'        $ 161,624
   Equity............................        =========
  Net interest & net interest spread.        $   7,391                    4.82%
                                             =========                    ====
  Net interest margin................                                     5.33%
(1)   Includes non-accrual loans.                                         ====















                                     -29-
<PAGE>
      The  following  table  reflects the change in net  interest  income due to
changes in the volume and rate of the Company's  assets and  liabilities for the
twelve month period ended December 31, 1999:

                                                      Increase (Decrease)
                                          --------------------------------------
Changes in net interest income                              Combination
   (dollars in thousands)                                   Rate/
                                           Volume    Rate   Volume     Total
                                          -------  ------  -------     --------
Interest earning assets:
  Loans, net...........................   $ 3,154   $(577)  $(175)     $  2,402
  Securities:
  Investment securities - taxable......       (64)    (38)      1          (101)
  Investment securities - non-taxable..        25      (4)     (9)           12
  Federal funds sold...................      (237)    (45)     20          (262)
                                          -------   -----   ------     --------
Total change in interest income........     2,878    (664)   (163)        2,051

Interest bearing liabilities:
  NOW & money market...................       209    (128)    (17)           64
  Savings..............................        10       -       -            10
  Time, $100,000 & over................       194     (21)     (7)          166
  Time other...........................        79    (214)     (7)         (142)
  Convertible subordinated debentures..         -       -       -             -
  Long-term debt.......................      (199)     12     (12)         (199)
  Trust preferred securities...........       606       -      (1)          605
  Other borrowings.....................        68      (1)      -            67
                                          -------   -----   ------     --------
Total change in interest expense.......       967    (352)    (44)          571
                                          -------   -----   ------     --------
Increase (decrease) in net interest
  income...............................   $ 1,911   $(312)  $(119)     $  1,480
                                          =======   =====   ======     ========

Noninterest Income

      Noninterest  income for the year ended  December 31, 1999 was $5.1 million
compared  to $4.1  million  for the same  period in 1998,  an  increase  of $1.0
million or 24.4%. This increase was primarily due to increased revenues from EPW
and United Trust whose combined  revenues  increased  $821 thousand  during this
period and include an  extraordinary  fee of $350  thousand from a trust account
for services  provided in  conjunction  with the sale of a closely held company.
Gain on sale of loans increased $203 thousand from the prior year.














                                      -30-
<PAGE>
      The following table indicates the components of noninterest income for the
years ended December 31, 1999 and 1998 (dollars in thousands):

                                               For the Years Ended December 31,
                                               ---------------------------------
                                                                     Increase/
                                                  1999      1998    (Decrease)
                                                --------  --------   --------
Service charges on deposit accounts.........    $   797   $   707    $    90
Trust and investment management income......      3,176     2,355        821
Other service charges, fees, and income.....        363       415        (52)
Loan servicing fees.........................        166       148         18
Net trading account profit..................         42        87        (45)
Income on cash value life insurance.........        135       137         (2)
Gain on sale of SBA loans...................        442       239        203
                                                --------  --------   ---------

Total noninterest income....................    $ 5,121   $ 4,088    $ 1,033
                                                ========  ========   =========

Noninterest Expense

      Total  noninterest  expense for the year ended  December 31, 1999 was $9.6
million,  compared to $8.0  million for the same period in 1998,  an increase of
$1.6 million or 20.0%.

      The following table reflects the components of noninterest expense for the
years ended December 31, 1999 and 1998 (dollars in thousands):

                                         For the Years Ended
                                            December 31,
                                                              Increase/
                                           1999      1998    (Decrease)
                                         --------  --------  ----------
Salaries and employee benefits........   $ 5,361   $ 4,631   $   730
Occupancy expense.....................       520       522        (2)
Furniture and equipment expense.......       607       512        95
Data processing expense...............       487       437        50
Legal and professional fees...........       175       121        54
Amortization of intangible assets.....        85        79         6
Advertising...........................       352       302        50
Telephone expense.....................       185       171        14
Stationery and supplies...............       177       137        40
Directors fees........................       191       191         -
Postage expense.......................       112        90        22
Consulting fees.......................       275        41       234
Other operating expenses..............     1,025       725       300
                                         --------  --------  -----------

Total noninterest expense.............   $ 9,552   $ 7,959   $ 1,593
                                         ========  ========  ===========







                                      -31-
<PAGE>
YEARS ENDED DECEMBER 31, 1998 AND 1997

Comparison of Balance Sheets at December 31, 1998 and December 31, 1997

Overview

      Total  assets of the Company  were $171.9  million at December  31,  1998,
compared to $147.3 million at December 31, 1997, an increase of $24.6 million or
16.7%.  This increase was primarily the result of the Company's  internal growth
of earning assets (primarily loans) funded by an increase in deposits.

Investment Securities

      Investment  securities,  consisting  of U.S.  Treasury and federal  agency
securities,  obligations of state and political subdivisions and mortgage-backed
and corporate debt securities, were $25.7 million at December 31, 1998, compared
to $21.6 million at December 31, 1997, an increase of $4.1 million or 19.0%.  At
December 31, 1998, the Company held certain securities totaling $14.5 million as
available for sale. These securities have been recorded at market value.

Loans

      Total loans were $119.2  million at December 31,  1998,  compared to $97.0
million at December 31,  1997,  an increase of $22.2  million or 22.9%.  For the
same period,  real estate  mortgage  loans  increased by $17.4 million or 28.7%,
commercial  loans  increased  by $4.4  million  or 14.3%,  and all  other  loans
including  consumer  loans  increased  by $0.3  million or 5.1%.  Net loans were
$116.5  million at December 31, 1998,  compared to $94.8 million at December 31,
1997.

Allowance for Loan Losses

      The  allowance  for loan losses  amounted to $2.0  million at December 31,
1998, compared to $1.6 million at December 31, 1997, an increase of $0.4 million
or 25.0%.  During 1998,  $426  thousand in loans were charged off, $752 thousand
was  added to the  allowance  for loan  losses  through a  provision,  which was
accounted for as an expense, reducing net income, and $10 thousand was recovered
from loans previously charged off.

Nonperforming Assets

      Nonperforming  assets were $5.5 million at December 31, 1998,  compared to
$.7 million at December  31,  1997.  Nonperforming  assets at December  31, 1998
consisted of nonperforming  loans of $4.0 million and ORE owned of $1.0 million.
A  nonperforming  loan in the amount of $1.3  million is being paid on a monthly
basis on a  pre-judgment  stipulation  and  interest  and  principal  are  being
recorded on a cash basis as received.  ORE owned consisted of one property which
has been listed for sale. Management believes that this property is carried at a
value that is equal to its current market value.

Bank Premises and Equipment

      Bank  premises  and  equipment  was $9.3  million at  December  31,  1998,
compared to $9.5  million at  December  31,  1997,  a decrease of $.2 million or
2.1%. This decrease was primarily due to depreciation of buildings and equipment
and amortization of leasehold improvements


                                      -32-
<PAGE>
Deposits

      Total  deposits  were $139.1  million at December  31,  1998,  compared to
$130.2  million at December 31, 1997, an increase of $8.9 million or 6.8%.  From
December 31, 1997 to December 31, 1998, demand deposits  decreased $0.7 million,
NOW  and  money  market  deposits  increased  $12.6  million,  savings  deposits
decreased $0.5 million, time deposits of $100 thousand or greater increased $1.8
million, and other time deposits decreased $4.3 million.

Long-term Debt and Convertible Subordinated Debentures

      Long-term debt outstanding (excluding convertible subordinated debentures)
was $34 thousand at December 31, 1998,  compared to $2.7 million at December 31,
1997,  a decrease  of $2.6  million.  The  majority of the  decrease  was due to
repayment  of debt with a portion  of the  proceeds  from the  Company's  public
offering. The remaining debt is payable to an unrelated bank. In addition,  $630
thousand in convertible  subordinated  debentures were  outstanding  during both
periods.

Mandatory Redeemable Capital Securities of Subsidiary Trust

      In December 1998, the Company,  through a statutory business trust created
and owned by the Company,  issued  $6,749,600  (including  an  overallotment  of
$749,600 that closed on January 14, 1999) of 9.40%  Cumulative  Trust  Preferred
Securities  which  will  mature  on  December  10,  2028.  See  Note  D  of  the
Consolidated Financial Statements for additional information.

Stockholders' Equity

      Stockholders'  equity was $14.8  million at December 31, 1998, or 8.61% of
total assets,  compared to $10.5  million,  or 7.13% of total assets at December
31,  1997.  At December  31, 1998,  the Bank's Tier I (core)  Capital  ratio was
7.44%,  its Tier I Risk-based  Capital ratio was 9.52%, and its Total Risk-based
Capital  ratio  was  10.78%.  The  capital  ratios  of the Bank at that date all
exceeded the minimum  regulatory  guidelines for an institution to be considered
"well  capitalized".  The increase in  stockholders'  equity was due to proceeds
from the Company's initial public offering and 1998 net income.

Comparison of Results of Operations  for the Years Ended  December 31, 1998 and
1997

Overview

      Net income for the year ended  December 31, 1998 was $1.8 million or $0.46
per share  diluted,  compared to $1.4 million or $0.38 per share diluted for the
same period in 1997.  On a pre-tax  basis,  United Trust earned $176 thousand in
1998 versus a loss of $114  thousand in 1997,  EPW's pre-tax  operating  profits
(before  deducting  $124  thousand  of costs  associated  with the  issuance  of
performance  shares)  increased to $210 thousand from $149 thousand  during this
period  and the Bank's  pre-tax  profits  increased  to $2.7  million  from $2.5
million during this same period.







                                      -33-
<PAGE>
Business Segment Information

      The Company's  operations  include  three  business  segments:  commercial
banking,   trust  services   (operated  through  United  Trust)  and  investment
management  services  (operated  through EPW).  The following are the results of
operations  for these three  segments for the years ended  December 31, 1998 and
1997 (dollars in thousands).

                                             Year Ended December 31,
                                                       1998
                                       Commercial United          Company
                                         Banking   Trust    EPW    Total
                                       --------  ------  -------  --------
Interest Income.....................   $ 12,561  $  171  $    0   $ 12,732
Interest Expense....................      5,066       0       4      5,070
                                       --------  ------  -------  --------
Net Interest Income.................      7,495     171      (4)     7,662
Loan Loss Provision.................        752       0       0        752
                                       --------  ------  -------  --------
Net Interest Income after loan loss       6,743     171      (4)     6,910
  Provision.........................
Noninterest Income..................      1,646     956   1,447      4,049
General and Administrative ("G&A")        5,637     926   1,356      7,919
  Expenses..........................
Other noninterest expense...........          0       0       0          0
Amortization of goodwill............         15      25       1         41
                                       --------  ------  ------  ---------
Total noninterest expense...........      5,652     951   1,357      7,960
                                       --------  ------  ------  ---------
Net Income before taxes.............   $  2,737  $   176 $   86      2,999
                                       ========  ======= ======
Net Corporate Overhead expense......                                   232
Income tax expense..................                                 1,010
                                                                 ---------
Net income..........................                             $   1,757
                                                                 =========






















                                      -34-
<PAGE>
                                          Year Ended December 31, 1997
                                       Commercial United         Company
                                         Banking   Trust    EPW   Total
                                       --------  ------  ------  --------
Interest Income.....................   $ 10,785  $    0  $    0  $ 10,785
Interest Expense....................      3,970       0       5     3,975
                                       --------  ------  ------  --------
Net Interest Income.................      6,815       0      (5)    6,810
Loan Loss Provision.................         90       0       0        90
                                       --------  ------  ------  --------
Net Interest Income after loan loss       6,725       0      (5)    6,720
  Provision.........................
Noninterest Income..................      1,286     765   1,238     3,289
General and Administrative ("G&A")        5,124     852   1,084     7,060
  Expenses..........................
Other noninterest expense...........        384       9       0       393
Amortization of goodwill............         15      18       0        33
                                       --------  ------  ------  --------
Total noninterest expense...........      5,523     879    1,084    7,486
                                       --------  ------  ------  --------
Net Income before taxes.............   $  2,488  $ (114) $   149    2,523
                                       ========  ======= ======= ========
Net Corporate Overhead expense......                                  253
Income tax expense..................                                  860
                                                                 --------
Net income..........................                             $  1,410
                                                                 ========

      Commercial Banking Activities. The Company's commercial banking activities
are  conducted  through the Bank.  Net interest  income of the Bank for the year
ended December 31, 1998 was $7.5 million,  compared to $6.8 million for the same
period  in 1997,  a $0.7  million  or  10.3%  increase.  Based on the  Company's
analysis of its loan  portfolio and loan loss reserve,  the loan loss  provision
was increased  substantially to $752 thousand for 1998, compared to $90 thousand
for  1997.  Non-interest  income  for 1998 was $1.6  million,  compared  to $1.3
million  for 1997,  an  increase of $0.3  million or 23.1%.  Total  non-interest
expense was $5.7  million for 1998,  compared to $5.5  million for 1997,  a 3.6%
increase.  Net income  before taxes was $2.7 million for 1998,  compared to $2.5
million for 1997, an 8.0% increase.

     The Bank's net income before taxes in 1997 included  several  non-recurring
noninterest  expenses.  In 1997,  the Bank took a  one-time  write-down  of $255
thousand in the value of a security held in portfolio and $129 thousand from the
write-off of leasehold  improvements  in a facility  that was  abandoned.  Other
increases in general and  administrative  expenses were substantially due to the
full year impact from a new branch which was opened in September 1996,  expenses
associated  with  moving  into the new  headquarters  building,  and  additional
employees  hired for  accounting and credit  administration  functions and other
support operations.

     Trust  Activities.  United Trust  reported net income  before taxes of $176
thousand  for the year  ended  December  31,  1998,  compared  to a loss of $114
thousand for 1997, an  improvement of $290 thousand.  This  improvement  was the
result of the increased volume of trust accounts.

      Investment  Advisory  Activities.  Net income before taxes for EPW was $86
thousand for the year ended December 31, 1998, compared to $149 thousand for the
same period of 1997, a $63 thousand decrease. In 1998, expenses of $124 thousand
                                     -35-
<PAGE>
were  incurred  due to the  issuance  of  "performance  shares"  pursuant to the
acquisition  agreement of EPW.  Income  before taxes  without this expense would
have been $210  thousand,  an increase of $61 thousand over 1997.  This increase
would have been  primarily  due to an  increase  in the  volume of assets  under
management  by EPW  resulting  from  higher  market  values of the assets  under
management.

Analysis of Net Interest Income
     Net interest  income for the year ended December 31, 1998 was $7.4 million,
compared to $6.7  million for the same period in 1997,  a $0.7  million or 10.4%
increase.  Interest  income was $12.7  million for the year ended  December  31,
1998,  compared to $10.8  million for the same period in 1997, a $1.9 million or
17.4%  increase.  Interest  expense was $5.3 million for the year ended December
31,  1998,  compared to $4.1 million for the same period in 1997, a $1.2 million
or 29.3% increase.

     The   following   table   summarizes   the   average   yields   earned   on
interest-earning   assets  and  the  average  rates  paid  on   interest-bearing
liabilities  for the  years  ended  December  31,  1998  and  1997  (dollars  in
thousands):
                                               Year Ended December 31, 1998
                                              Average                   Average
Summary of average rates/                     Balance      Interest     Rate
   interest earning assets:                  ---------     ---------    -------
Interest earning assets:
  Loans, net(1)......................        $ 102,197     $  10,382    10.16%
  Securities:
  Investment securities - taxable....           26,325         1,714     6.51
  Investment securities - non-taxable              570            31     8.63
  Federal funds sold.................            9,821           532     5.42
                                             ---------     ---------
  Total earning assets...............          138,913        12,659     9.13%
  Non-earning assets.................           22,711
                                             ---------
Total average assets.................        $ 161,624
                                             =========
Interest bearing liabilities:
  NOW & money market.................        $  50,328     $   1,564     3.11%
  Savings............................            4,742            97     2.05%
  Time, $100,000 & over..............            9,850           534     5.42
  Time other.........................           49,455         2,669     5.40
  Convertible subordinated
  Debentures.........................              630            50     8.00
  Long-term debt.....................            2,329           200     8.59
  Other borrowings...................            5,036           154     3.06
                                             ---------     ---------
Total interest bearing liabilities...          122,370         5,268     4.30
Non-Interest bearing liabilities:
  Deposits...........................           25,276
  Other..............................            2,152
  Stockholders' equity...............           11,826
                                             ---------
  Total liabilities and stockholders'        $ 161,624
   equity............................        =========
  Net interest & net interest spread.                   $    7,391       4.82%
                                                        ==========       ====
  Net interest margin................                                    5.33%
(1)   Includes non-accrual loans.                                        ====
                                     -36-
<PAGE>

                                                Year Ended December 31, 1997
                                              Average                   Average
                                              Balance      Interest     Rate
                                             ---------     ---------    -------
Summary of average rates/
   interest earning assets:
Interest earning assets:
  Loans, net(1)......................        $  83,614     $  8,961     10.72%
  Securities:
  Investment securities - taxable....           22,995        1,508      6.56
  Investment securities - non-taxable              494           29      9.09
  Federal funds sold.................            5,447          295      5.42
                                             ---------     --------
  Total earning assets...............          112,550       10,793      9.60%
  Non-earning assets.................           18,230
                                             ---------
Total average assets.................        $ 130,780
                                             =========

Interest bearing liabilities:
  NOW & money market.................        $  30,692     $    795      2.59%
  Savings............................            4,774           97      2.02
  Time, $100,000 & over..............            7,518          419      5.57
  Time other.........................           47,445        2,604      5.49
  Convertible subordinated
  Debentures.........................              630           50      8.00
  Long-term debt.....................            1,037           80      7.73
  Other borrowings...................            2,638           56      2.13
                                             ---------     --------
Total interest bearing liabilities...           94,734        4,101      4.33

Non-Interest bearing liabilities:
  Deposits...........................           24,774
  Other..............................            1,380
  Stockholders' equity...............            9,892
                                             ---------
  Total liabilities and stockholders'        $ 130,780
  equity.............................        =========
  Net interest & net interest spread.                      $  6,692      5.27%
                                                           ========      ====
  Net interest margin................                                    5.96%
                                                                         ====

(1)   Includes non-accrual loans.













                                     -37-
<PAGE>
     The  following  table  reflects  the change in net  interest  income due to
changes in the volume and rate of the Company's  assets and  liabilities for the
twelve month period ended December 31, 1998:
                                                      Increase (Decrease)
                                          --------------------------------------
Changes in net interest income                              Combination
   (dollars in thousands)                                   Rate/
                                           Volume    Rate   Volume     Total
                                          -------  ------  -------     --------
Interest earning assets:
  Loans, net...........................   $ 1,992  $ (467) $  (104)    $ 1,421
  Securities:
  Investment securities - taxable......       218     (11)      (2)        206
  Investment securities - non-taxable..         7      (2)      (3)          2
  Federal funds sold...................       237       -        -         237
                                          -------  ------  -------     --------
Total change in interest income........     2,454    (480)    (108)      1,866

Interest bearing liabilities:
  NOW & money market...................       509     159      102         769
  Savings..............................        (1)      1       (1)          -
  Time, $100,000 & over................       130     (11)      (4)        115
  Time other...........................       110     (43)      (2)         65
  Convertible subordinated debentures..         -       -        -           -
  Long-term debt.......................       100      (9)      11         120
  Other borrowings.....................        51      24       22          98
                                          -------  ------  -------     --------
Total change in interest expense.......       899     139      129       1,167
                                          -------  ------  -------     --------
Increase (decrease) in net
  interest income......................   $ 1,555  $ (619) $  (237)    $   699
                                          =======  ======  =======     =======

Noninterest Income

     Noninterest  income for the year ended  December  31, 1998 was $4.1 million
compared  to $3.2  million  for the same  period in 1997,  an  increase  of $0.9
million or 28.1%. This increase was primarily due to increased revenues from EPW
and United Trust whose combined  revenues  increased  $469 thousand  during this
period.  Income on cash value life insurance was $137 thousand in 1998 while all
other fees and commissions increased by $190 thousand.

     The following table  indicates the components of noninterest  income for
   the years ended December 31, 1998 and 1997 (dollars in thousands):
                                               For the Years Ended December 31,
                                                                     Increase/
                                                1998       1997      (Decrease)
                                              --------   --------    ---------
Service charges on deposit accounts......     $    707   $    675    $      32
Trust and investment management income...        2,355      1,886          469
Other service charges, fees, and income..          415        225          190
Loan servicing fees......................          148        164          (16)
Net trading account profit...............           87          -           87
Income on cash value life insurance......          137          -          137
Gain on sale of SBA loans................          239        290          (51)
                                              --------   --------    ----------
Total noninterest income.................     $  4,088   $  3,240    $     848
                                              ========   ========    =========
                                     -38-
<PAGE>
Noninterest Expense

     Total  noninterest  expense for the year ended  December  31, 1998 was $8.0
million,  compared to $7.6  million for the same period in 1997,  an increase of
$0.4 million or 5.3%.

     The following table reflects the components of noninterest  expense for the
years ended December 31, 1998 and 1997 (dollars in thousands):

                                              For the Years Ended December 31,
                                                                      Increase/
                                                1998       1997      (Decrease)
                                             ---------   --------    ----------
Salaries and employee benefits...........     $  4,631   $  4,048    $     583
Occupancy expense........................          522        514            8
Furniture and equipment expense..........          512        494           18
Data processing expense..................          437        418           19
Legal and professional fees..............          121        177          (56)
Amortization of intangible assets........           79         67           12
Advertising..............................          302        265           37
Relocation expense.......................            -        138        (138)
Stationery and supplies..................          137        151         (14)
Directors fees...........................          191        199          (8)
Securities write-down....................            -        255        (255)
Other operating expenses.................        1,027        846          181
                                              --------   --------     ---------
Total noninterest expense................     $  7,959   $  7,572     $    387
                                              ========   ========     =========

 Liquidity and Asset/Liability Management

     The  Investment  and  Asset/Liability  Committee  of the Board of Directors
reviews the  Company's  liquidity,  which is its ability to generate  sufficient
cash to meet the funding needs of current loan demand, deposit withdrawals,  and
other  cash  demands.   The  primary  sources  of  funds  consist  of  deposits,
amortization  and prepayments of loans,  sales of investments,  other funds from
operations and the Company's  capital.  The Bank is a member of the Federal Home
Loan Bank of Atlanta  ("FHLB") and has the ability to borrow to  supplement  its
liquidity needs.

     When the  Company's  primary  sources of funds are not  sufficient  to meet
deposit outflows,  loan originations and purchases and other cash  requirements,
the  Company  may  supplementally  borrow  funds  from the  FHLB and from  other
sources.  The FHLB acts as an additional  source of funding for banks and thrift
institutions that make residential mortgage loans.

     FHLB  borrowings,  known as "advances",  are secured by the Bank's mortgage
loan  portfolio,  and the terms  and rates  charged  for FHLB  advances  vary in
response to general economic conditions.  As a shareholder of the FHLB, the Bank
is  authorized to apply for advances from this bank. A wide variety of borrowing
plans are offered by the FHLB, each with its own maturity and interest rate. The
FHLB will  consider  various  factors,  including  an  institution's  regulatory
capital  position,  net  income,  quality  and  composition  of assets,  lending
policies and practices,  and level of current  borrowings  from all sources,  in
determining the amount of credit to extend to an institution. As of December 31,
1999, the Company had no FHLB advances outstanding.


                                     -40-
<PAGE>
     A Florida  chartered  commercial  bank is  required to maintain a liquidity
reserve of at least 15% of its total  transaction  accounts  and 8% of its total
nontransaction  accounts  less deposits of certain  public funds.  The liquidity
reserve  may consist of cash on hand,  cash on demand  with other  correspondent
banks and other investments and short-term  marketable  securities as determined
by the rules of the  Department,  such as federal  funds sold and United  States
securities  or securities  guaranteed by the United States or agencies  thereof.
The Company  complies with  applicable  liquidity  reserve  requirements.  As of
December 31, 1999,  the Bank had  liquidity of  approximately  $22.8  million or
approximately  12.2% of total deposits  combined with borrowings.  The Company's
primary  sources of funds consist of principal  payments on loans and investment
securities,  proceeds from sales and maturities of securities available for sale
and net  increases  in  deposits.  The  Company  uses its funds  principally  to
purchase   investment   securities  and  fund  existing  and   continuing   loan
commitments.  At December 31,  1999,  the Company had  commitments  to originate
loans totaling $26.0 million.  Scheduled  maturities of  certificates of deposit
during the 12 months  following  December  31,  1999 total  $51.0  million as of
December 31,  1999.  Management  believes the Company has adequate  resources to
fund all its  commitments,  and, if so desired,  that it can adjust the rates on
certificates  of  deposit  to  retain  deposits  in  a  changing   interest-rate
environment.

Asset/Liability Management

      One of the primary objectives of the Company is to reduce  fluctuations in
net interest income caused by changes in interest rates. To manage interest rate
risk,  the Board of Directors has  established  interest-rate  risk policies and
procedures  which delegate to the Investment and  Asset/Liability  Committee the
responsibility to monitor and report on interest-rate risk, devise strategies to
manage  interest-rate risk, monitor loan originations and deposit activity,  and
approve all pricing strategies.

      The  management  of  interest-rate  risk  is one of the  most  significant
factors  affecting the ability to achieve  future  earnings.  The measure of the
mismatch of assets maturing or repricing within certain periods, and liabilities
maturing or  repricing  within the same period,  is commonly  referred to as the
"gap" for such period. Controlling the maturity or repricing of an institution's
assets and  liabilities  in order to  minimize  interest  rate risk is  commonly
referred to as gap  management.  "Negative  gap" occurs when,  during a specific
time period, an institution's  liabilities are scheduled to reprice more rapidly
than its assets, so that,  barring other factors  affecting  interest income and
expense, in periods of rising interest rates the institution's  interest expense
would increase more rapidly than its interest income,  and in periods of falling
interest rates the  institution's  interest  expense would decrease more rapidly
than its interest income. "Positive gap" occurs when an institution's assets are
scheduled to reprice more rapidly than its liabilities,  so that,  barring other
factors  affecting  interest income and expense,  in periods of falling interest
rates,  the  institution's  interest income would decrease more rapidly than its
interest  expense,  and in periods of rising interest rates,  the  institution's
interest  income would  increase more rapidly than its interest  expense.  It is
common to focus on the one-year gap, which is the difference  between the dollar
amount of assets and the dollar  amount of  liabilities  maturing  or  repricing
within the next 12 months.

      To the  extent  market  conditions  permit,  the Bank  follows a  strategy
intended to protect its net  interest  income from  adverse  changes in interest
rates by maintaining  spreads through the  adjustability of its interest earning

                                     -40-
<PAGE>
assets  and its  interest  bearing  liabilities.  The Bank  employs  a number of
strategies  designed to protect its net interest income. The Bank calculates its
net interest  margin on a monthly basis and compares it to a quarterly  national
peer group  ratio.  Historically,  the Bank has enjoyed a higher than peer group
average  net  interest  margin  as  well as a  higher  margin  than  most of the
community banks operating in Pinellas County.

      Additionally,  the Investment  and  Asset/Liability  Committee  meets on a
quarterly  basis to review the most recent margin  analysis,  the Bank's overall
pricing  strategies,  and a monthly  gap  report  measuring  its  interest  rate
sensitivity position.

      The Bank is also a member  of the  FHLB.  Member  banks  have  access to a
variety of fixed and variable rate  borrowings,  ranging from overnight to up to
20 years or  longer.  Access to these  instruments  can permit the Bank to match
maturities  of  either  specific  groups  of  loans  or  larger,  single  loans.
Currently, the Bank has no FHLB advances outstanding.

      The  cumulative  one-year  gap at December  31, 1999 was a negative  $33.9
million or a negative  16.2%  (expressed as a percentage of total  assets).  The
exclusion of  approximately  $1.9 million of  non-accrual  loans  increased  the
negative  gap by  approximately  1%. The Company  performs an income  simulation
analysis  to measure  net  interest  income  volatility  when the  portfolio  is
subjected to a 200 basis point interest rate shock. Based on the results of this
simulation  and the current  interest  rate  environment  (taking  into  account
competitive  pricing  and  generally  increasing  interest  rates), the  Company
believes  that its gap  position as of December  31, 1999 was  appropriate,  and
currently  anticipates that a similar negative gap position will continue in the
subsequent one year time period.

      The   following   table   presents   the   maturities   or   repricing  of
interest-earning  assets and interest-bearing  liabilities at December 31, 1999.
The balances shown have been derived based on the financial  characteristics  of
the various  assets and  liabilities.  Adjustable and  floating-rate  assets are
included  in the period in which  interest  rates are next  scheduled  to adjust
rather than their scheduled  maturity dates.  Fixed-rate  loans are shown in the
periods  in which  they are  scheduled  to be repaid  according  to  contractual
amortization and, where appropriate,  prepayment assumptions based on the coupon
rates in the portfolio have been used to adjust the repayment amounts. Repricing
of time deposits is based on their scheduled maturities.


















                                     -41-
<PAGE>
                          Interest Sensitivity Analysis
                             (dollars in thousands)

                                       0 to 3     4 to 6      7 to 12
                                       Months     Months      Months
                                    ---------  ----------  ----------
Assets:
  Federal funds sold..............  $   2,971  $        0  $       0
  Securities......................      1,957         720        556
  Loans:(1)
    Fixed.........................      9,751       2,675      7,337
    Variable......................     33,514      16,146      4,153
                                    ---------  ----------  ---------
Total rate sensitive assets.......  $  48,139  $   19,541  $  12,046
                                    =========  ==========  =========
Liabilities:
  Interest demand.................  $  49,992  $        0  $       0
  Savings.........................      4,873           0          0
  Time deposits...................     17,368      15,592     18,056
  Other borrowings................      7,713           0          0
  Long term debt..................          0           0          0
                                    ---------  ----------  ---------
Total rate sensitive liabilities..  $  79,946  $    15,592 $  18,056
                                    =========  =========== =========
Dollar gap........................  $ (31,807) $    3,949  $  (6,010)
Cumulative dollar gap.............  $ (31,807) $  (27,858) $ (33,868)
Cumulative gap/total assets(2)....    (15.18)%    (13.30)%   (16.17)%
--------------------------------------------------------------------------------
Interest Sensitivity Analysis Table Continued...         Non-Rate
                                                         Sensitive
                                     13 to 60     60+    Assets/
                                      Months    Months   Liabilities   Total
                                    ---------  --------- ----------- ---------
Assets:
  Federal funds sold..............  $       0  $       0       N/A   $   2,917
  Securities......................     19,495      1,819       N/A      24,547
  Loans:(1)
    Fixed.........................     26,991     11,207       N/A      57,961
    Variable......................     41,347      1,878       N/A      97,038
                                    ---------  ---------  ---------  ---------
Total rate sensitive assets.......  $  87,833  $  14,904       N/A   $ 182,463
                                    =========  =========  =========  =========
Liabilities:
  Interest demand.................  $       0  $       0  $  17,922  $  67,914
  Savings.........................          0          0          0      4,873
  Time deposits...................     18,359          0          0     69,375
  Other borrowings................          0          0          0      7,713
  Long term debt..................        630          0          0        630
                                    ---------  ---------  ---------  ---------
Total rate sensitive liabilities..  $  18,989  $       0  $  17,922  $ 150,505
                                    =========  =========  =========  =========
Dollar gap........................  $  68,844  $  14,904  $ (17,922) $  31,958
Cumulative dollar gap.............  $  34,976  $  49,880  $  31,958  $  31,958
Cumulative gap/total assets(2)....      16.70%     23.81%     15.26%     15.26%
-------------------
(1)   Excludes nonaccrual loans of approximately $1.9 million.
(2)   Calculated based on total assets of $209,481.

                                     -42-
<PAGE>
The following  tables presents  various  operating ratios at the period ended or
for the period ended:

                                                   December 31,
                                          1999           1998           1997
                                          -----          -----         ------
Return on average assets............       1.22%          1.09%         1.08%
Return on average equity............      14.61%         14.86%        14.25%
Equity to total assets..............       8.03%          8.59%         7.56%
Dividend Payout.....................      28.46%         30.51%        33.65%
Net interest margin.................       5.40%          5.33%         5.95%


      The following  table  summarizes the Company's  securities by maturity and
weighted  average yields at December 31, 1999.  Yields on tax exempt  securities
are  stated  at their  nominal  rates  and have not been  adjusted  for tax rate
differences.  Refer  to  Note  G -  Securities  in  the  Company's  Consolidated
Financial  Statements  for  additional   information  regarding  the  Securities
portfolio.
                                           After One Year But  After 5 Years But
                                           ------------------  -----------------
                        Within One Year    Within 5 Years      Within 10 Years
                        Carrying Average   Carrying  Average   Carrying  Average
                        Value    Yield     Value     Yield     Value     Yield
                        -------  ------    -------   ------    -------   -------
At December 31, 1999:
Securities held to maturity:
    U.S. Treasury securities and
    obligations of U.S. government
    corporations and
    agencies            $   132   7.10%    $ 7,406    6.13%    $ 2,000     6.73%
Obligations of State
    and political
    Subdivisions            135   5.75%        375    6.95%        794     6.21%
Corporate obligations       500   7.61%          0    0.00%          0     0.00%
Other                       100   5.75%          0    0.00%          0     0.00%
                        -------  ------    -------   ------    -------   -------
                        $   867   7.03%    $ 7,781    6.17%    $ 2,794     6.58%
Mortgage Backed Securities
                        =======  ======    =======   ======    =======   =======
Total                   $   867   7.03%    $ 7,781    6.17%    $ 2,794     6.58%
                        =======  ======    =======   ======    =======   =======
At December 31, 1999:
Securities available for sale:
    U.S. Treasury securities and
    obligations of U.S. government
    corporations and
    agencies            $ 1,502   6.06%    $ 1,597    6.58%    $ 1,421     6.63%
Obligations of State
    and political
    Subdivisions              0   0.00%        347    7.20%      1,362     6.26%
                        -------  ------    -------   ------    -------   -------
                        $ 1,502   6.06%    $ 1,944    6.69%    $ 2,783     6.45%
Mortgage Backed Securities:
Equity Securities
                        -------  ------    -------   ------    -------   -------
Total                   $ 1,502   6.06%    $ 1,944    6.69%    $ 2,783     6.45%
                        =======  ======    =======   ======    =======   =======
                                     -43-
<PAGE>
Continued..........
                        After 10 Years         Total
                        Carrying  Average Carrying  Average
                        Value    Yield     Value     Yield
                        -------  ------    -------   ------
At December 31, 1999:
Securities held to
maturity:
    U.S. Treasury
    securities and
    obligations of U.S.
    government
    corporations and
    agencies            $   573   6.53%  $  10,111    6.29%
Obligations of State
    and political
    Subdivisions            522   4.62%      1,826    5.87%
Corporate obligations         0   0.00%        500    7.61%
Other                         0   0.00%        100    5.75%
                        -------  ------    -------   ------
                        $ 1,095   4.62%    $12,537    6.27%
Mortgage Backed                              2,004    7.49%
Securities
                        =======  ======    =======   ======
Total                   $ 1,095   4.62%    $14,541    6.45%
                        =======  ======    =======   ======

At December 31, 1999:
Securities available for
sale:
    U.S. Treasury
    securities and
    obligations of U.S.
    government
    corporations and
    agencies            $   776   6.64%    $ 5,296    6.46%
Obligations of State
    and political
    Subdivisions              0   0.00%      1,709    6.45%
                        -------  ------    -------   ------
                        $   776   6.64%    $ 7,005    6.46%
Mortgage Backed                              1,136    6.71%
Securities
Equity Securities                            1,783    2.48%
                        -------  ------    -------   ------
Total                   $   776   6.64%    $ 9,924    5.77%
                        =======  ======    =======   ======


YEAR 2000 CONSIDERATIONS

      During the past year, many businesses,  including  financial  institutions
such as the  Company,  faced  potentially  serious  issues  associated  with the
inability  of  certain  existing  data  processing   hardware  and  software  to
appropriately  recognize  calendar  dates  beginning in the year 2000. The "Year
2000" problem arose  because many existing  computer  programs use only the last
two  digits  to refer to a year.  Therefore,  these  computer  programs  may not

                                     -44-
<PAGE>
properly  recognize a year that begins with "20" instead of "19."  Additionally,
many  computer  programs that can only  distinguish  the final two digits of the
year may read entries for the year 2000 as the year 1900. For example,  computer
systems may compute payment, interest, delinquency or other figures important to
the  operations  of  financial  institutions  based on the  wrong  date.  If not
corrected, many computer applications,  including those owned by the Company and
third  parties  with  which the  Company  does  business,  could  fail or create
erroneous results,  thereby  potentially  impacting the operations and financial
performance of the Company.

      In 1997,  the Company  began the  process of  evaluating  its  information
technology for Year 2000 readiness. In April 1998, the Company adopted a formal,
comprehensive  Year 2000 Policy Statement  designed to identify and address Year
2000 issues that might impact the Company  (the "Year 2000  Plan").  In 1998 and
1999 the Company  completed  the  "Awareness,"  "Inventory,"  "Assessment,"  and
"Testing/Validation" phases of its Year 2000 Plan, which are designed to appoint
and train a group of employees to oversee and  implement  the Year 2000 Plan, to
provide for the  inventory of the  software and hardware of the Company,  and to
provide  further  assessment of the nature and size of the Year 2000 issues that
might affect the Company.  The Company continues to oversee its internal efforts
and the efforts of third  parties to timely and  properly  address the Year 2000
issues that have been  identified.  Testing and  validation  of the actions that
have been  taken  thus far were  completed  by June 30,  1999.  This  validation
process has also been audited by outside consultants.

      The Company outsources its principal data processing activities to a third
party and purchases most of its software  applications from third party vendors.
Additionally,  the Company  outsources  its trust  business data  processing and
custodial management activities to a third party. Each of the two foregoing data
processing  servicers has  represented  to the Company that it has completed its
Year 2000  testing.  The Company has received and reviewed the third party proxy
test results  which  support  their  claims.  Also the Company has completed all
testing and  validating of its own systems.  Based on these efforts to date, the
Company  believes  that its  vendors  and  significant  customers  are  actively
addressing the problems associated with the Year 2000 issue and that the Company
will be  prepared to respond to Year 2000  problems  as they arise.  The Company
will  continue to refine the  contingency  plans to address the most  reasonably
likely worst case scenarios  relating to the Year 2000 problem  throughout 2000.
Although  the  Company's  Year  2000  efforts  are  ongoing  and  will  continue
throughout  the Year 2000,  there can be no  assurance  that the Company will be
prepared to timely respond to all year 2000 issues that may arise.

      The  Company  has  attempted  to  identify  potential  Year 2000  problems
stemming from non-information  technology systems, such as microcontrollers used
to operate  security systems and elevators and embedded systems in its buildings
and equipment and other  infrastructure,  and establishing a program for testing
these systems for Year 2000 compliance. To date, the Company has not encountered
any  substantial  Year  2000  problems  with  respect  to  such  non-information
technology  systems,  and believes the cost to remedy any such problems will not
be material.

      To date,  the Company has not incurred  material  testing,  compliance  or
replacement  costs relating to its Year 2000  investigation to date. The Company
incurred  costs of  approximately  $255,000 in 1998 and $289,000 in 1999 towards
technology  related  costs,  including  the  updating of software  and  hardware
systems to ensure Year 2000  compliance.  The  Company  does not expect to incur
additional  material  related  testing,  compliance or replacement  costs in the

                                      -45-
<PAGE>
future and does not believe that the potential non-compliance of its information
and  non-information  technology systems and programs present a material risk to
the Company's financial condition or results of operations.

      Although to date, the Company has not  experienced  significant  Year 2000
issues,  there can be no assurance  that Year 2000 related issues will not arise
in the future and that the Company not be  adversely  affected by the failure of
third party  vendors or  significant  customers  to become Year 2000  compliant.
Although the Company is taking steps to identify and address Year 2000 problems,
if  unexpected or unresolved  Year 2000  problems  develop,  given the Company's
reliance on data  processing  services to maintain  customer  balances,  service
customer  accounts  and to perform  other  record  keeping and service  oriented
functions  associated with the Company's three primary  business  segments,  the
occurrence  of any such  events  could have a material  impact on the  Company's
results of operations, liquidity and financial condition.

FORWARD LOOKING STATEMENTS

      This Form 10-KSB  contains  statements  that  constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words  "believe,"  "estimate,"  "expect,"  "intend,"  "anticipate"  and  similar
expressions  and variations  thereof  identify  certain of such  forward-looking
statements,  which  speak  only as of the  dates on which  they were  made.  The
company   undertakes   no   obligation   to   publicly   update  or  revise  any
forward-looking  statements,  whether  as a result  of new  information,  future
events,  or  otherwise.  Readers  are  cautioned  that any such  forward-looking
statements  are not  guarantees  of future  performance  and  involve  risks and
uncertainties,  and  that  actual  results  may  differ  materially  from  those
indicated in the forward-looking statements as a result of various factors. Such
factors include competition,  general economic conditions,  potential changes in
interest  rates,  and changes in the value of real estate securing loans made by
the issuer.

FACTORS AFFECTING FUTURE RESULTS

Impact of Changes in Real Estate Values

      A significant  portion of the Company's loan  portfolio  consists of loans
secured by real estate.  At December 31, 1999,  5.1% of the Company's loans were
secured by one-to-four  family  residential  real estate,  61.4% were secured by
commercial real estate and multifamily residential, 2.9% were construction loans
and the Company had ORE acquired  through  foreclosure with a book value of $1.5
million.  The properties securing these loans are concentrated in Florida.  Real
estate  values and real estate  markets  generally  are affected by, among other
things, changes in national, regional or local economic conditions, fluctuations
in interest rates and the availability of loans to potential purchasers, changes
in the tax laws and other  governmental  statutes,  regulations and policies and
acts of nature.  Any decline in real  estate  prices,  particularly  in Florida,
could significantly  reduce the value of the real estate collateral securing the
Company's real estate loans,  increase the level of the Company's  nonperforming
loans,  require  write-downs  in the book value of its ORE,  and have a material
negative impact on the Company's financial performance.

Nonperforming Assets

      The Company's ratio of  nonperforming  assets to total assets was 1.85% at
December  31,  1999,  which  is  somewhat  above  the  average  level  of  other
                                      -46-
<PAGE>
similarly-sized financial institutions.  While the Company carefully manages its
loan portfolio with a view to minimizing its nonperforming  assets, there can be
no assurance that the Company's  ratio of  nonperforming  assets to total assets
will  improve  or not  increase,  particularly  if general  economic  conditions
deteriorate.

Adequacy of Allowance for Loan Losses

      Industry  experience  indicates that a portion of the Company's loans will
become  delinquent  and a portion  of the loans will  require  partial or entire
charge-off.  Regardless of the  underwriting  criteria  utilized by the Company,
losses may be  experienced  as a result of various  factors beyond the Company's
control,  including,  among other things, changes in market conditions affecting
the value of properties and problems  affecting the credit of the borrower.  The
Company's  determination  of the  adequacy of its  allowance  for loan losses is
based  on  various   considerations,   including   an   analysis   of  the  risk
characteristics  of  various   classifications  of  loans,  previous  loan  loss
experience,  specific  loans which would have loan loss  potential,  delinquency
trends,  estimated fair value of the  underlying  collateral,  current  economic
conditions,  the view of the Company's  regulators,  and geographic and industry
loan concentration. If, however, delinquency levels were to increase as a result
of adverse general  economic  conditions,  especially in Florida,  the loan loss
reserve so determined by the Company may not be adequate. To the extent that the
Company's  loan losses  exceed its  allowance  for loan  losses,  the  Company's
results of  operations  would be adversely  affected.  There can be no assurance
that the Company's  allowance for loan losses will be adequate to cover its loan
losses or that the  Company  will not  experience  losses in its loan  portfolio
which may require significant  increases to the allowance for loan losses in the
future.

Potential Impact of Changes in Interest Rates

      The  Company's  profitability  is  dependent  to a large extent on its net
interest  income,  which  is the  difference  between  its  interest  income  on
interest-earning   assets  and  its   interest   expense   on   interest-bearing
liabilities.  The  Company,  like most  financial  institutions,  is affected by
changes in general  interest rate levels,  which are currently at relatively low
levels,  and by other economic  factors  beyond its control.  Interest rate risk
arises from mismatches  (i.e., the interest  sensitivity gap) between the dollar
amount of repricing or maturing assets and liabilities, and is measured in terms
of the ratio of the interest rate  sensitivity gap to total assets.  More assets
repricing or maturing  than  liabilities  over a given time frame is  considered
asset-sensitive  and is  reflected  as a  positive  gap,  and  more  liabilities
repricing  or  maturing  than  assets  over a given  time  frame  is  considered
liability-sensitive  and is  reflected  as a negative  gap.  An  asset-sensitive
position  (i.e.,  a positive gap) will  generally  enhance  earnings in a rising
interest  rate  environment  and will  negatively  impact  earnings in a falling
interest  rate  environment,  while  a  liability-sensitive  position  (i.e.,  a
negative  gap)  will  generally  enhance  earnings  in a falling  interest  rate
environment   and  negatively   impact   earnings  in  a  rising  interest  rate
environment. Fluctuations in interest rates are not predictable or controllable.
The  Company has  attempted  to  structure  its asset and  liability  management
strategies  to mitigate the impact on net  interest  income of changes in market
interest  rates.  At December  31, 1999,  the Company had a one year  cumulative
negative gap of 16.2%.  This negative one year gap position may, as noted above,
have a negative impact on earnings in a rising interest rate environment.


                                      -47-
<PAGE>
Regulatory Oversight

      The Bank is subject to extensive  regulation,  supervision and examination
by the  Department as its  chartering  authority and primary  regulator,  by the
Federal Reserve as its federal regulator and by the FDIC as administrator of the
insurance fund that insures the Bank's deposits up to applicable  limits. As the
holding  company of the Bank, the Company is subject to regulation and oversight
by the Federal Reserve.  Such regulation and supervision  governs the activities
in which an institution may engage and is intended  primarily for the protection
of the FDIC insurance funds and  depositors.  Regulatory  authorities  have been
granted   extensive   discretion  in  connection  with  their   supervisory  and
enforcement   activities  and  regulations  have  been  implemented  which  have
increased capital  requirements,  increased insurance premiums and have resulted
in increased administrative,  professional and compensation expenses. Any change
in the regulatory structure or the applicable statutes or regulations could have
a material  impact on the  Company,  the Bank and their  operations.  Additional
legislation  and regulations may be enacted or adopted in the future which could
significantly  affect the powers,  authority and  operations of the Bank and the
Bank's  competitors  which in turn could have a material  adverse  affect on the
Bank and its operations.

Dependence on Existing Management

     The Company's  business  depends in large part upon the availability of the
services of its senior  management,  including  Neil W. Savage,  Ward J. Curtis,
Jr.,  Harold J. Winner and William A.  Eickhoff.  If the services of any of such
senior  management  personnel  were to become  unavailable  to the Company,  the
Company's business and operating results could be adversely affected.  While the
Company  maintains  key-man  life  insurance  policies  on certain of its senior
management  personnel,  naming  the  Company  as  beneficiary,  there  can be no
assurance that the proceeds of any such policies would adequately compensate the
Company for the loss of the services of any of such persons.  Neither Mr. Savage
nor Mr. Winner have entered into a non-competition agreement with the Company or
the Bank.  Although both Mr.  Eickhoff's and Mr. Curtis's  employment  contracts
contain   non-competition   clauses,  the  provisions  terminate  under  certain
conditions.

Control by Existing Shareholders

      The  Company's  directors and  executive  officers  (and their  respective
affiliates  and  immediate  family  members)  own  approximately  50.6%  of  the
outstanding  Common  Stock.  As a result of such  ownership,  these persons will
likely be able to  effectively  control the election of the Company's  directors
and the outcome of matters requiring shareholder  approval,  and thereby control
the management and policies of the Company.

Competition

      The  Company  competes  with  various  types  of  financial  institutions,
including  other  commercial  banks and savings  institutions,  and with finance
companies,  mortgage banking  companies,  money market mutual funds,  investment
advisory firms and companies and credit unions, many of which have substantially
greater financial  resources than the Company and, in some cases,  operate under
fewer regulatory constraints.




                                      -48-
<PAGE>
Anti-Takeover Considerations

      The Company's articles of incorporation and bylaws and Florida law contain
certain  provisions  that may discourage or make more difficult any attempt by a
person or group to obtain  control of the  Company.  In  addition,  the board of
directors  of the  Company is  empowered  to issue from time to time one or more
series of Undesignated  Preferred Stock without shareholder approval,  the terms
of which could have the effect of delaying or  preventing a change in control of
the Company.

Possible Volatility of Share Price

      The market price of the Common Stock may experience  fluctuations that are
unrelated to the operating  performance of the Company.  The market price of the
Common Stock may be affected by conditions in the securities  markets  generally
as well as  developments  in the banking  industry or the United States or world
economy.  Any  securities  exchange on which the Common  Stock may be traded may
from time to time experience  significant price and volume fluctuations that may
be unrelated to the operating  performance of particular  companies.  The market
price of the Common Stock,  like the stock prices of many  publicly  traded bank
holding companies, may prove to be highly volatile.

Restrictions on Ability to Pay Dividends

      The Company is  primarily  a holding  company  with no  material  business
operations,  sources of income or assets of its own other than the shares of its
subsidiaries.   Because  substantially  all  of  the  Company's  operations  are
conducted through subsidiaries,  the Company's cash flow and, consequently,  its
ability to pay dividends or make other  distributions  is dependent  upon either
third-party  borrowings made by the Company or the cash flow of its subsidiaries
and the  payment  of funds by those  subsidiaries,  including  the Bank,  to the
Company  in the form of  loans,  dividends,  fees or  otherwise.  The  Company's
subsidiaries  are  separate  and  distinct  legal  entities  and  will  have  no
obligation, contingent or otherwise, to make any funds available, whether in the
form of  loans,  dividends  or  otherwise.  Regulatory  limitations  on the Bank
restrict its ability to make loans or distributions to the Company.

ITEM 7.           FINANCIAL STATEMENTS

The following  financial  statements  are contained on pages F-1 through F-41 of
this Report:

   Report of Independent Certified Public Accountants;

   Consolidated Balance Sheets - December 31, 1999 and 1998

   Consolidated Statements of Earnings - Years ended December 31, 1999, 1998
   and 1997;

   Consolidated  Statements of  Comprehensive  Income - Years ended December 31,
   1999, 1998 and 1997;

   Consolidated  Statement of  Stockholders'  Equity - Years ended  December 31,
   1999, 1998 and 1997;

   Consolidated  Statements of Cash Flows - Years ended December 31, 1999,  1998
   and 1997;

                                      -49-
<PAGE>
   Notes to Consolidated Financial Statements

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Not Applicable.

                                   PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Information  required  by Item 9 of Form 10-KSB is  incorporated  herein by
reference to the  Registrant's  definitive  Proxy  Statement for the 2000 Annual
Meeting of  Shareholders  which will be filed with the  Securities  and Exchange
Commission  no later  than 120 days after the close of the  Registrant's  fiscal
year.

ITEM 10.  EXECUTIVE COMPENSATION

     Information  required by Item 10 of Form 10-KSB is  incorporated  herein by
reference to the  Registrant's  definitive  Proxy  Statement for the 2000 Annual
Meeting of  Shareholders  which will be filed with the  Securities  and Exchange
Commission  no later  than 120 days after the close of the  Registrant's  fiscal
year.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information  required by Item 11 of Form 10-KSB is  incorporated  herein by
reference to the  Registrant's  definitive  Proxy  Statement for the 2000 Annual
Meeting of  Shareholders  which will be filed with the  Securities  and Exchange
Commission  no later  than 120 days after the close of the  Registrant's  fiscal
year.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information  required by Item 12 of Form 10-KSB is  incorporated  herein by
reference to the  Registrant's  definitive  Proxy  Statement for the 2000 Annual
Meeting of  Shareholders  which will be filed with the  Securities  and Exchange
Commission  no later  than 120 days after the close of the  Registrant's  fiscal
year.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

           3.1  Amended and Restated Articles of Incorporation of the Company*
           3.2  Bylaws of the Company*
          10.1  UFH Stock Option and Incentive Compensation Plan*
          10.2  Trust Department Stock Option Plan*
          10.3  Eickhoff, Pieper & Willoughby Stock Option Plan*
          10.4  Modification Agreement*
          10.5  Property Management Agreement between Imaginative Investments,
                Inc. and the Southeast Companies of Tampa Bay, Inc.*
          10.6  Employment Agreement of Charles O. Lowe*
          10.7  Employment Agreement of Ward J. Curtis, Jr.*
          10.8  Employment Agreement of Harold J. Winner*

                                      -50-
<PAGE>
          10.9  Employment Agreement of John H. Pieper**
         10.10  Employment Agreement of Neil W. Savage*
         10.11  Employment Agreement of William A. Eickhoff*
         10.12  Salary Continuation Agreement of Harold J. Winner*
         10.13  Salary Continuation Agreement of Neil W. Savage*
         10.14  Agreement  between  Willow  Green  Partnership,  LTD  and  Irwin
                Contracting  relating to foreclosed  property acquired by United
                Bank**
         10.15  Pinellas Bancshares Corporation 8% Convertible Debentures held
                by Eickhoff & Pieper, a Florida General Partnership*
         10.16  Loan Agreement between AmSouth f/k/a AmSouth Bank of Florida and
                UFH f/k/a Pinellas Bancshares Corporation*
            21  List of Subsidiaries*
            27  Financial Data Schedule

     *This  information  is  incorporated  herein by reference to the  Company's
     Amendment No. 2 to Registration Statement on Form SB-2 (File No. 333-60431)
     previously filed with the Commission on October 7, 1998. **This information
     is  incorporated  herein by reference to the Company's  Form 10KSB filed on
     March 31, 1999.

(b) Reports on Form 8-K

     There  were no reports on Form 8-K filed  during  the  fiscal  year  ending
December 31, 1999.

































                                      -51-
<PAGE>
                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
9134,  the  Registrant  has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                          UNITED FINANCIAL HOLDINGS, INC.

Date:    March 14, 2000                   By: /s/ Neil W. Savage
                                          ------------------------------
                                          Neil W. Savage
                                          President and Chief Executive Officer

     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.

       Signature                         Title                       Date
-------------------------       ---------------------------    ----------------
/s/ John B. Norrie               Chairman of the Board          March 14, 2000
-------------------------
John B. Norrie

/s/ Neil W. Savage               President, Chief Executive     March 14, 2000
-------------------------        Officer and Director
Neil W. Savage                   (Principal Executive Officer)

/s/ Ronald E. Clampitt           Director                       March 14, 2000
-------------------------
Ronald E. Clampitt

/s/ Ward J. Curtis               Director                       March 14, 2000
-------------------------
Ward J. Curtis

/s/ David K. Davis               Director                       March 14, 2000
-------------------------
David K. Davis

/s/ William A. Eickhoff          Director                       March 14, 2000
-------------------------
William A. Eickhoff

/s/ Edward D. Foreman            Director                       March 14, 2000
-------------------------
Edward D. Foreman

/s/ Ian F. Irwin                 Director                       March 14, 2000
-------------------------
Ian F. Irwin

/s/ Charles O. Lowe              Director                       March 14, 2000
-------------------------
Charles O. Lowe




                                      -52-
<PAGE>
/s/ Jack A. MaCris, M.D.         Director                       March 14, 2000
-------------------------
Jack A. MaCris, M.D.

/s/ Ronald R. Petrini            Director                       March 14, 2000
-------------------------
Ronald R. Petrini

/s/ John B. Wier, Jr.            Director                       March 14, 2000
-------------------------
John B. Wier, Jr.

/s/ Harold J. Winner             Director                       March 14, 2000
-------------------------
Harold J. Winner

/s/ C. Peter Bardin              Chief Financial Officer        March 14, 2000
-------------------------        (Principal Financial Officer)
C. Peter Bardin





































                                     -53-