EXHIBIT 13

                       COMMUNITY SAVINGS BANKSHARES, INC.
                       1999 ANNUAL REPORT TO SHAREHOLDERS

<PAGE>
                       COMMUNITY SAVINGS BANKSHARES, INC.

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This is a picture of the Board of Directors and Executive Officers
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(FROM TOP DOWN) Robert F. Cromwell, Larry J. Baker, Feriel G. Hughes, Harold I.
Stevenson, Frederick A. Teed, Karl D. Griffin, Forest C. Beaty, Jr., Cecil F.
Howard, Jr., Mary L. Kaminske, Michael E. Reinhardt and James B. Pittard, Jr.
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BOARD OF DIRECTORS

Frederick A. Teed, CHAIRMAN
Forest C. Beaty, Jr.
Robert F. Cromwell
Karl D. Griffin
James B. Pittard, Jr.
Harold I. Stevenson, CPA
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EXECUTIVE  OFFICERS

James B. Pittard, Jr., PRESIDENT AND CHIEF EXECUTIVE OFFICER
Larry J. Baker ,CPA, CHIEF FINANCIAL OFFICER AND TREASURER
Cecil F. Howard, Jr., SENIOR VICE PRESIDENT
Feriel G. Hughes, SENIOR VICE PRESIDENT
Mary L. Kaminske, SENIOR VICE PRESIDENT
Michael E. Reinhardt, SENIOR VICE PRESIDENT

OTHER CORPORATE OFFICERS
(not shown in photograph)

Joe L. Knorr, VICE PRESIDENT
Trina L. Miles, ASSISTANT SECRETARY
Deborah M. Rousseau, VICE PRESIDENT AND SECRETARY
Donna L. Sheppard, CPA,  VICE PRESIDENT
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<PAGE>
                                CORPORATE PROFILE

Community Savings Bankshares, Inc. ("Bankshares") is a Delaware-chartered stock
holding company which was organized in August 1998 and became the holding
company for Community Savings, F. A. ("the Association" or "Community Savings")
on December 15, 1998. Bankshares' primary asset consists of its investment in
its wholly-owned subsidiary, the Association, a stock savings and loan
association headquartered in North Palm Beach, Florida. The Association's 21
full-service banking offices are well positioned in one of America's
fastest-growing markets, known for its affluent population and its high quality
of life. The mission statement of the Association reflects our dedication to our
shareholders and customers.

      "COMMUNITY SAVINGS IS A SOUTH FLORIDA BASED, COMMUNITY-ORIENTED
      FINANCIAL INSTITUTION DEDICATED TO PROVIDING QUALITY RETAIL
      FINANCIAL PRODUCTS AND CUSTOMER SERVICE AT COMPETITIVE PRICES TO
      INDIVIDUALS AND BUSINESSES IN OUR PRIMARY MARKET AREA OF PALM
      BEACH, MARTIN, ST. LUCIE, AND INDIAN RIVER COUNTIES, WHILE
      EFFECTIVELY UTILIZING THE RESOURCES OF THE INSTITUTION, ITS
      HOLDING COMPANY'S SHAREHOLDERS, AND OPERATING IN A SAFE, SOUND
      AND PROFITABLE MANNER."

                                TABLE OF CONTENTS
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      Community Savings Bankshares, Inc.
         Corporate Directory                                  Inside Front Cover

      President's Message                                                      2

      Corporate Information                                                    4

      Financial Highlights                                                     5

      Management's Discussion and Analysis                                     6

      Independent Auditors' Report                                            15
         Consolidated Statements of Financial Condition                       16
         Consolidated Statements of Income                                    17
         Consolidated Statements of Changes in Shareholders' Equity           18
         Consolidated Statements of Cash Flow                                 19
         Notes to Consolidated Financial Statements                           20

      Community Savings, F. A. Corporate Directory                            44

      Locations                                                Inside back cover
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                                        1
<PAGE>

"OUR SHAREHOLDERS AND CUSTOMERS ARE IMPORTANT TO OUR SUCCESS AS A COMPANY."

--------------------------------------------------------------------------------
This is a picture of James B. Pittard, Jr.
President and Chief Executive Officer
of Community Savings Bankshares, Inc.
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PRESIDENT'S MESSAGE TO SHAREHOLDERS

Dear Shareholders,

Our mission statement states that we will provide quality products and
outstanding service to individuals and businesses in our market area. In my 1998
letter to shareholders, I described some of our goals for 1999 to accomplish
this mission and shared my expectation that 1999 would be a year of continued
growth and profitability. I'd like to share with you our accomplishments.

"WE WILL EMPHASIZE RESIDENTIAL, CONSUMER, AND COMMERCIAL REAL ESTATE LOANS."

Lending is an important part of our business. As part of our business plan to
prudently deploy the capital raised in our second step conversion in December
1998, we grew the loan portfolio by a net of $70.2 million during 1999 while
maintaining our conservative loan underwriting standards. To accomplish this
growth, we originated $226.3 million of residential, consumer, and commercial
real estate loans in our local market area through our loan origination network.
To better serve our growing number of commercial customers, we added a third
commercial loan officer to our staff.

"WE WILL LOOK FOR NEW DEPOSIT MARKETS."

Our goal continues to be to make our delivery system the best in the local
communities we serve. In December 1999, we opened a new office near the Ibis
Country Club golf community, located in suburban West Palm Beach. The office is
located on an outparcel in a shopping center near the entrance to the Ibis
development. In addition to seeking new branching opportunities, we constantly
analyze our existing offices to determine whether they are not only profitable
but are serving their markets efficiently. As a result of this review, we
decided to close our Hutchinson Island office at the expiration of its lease in
1999. The accounts at this branch were transferred to our Jensen Beach office,
located just two miles away. As a result, we ended 1999 with 21 full service
branch offices.

"WE WILL UTILIZE THE MARKETING CALL CENTER TO CREATE ADDITIONAL NEW BUSINESS
OPPORTUNITIES."

The Marketing Call Center became fully operational early in 1999. It has proven
to be an effective tool for cross selling our products and services to a wide
range of customers, with more than 600 new and expanded customer relationships
resulting from the efforts of the Call Center team during this first year.

"WE WILL IMPROVE OUR EFFICIENCY BY COMPETITIVELY PRICING OUR PRODUCTS AND
SERVICES AND BY REDUCING OUR COSTS."

Our net income increased by $1.5 million, or 31%, during 1999, primarily as a
result of a $4.6 million increase in net interest income. This increase in net
interest income was due in large part to an increase in interest-earning assets,
as well as to a certain extent, a decline in weighted average interest costs
during 1999. Interest-earning assets increased, primarily due to the new loan
originations. Partly offsetting this increase, Federal Home Loan Bank advances

                                       2
<PAGE>

were used primarily in leveraged transactions to purchase securities. Net
interest income was also positively affected by the decline in interest rates
for much of 1999. The decline in rates on deposits and borrowings was greater
than the decline in rates on loans and investments which produced a slight
increase in the interest rate spread to 3.19%, increasing net interest income.

The increase in net interest income was offset in part by a $2.3 million
increase in operating expense. Of that increase, $1.5 million was attributable
to employee compensation and benefits as a result of increased staffing and
compensation levels and the increased cost of the stock benefit plans approved
by the shareholders, as well as the amortization of the cost of the additional
shares purchased by the Employee Stock Ownership Plan in the second step
conversion.

"WE CONTINUE OUR EFFORTS TO ENHANCE SHAREHOLDER VALUE."

During 1999, the Office of Thrift Supervision approved our applications to
repurchase stock in the open market. A total of 1,267,444 shares at an average
cost of $12.55 were repurchased during 1999, resulting in a book value of $13.50
per share at December 31, 1999. In addition, the Board of Directors again
declared dividends during 1999 totaling $0.44 per share.

"THE YEAR 2000 ISSUE WAS A MAJOR FOCUS FOR US."

Due to the hard work and dedication of our staff, we completed the change to
January 1, 2000 on all of our systems with no material problems. We will
continue to monitor and test all date sensitive calculations throughout 2000. As
an added benefit of the Year 2000 project, much of our computer technology and
systems were upgraded, allowing our personnel to more efficiently perform their
duties.

"OUR GOALS FOR 2000 ARE EXCITING."

We will continue to seek out lending opportunities in our local market area. Our
lending staff will aggressively meet the needs of residential and commercial
borrowers, emphasizing the origination of commercial real estate and business
loans, as well as single-family residential mortgage and consumer loans. As a
result of the 1999 sales of the majority of the MacArthur Foundation land
holdings in Palm Beach, Martin and St. Lucie counties, major real estate
development is scheduled to begin in northern Palm Beach County during 2000.
Developers have already filed plans for residential projects with construction
scheduled to begin in 2000.

We will continue to look for suitable locations for new branch offices. During
2000, we plan to open a new office on land we purchased at Andros Isle in West
Palm Beach. Also in 2000, we will develop one of the other branch sites we own
in our current market area.

We will continue to enhance shareholder value in 2000. Our stock buyback, which
was approved by the Office of thrift Supervision in December 1999, will continue
during 2000. In addition, our plan is to continue the growth of our asset base
and, consequently, to continue to grow core earnings both through the asset
growth and by improving our operating efficiency. Strategic planning committees
are focusing on identifying cost reduction and enhanced fee income strategies
and exploring new business opportunities during 2000.

"OUR CUSTOMERS, EMPLOYEES AND SHAREHOLDERS ARE IMPORTANT TO OUR SUCCESS AS A
COMPANY."

The most significant asset in our "Customers First" quality service program is
our employees because of their extensive banking knowledge and commitment to
customer satisfaction.

Our directors, officers and employees appreciate the support and encouragement
of our shareholders and remain committed to increasing shareholder value. We
look forward to a successful year 2000 with growth and profitability as our
primary goals.

Sincerely,



James B. Pittard, Jr.
President and Chief Executive Officer of Community Savings Bankshares, Inc.


          CUSTOMERS FIRST
          COMMUNITY SAVINGS
          LOGO


                                       3
<PAGE>
<TABLE>
<CAPTION>
                                          COMMUNITY SAVINGS BANKSHARES, INC.
                                                CORPORATE INFORMATION

            <S>                                                         <C>
                     CORPORATE HEADQUARTERS                                               AUDITORS
            660 U.S. Highway One , P. O. Box 14547                              Crowe, Chizek and Company LLP
                  North Palm Beach, FL 33408                            400 Riverfront Plaza Bldg. 55 Campau Ave. NW
                   www.communitysavings.com                                        Grand Rapids, MI 49503
            (561) 881-2212 (800) 879-0112 (Florida)
                                                                                       SPECIAL COUNSEL
                        ANNUAL MEETING                                      Elias, Matz, Tiernan & Herrick L.L.P.
                   April 26, 2000, 1:30 p.m.                                   734 15th Street, NW, 12th Floor
            Embassy Suites PGA, 4350 PGA Boulevard                                  Washington, DC 20005
                 Palm Beach Gardens, FL 33410                                           www.emth.com

                           FORM 10-K                                                   GENERAL COUNSEL
       A copy of Bankshares' Annual Report on Form 10-K,                        Hurd, Horvath & Dinkin P. A.
     as filed with the Securities and Exchange Commission,                     8295 N. Military Trail, Suite A
                 is available without charge.                                   Palm Beach Gardens, FL 33410

                         STOCK LISTING                                           REGISTRAR & TRANSFER AGENT
   The common stock of Community Savings Bankshares, Inc. is              ChaseMellon Shareholder Services, L.L.C.
   traded on The Nasdaq Stock Market under the symbol CMSV.                  Overpeck Centre, 85 Challenger Road
                                                                                  Ridgefield Park, NJ 07660
                       DIVIDEND SERVICES                                     (800) 526-0801 www.chasemellon.com
    Dividend Reinvestment and Optional Cash Investment Plan
     provides shareholders a regular way of investing cash                          SHAREHOLDER RELATIONS
  dividends in additional shares and investing optional cash              Deborah M. Rousseau, Corporate Secretary
      payments without payment of brokerage commissions.                Trina L. Miles, Assistant Corporate Secretary
                                                                      Susan L. Sabias, Shareholder Relations Secretary

                SHAREHOLDER ACCOUNT ASSISTANCE
     Shareholders who wish to change the name, address or                            INVESTOR RELATIONS
 ownership of stock or report lost certificates should contact         James B. Pittard, Jr., Chief Executive Officer
    ChaseMellon Shareholder Services, L.L.C. at the address             Larry J. Baker, CPA, Chief Financial Officer
                    or phone number above.
</TABLE>
On December 15, 1998, the conversion and reorganization of ComFed, M. H. C. was
consummated. Each existing share of Community Savings Bankshares, Inc. except
for those shares held by ComFed, M. H. C., was exchanged for 2.0445 shares of
common stock of Bankshares. The book value, prices, and dividends per share in
the following table have been adjusted to reflect the transaction. As of
December 31, 1999, there were 9,319,873 shares of Common Stock outstanding and
1,742 shareholders of record, not including the number of persons or entities
whose stock is held in nominee or "street" name through various brokerage firms
or banks. The following table sets forth quarter ending book value, high, low,
and closing trade prices, and dividend per share information.

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                                            Stock Prices
                                    ------------------------------
                        Book                                           Dividend
Quarter Ended           Value       High        Low          Close     Per Share
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December 31, 1999      $13.50      $13.44      $11.44       $12.56       $.1100
September 30, 1999     $13.41      $13.50      $11.63       $12.00       $.1100
June 30, 1999          $13.38      $13.13      $11.81       $12.63       $.1100
March 31, 1999         $13.42      $13.13      $10.69       $12.50       $.1100

December 31, 1998      $13.43      $12.23      $ 8.50       $10.75       $.1100
September 30, 1998     $ 8.27      $18.22      $10.27       $10.64       $.1100
June 30, 1998          $ 8.15      $19.08      $15.16       $16.14       $.1100
March 31, 1998         $ 8.08      $20.05      $16.45       $18.89       $.1100

                                        4
<PAGE>

FINANCIAL HIGHLIGHTS

The common stock of Community Savings Bankshares, Inc. trades on The Nasdaq
Stock Market under the symbol "CMSV".
<TABLE>
<CAPTION>
                                                12/31/99    12/31/98    12/31/97    12/31/96     9/30/96     9/30/95
FOR THE YEAR ENDED (In Thousands)
--------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>         <C>         <C>         <C>         <C>
Interest income                                 $ 58,464    $ 54,489    $ 50,316    $ 45,580    $ 43,889    $ 37,720
Interest expense                                  29,535      30,159      27,390      23,888      22,859      18,634
Net interest income                               28,929      24,330      22,926      21,692      21,030      19,086
Net income                                         6,534       4,994       5,356       4,024       3,915       4,574

AVERAGE FOR THE YEAR ENDED (In Thousands)
--------------------------------------------------------------------------------------------------------------------
Total assets                                    $858,785    $772,248    $693,175    $631,038    $612,004    $544,555
Loans receivable, net                            577,603     510,491     411,098     359,414     346,880     321,849
Cash and cash equivalents                         49,794      44,819      42,029      47,532      48,367      53,736
Securities held to maturity and available for    171,212     167,357     210,870     195,765     187,239     183,443
Deposits                                         591,849     578,574     537,965     494,034     478,955     429,893
Borrowed funds                                   123,689      90,928      61,551      46,076      42,416      29,086
Shareholders' equity                             130,119      86,980      78,822      75,323      74,638      69,263

AT YEAR END (In Thousands)
--------------------------------------------------------------------------------------------------------------------
Total assets                                    $892,974    $844,041    $720,133    $655,209    $650,332    $567,006
Loans receivable, net                            608,369     538,204     451,709     389,040     376,219     329,442
Cash and cash equivalents                         45,239     117,015      25,954      42,442      44,780      42,497
Securities held to maturity                       38,802      52,619      67,801      75,544      77,238     137,178
Securities available for sale                    144,840      95,151     142,269     123,152     124,287      27,028
Real estate owned                                    494         522         592       1,455       1,384       1,910
Deposits                                         613,943     594,400     550,708     513,709     498,929     437,376
Borrowed funds                                   154,694     107,350      75,098      53,908      55,867      39,101
Shareholders' equity                             115,701     133,286      81,259      76,119      75,056      72,848

KEY FINANCIAL DATA
--------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS:
Return on average assets                            0.76%       0.65%       0.77%       0.64%       0.64%       0.84%
Return on average equity                            5.02        5.74        6.80        5.34        5.25        6.60
Net interest rate spread                            3.19        3.04        3.13        3.24        3.24        3.40
Net interest margin                                 3.62        3.37        3.51        3.64        3.65        3.78
Non-interest income to average assets               0.45        0.53        0.64        0.58        0.55        0.62
Non-interest expense to average assets              2.68        2.68        2.72        3.18        3.20        2.74
Dividend payout ratio                              62.98       53.54       38.69       39.57       42.89       28.22
ASSET QUALITY RATIOS, AT PERIOD END:
Non-performing loans to net loans receivable        0.17        0.31        0.31        0.42        0.22        0.20
Non-performing assets to total assets               0.17        0.26        0.27        0.47        0.40        0.45
Allowance for loan losses
    to non-performing loans                       377.57      189.45      193.04      155.86      274.58      527.49
Allowance for loan losses to loans receivable       0.64        0.58        0.59        0.65        0.61        1.05

CAPITAL RATIOS:
Shareholders' equity to total assets,
    at period end                                  12.96       15.79       11.28       11.62       11.54       12.85
Average equity to average assets                   15.15       11.26       11.37       11.94       12.20       12.72
OTHER DATA:
Number of offices                                     21          21          21          18          18          17
</TABLE>

                                        5
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

GENERAL

In the following discussion, references to "Bankshares" refer to Community
Savings Bankshares, Inc. together with its subsidiary, Community Savings, F. A.
(the "Association"). During January 1997, the Board of Directors approved the
change in the fiscal year end for all related entities from September 30th to
December 31st, effective with the year and the three months ended December 31,
1996.

                       COMMUNITY SAVINGS BANKSHARES, INC.

Bankshares is a Delaware-chartered stock holding company organized in August
1998. Bankshares' significant assets include cash and its investment in its
wholly-owned subsidiary, the Association. On December 15, 1998, Bankshares
completed its reorganization and stock offering in connection with the
conversion and reorganization of ComFed, M. H. C. (the "Holding Company"), a
mutual holding company, and its mid-tier holding company ("Mid-Tier").
Bankshares sold 5,470,65l shares of common stock at $10.00 per share in a
subscription and community offering (the "Offering") resulting in net proceeds
of approximately $53.0 million. Bankshares also issued 5,078,233 shares of
common stock to existing minority shareholders of Mid-Tier (the "Exchange") at
an exchange ratio of 2.0445 shares for each share of the Mid-Tier common stock.
At December 31, 1999, there were 9,319,873 shares of common stock outstanding.

                            COMMUNITY SAVINGS, F. A.

The Association, founded in 1955, is a federally-chartered stock savings and
loan association headquartered in North Palm Beach, Florida. The Association's
deposits are federally insured by the Federal Deposit Insurance Corporation
("FDIC") through the Savings Association Insurance Fund ("SAIF"). The
Association has been a member of the Federal Home Loan Bank of Atlanta ("FHLB")
since 1955. The Association is regulated by the Office of Thrift Supervision
("OTS").

On December 15, 1998, Bankshares became the holding company for the Association
as a result of the completion of the conversion and reorganization of the
Association from the two-tier mutual holding company structure to the stock
holding company structure and the related stock offering of Bankshares (the
"Reorganization"). In the course of the Reorganization, the Holding Company and
Mid-Tier were merged with and into the Association. The Reorganization,
including the mergers, was accounted for in a manner similar to a pooling of
interests and did not result in any significant accounting adjustments. Net
proceeds from the Reorganization approximated $53.0 million which were initially
invested in interest-earning deposits at December 31, 1998, and which have been
since disbursed primarily to fund loan originations, securities purchases, and
repurchases of Bankshares' common stock in the open market This use of funds
reflected the implementation of the Association's business plan to prudently
deploy the capital raised in the Reorganization, without an increase in high
risk lending or investment activities.

The Association is a community-oriented financial institution engaged primarily
in the business of attracting deposits from the general public and using such
funds, together with other borrowings, to invest in various residential and
commercial real estate loans, consumer and commercial business loans,
mortgage-backed securities ("MBS"), and investment securities. As part of its
asset/liability strategy, the Association emphasizes the origination of
adjustable- and hybrid-rate loans on residential properties. The interest on
adjustable-rate loans adjusts annually. Hybrid loans are loans which have a
fixed-interest rate for the first five or seven years. After this period, the
loans convert to adjustable-rate loans. The Association also offers traditional
fixed-rate residential loans for terms of 15 or 30 years. The Association's plan
is to operate as a well-capitalized, profitable and independent institution. The
Association currently exceeds all regulatory capital requirements.

The Association's profitability is highly dependent on its net interest income.
The components that determine net interest income are the amount of
interest-earning assets and interest-bearing liabilities, non interest bearing
liabilities, and capital, together with the yields earned or rates paid on such
interest rate-sensitive instruments. The Association manages interest rate risk
exposure by matching, to a degree, asset and liability maturities and rates.
This is accomplished while considering the credit risk of certain assets. The
Association maintains asset quality by utilizing comprehensive loan underwriting
standards and collection efforts as well as by primarily originating or
purchasing secured or guaranteed assets.

The Association has two wholly-owned subsidiaries. ComFed, Inc. ("ComFed"),
formed in 1971, operates as Community Insurance Agency. Palm River Development
Co., Inc. ("Palm River"), incorporated in 1999, is engaged in a real estate
development joint venture in Indian River County.

                                       6
<PAGE>

RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998

GENERAL
Net income for the year ended December 31, 1999 increased 30.8% to $6.5 million,
or $0.65 diluted earnings per share, compared to $5.0 million, or $0.48 diluted
earnings per share for the same period in 1998. The increase was primarily the
result of a $4.6 million increase in net interest income, partially offset by a
$2.3 million increase in operating expense.

INTEREST INCOME
Interest income for the year ended December 31, 1999 totaled $58.5 million, an
increase of $4.0 million, or 7.3%, from $54.5 million for 1998 reflecting, in
part, the implementation of the Association's growth strategy to expand the loan
and securities available for sale portfolios, offset in part by the
lower-interest environment which existed for much of 1999. The increase was due
primarily to a $75.9 million increase in average interest-earning assets to
$798.6 million for the year ended December 31, 1999 from $722.7 million for
1998, partially offset by a decrease in the average yield on average
interest-earning assets to 7.32% for the year ended December 31, 1999 from 7.54%
for 1998. Interest income on loans increased $4.3 million, or 10.7%, to $44.5
million for the year ended December 31, 1999 compared to $40.2 million for 1998.
Interest income from securities held to maturity and securities available for
sale decreased by $371,000, or 3.2%, to $11.3 million for the year ended
December 31, 1999 from $11.6 million for 1998. The decrease in income from
securities held to maturity and securities available for sale was caused by a
$3.8 million decrease in the average balance to $171.2 million for the year
ended December 31, 1999 from $167.4 million for 1998 as well as a decrease in
the average yield to 6.58% for the year ended December 31, 1999 from 6.95% for
1998. For further details on the increase in interest income, see the charts in
"Average Balance Sheet" and "Rate Volume Analysis" on pages 8-9.

Management's strategy during 2000 will be to continue to grow the Association's
loan portfolio with a continued emphasis on higher yielding commercial real
estate and business loans. Such growth, in the rising interest-rate environment
which exists in early 2000, should have a positive effect on interest income and
the over all yield on interest-earning assets. However, such growth may also
result in additional provisions for loan losses. Interest rate spreads on the
growth may tighten due to the current interest rate environment and the cost of
funding sources.

INTEREST EXPENSE
Interest expense decreased $624,000, or 2.1%, to $29.5 million for the year
ended December 31, 1999 from $30.2 million for 1998. Interest on deposits
decreased $2.1 million, or 8.7%, to $22.0 million for the year ended December
31, 1999 from $24.1 million for 1998. The decrease was due primarily to a
decrease in the average cost of deposits to 3.71% from 4.17%, which reflected a
lower-interest rate environment in the Association's market area for much of
1999. Such decreases were partially offset by a $13.3 million, or 2.3%, increase
in the average balance to $591.8 million in 1999. For most of 1999, management's
policy was to maintain existing deposit accounts when possible without matching
competitor's rates on certificates of deposits. However, during the last quarter
of 1999, management found it necessary to place an increased emphasis on
competitively pricing its deposit products, including odd-term certificate of
deposit products, as well as existing certificate of deposit products, in order
to attract new deposits, as well as to maintain its existing deposit customers.
Because certificates of deposit typically have a higher interest rate cost to
the Association than transaction accounts, an increased emphasis was placed on
obtaining a checking account as well as the certificate of deposit from new
customers. Such strategy was implemented as part of the Association's asset
liability policy. As a result, certificates of deposits and transaction accounts
increased $6.5 million and $13.0 million, respectively, at December 31, 1999 as
compared to December 31, 1998. Interest expense attributable to borrowed funds
increased $1.5 million, or 24.2%, to $7.6 million for the year ended December
31, 1999 from $6.1 million for 1998, primarily due to a $32.8 million, or 36.0%,
increase in the average balance of borrowed funds to $123.7 million during 1999
from $90.9 million during the 1998 period, partially offset by a decrease in the
average cost of borrowed funds to 6.10% for the year ended December 31, 1999
from 6.65% for the 1998 period. During 1999, additional FHLB advances totaling
$65.0 million included advances totaling $35.7 million used primarily to fund
the purchase of securities with higher interest yields than the rate paid on the
advances. For further details on interest expense, see the tables in "Average
Balance Sheet" and "Rate Volume Analysis" on pages 8-9.

The Association will be operating in a rising interest-rate environment during
the beginning of 2000. In such an environment, interest rate spreads tend to
decrease as rates paid on funding sources typically rise faster than yields
received on interest-earning assets. The Association will continue to match new
asset growth with the least expensive funding sources available. Some strategies
may include emphasizing lower-costing transaction accounts or FHLB advances.

                                       7
<PAGE>

AVERAGE BALANCE SHEET
The following tables set forth certain additional information relating to
Bankshares' average balance sheet and reflect the average yield on assets and
average cost of liabilities for the periods indicated and the average yields
earned and rates paid. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods presented. The use of monthly average balances instead of daily average
balances has not caused any material difference in the information presented.
This information, when considered with the prior comments and the following Rate
Volume Analysis table, explains the reasons for the growth in net interest
income.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                    For the Years Ended December 31,
                                         ------------------------------------------------------------------------------------------
                                                      1999                           1998                          1997
                                         -----------------------------   ---------------------------   ----------------------------
                                                               AVERAGE                       Average                        Average
                                          AVERAGE              YIELD/    Average             Yield/    Average              Yield/
                                          BALANCE   INTEREST   COST      Balance   Interest  Cost      Balance   Interest   Cost
-----------------------------------------------------------------------------------------------------------------------------------
                                                                          (Dollars In Thousands)
                                         ------------------------------------------------------------------------------------------
<S>                                       <C>        <C>        <C>     <C>        <C>        <C>     <C>         <C>        <C>
Interest-earning assets:
    Real estate loans                     $557,419   $42,759    7.67%   $489,915   $38,342    7.83%   $392,782    $31,846    8.11%
    Consumer and commercial business        20,184     1,756    8.70      20,576     1,886    9.17      18,316      1,644    8.98
    Securities held to maturity and
        available for sale                 171,212    11,258    6.58     167,357    11,629    6.95     210,870     14,870    7.05
    Other investments (1)                   49,794     2,691    5.40      44,819     2,632    5.87      31,851      1,956    6.14
                                          --------   -------            --------   -------            --------    -------
  Total interest-earning assets            798,609    58,464    7.32     722,667    54,489    7.54     653,819     50,316    7.70
                                                     -------                       -------                        -------
Non-interest-earning assets                 60,176                        49,581                        39,356
                                          --------                      --------                      --------
       Total assets                       $858,785                      $772,248                      $693,175
                                          ========                      ========                      ========

Interest-bearing liabilities:
    Deposits                              $591,849    21,987    3.71    $578,574    24,111    4.17    $537,965     22,648    4.21
    Borrowed funds                         123,689     7,548    6.10      90,928     6,048    6.65      61,551      4,742    7.70
                                          --------   -------            --------   -------            --------    -------
  Total interest-bearing liabilities       715,538    29,535    4.13     669,502    30,159    4.50     599,516     27,390    4.57
                                                     -------                       -------                        -------
Non-interest-bearing liabilities            13,128                        15,766                        14,837
                                          --------                      --------                      --------
       Total liabilities                   728,666                       685,268                       614,353
Shareholders' equity                       130,119                        86,980                        78,822
                                          --------                      --------                      --------
Total liabilities and shareholders'
       equity                             $858,785                      $772,248                      $693,175
                                          ========                      ========                      ========

Net interest income                                  $28,929                       $24,330                        $22,926
                                                     =======                       =======                        =======
Net interest rate spread (2)                                    3.19%                         3.04%                          3.13%
                                                              ======                        ======                         ======
Net yield on interest-earning assets (3)                        3.62%                         3.37%                          3.51%
                                                              ======                        ======                         ======
Ratio of average interest-earning assets
  to average interest-bearing liabilities                     111.61%                       107.94%                        109.06%
                                                              ======                        ======                         ======
-----------------------------------------------------------------------------------------------------------------------------------
(1) Includes interest-earning deposits and FHLB stock.
(2) Net interest-rate spread represents the difference between the weighted
    average yield earned on interest-earning assets and the weighted average
    rate paid on interest-bearing liabilities.
(3) Net yield on interest-earning assets represents net interest income as a
    percentage of average interest-earning assets.
</TABLE>
                                       8
<PAGE>

RATE VOLUME ANALYSIS
Net interest income can also be analyzed in terms of the impact of changing
interest rates on interest-earning assets and interest-bearing liabilities and
changing the volume or amount of these assets and liabilities. The following
table represents the extent to which changes in interest rates and changes in
the volume of interest-earning assets and interest-bearing liabilities have
affected the interest income and interest expense during the periods indicated.
Information is provided in each category with respect to (i) changes
attributable to changes in average volume (change in average volume multiplied
by prior rate); (ii) changes attributable to changes in rate (changes in rate
multiplied by prior average volume); (iii) changes in rate-volume (changes in
rate multiplied by changes in average volume); and (iv) the net change.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                   Year Ended December 31,            Year Ended December 31,         Year Ended December 31, 1997
                                        1999 VS. 1998                      1998 vs. 1997           vs. Year Ended September 30, 1996
                             ---------------------------------- ----------------------------------- --------------------------------
                               Increase/(Decrease)                Increase/(Decrease)                 Increase/(Decrease)
                                     Due to                             Due to                             Due to
                             ------------------------  Total    ------------------------   Total    ----------------------  Total
                                              Rate/  Increase                    Rate/    Increase                 Rate/   Increase
                             Volume   Rate    Volume (Decrease) Volume   Rate    Volume  (Decrease) Volume  Rate   Volume (Decrease)
------------------------------------------------------------------------------------------------------------------------------------
                                                                         (In Thousands)
                             -------------------------------------------------------------------------------------------------------
<S>                          <C>     <C>      <C>     <C>      <C>     <C>       <C>      <C>      <C>     <C>      <C>    <C>
 INTEREST INCOME:
    Real estate loans        $5,287  $ (784)  $ (86)  $4,417   $7,877  $(1,100)  $ (281)  $6,496   $4,981  $  99    $  1   $5,081
    Consumer and commercial
      business loans            (37)    (97)      4     (130)     203       35        4      242      246    (94)    (16)     136
    Securities held to
      maturity and available
      for sale                  231    (535)    (67)    (371)  (3,033)    (239)      31   (3,241)   1,542    137      68    1,747
    Other investments (1)       292    (211)    (22)      59      796      (86)     (34)     676     (594)    75     (18)    (537)
                             ------  ------   -----   ------   ------  -------   ------   ------   ------  -----    ----   ------
    Total interest-earning
      assets                  5,773  (1,627)   (171)   3,975    5,843   (1,390)    (280)   4,173    6,175    217      35    6,427
                             ------  ------   -----   ------   ------  -------   ------   ------   ------  -----    ----   ------
 INTEREST EXPENSE
    Deposits                    525  (2,661)     12   (2,124)   1,710     (215)     (32)   1,463    2,372    910     119    3,401
    Borrowed funds            2,208    (500)   (208)   1,500    2,262     (646)    (310)   1,306    1,630   (348)   (152)   1,130
                             ------  ------   -----   ------   ------  -------   ------   ------   ------  -----    ----   ------
    Total interest-bearing
      liabilities             2,733  (3,161)   (196)    (624)   3,972     (861)    (342)   2,769    4,002    562     (33)   4,531
                             ------  ------   -----   ------   ------  -------   ------   ------   ------  -----    ----   ------
 Net change in net           $3,040  $1,534   $  25   $4,599   $1,871  $  (529)  $   62   $1,404   $2,173  $(345)   $ 68   $1,896
 interest income             ======  ======  ======   ======   ======  =======   ======   ======   ======  =====    ====   ======
                             -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes interest-earning deposits and FHLB stock.

PROVISION FOR LOAN LOSSES
The Association maintains an allowance for loan losses based upon a periodic
evaluation of known and inherent risks in the loan portfolio, its past loan loss
experience, adverse situations that may affect borrowers' ability to repay
loans, the estimated value of the underlying loan collateral, the nature and
volume of its loan activities, and current as well as expected future economic
conditions. Loan loss provisions are based upon management's estimate of the
fair value of the collateral and the actual loss experience, as well as
guidelines applied by the OTS and the FDIC. The provision for loan losses was
$905,000 for the year ended December 31, 1999 as compared to $622,000 for 1998.
The provision for loan losses was reduced in 1998 due to a $252,000 recovery of
a prior loss which reduced the necessary provision amount for 1998. The
Association did not experience this level of recoveries in 1999. Management
increased the allowance for loan losses in 1999 in order to protect against the
inherent risk in the loan portfolio due to the $70.2 million increase in the
loan portfolio during this period. Management reviews the adequacy of its
allowances for loan losses monthly through asset classification review. The
allowance for loan losses as a percentage of loans receivable at December 31,
1999 and 1998 was 0.64% and 0.58%, respectively.

OTHER INCOME
Other income consists of servicing income and fee income, service charges, gain
or loss on the sale or early maturity of securities available for sale, loans,
and other assets. Other income decreased $227,000 or 5.6%, to $3.8 million for
the year ended December 31, 1999 from $4.1 million for 1998 primarily due to the
recognition of a $138,000 loss reflecting the decline in fair value of a
security that was determined during 1999 by management to be other than
temporary. In addition, the results for 1998 included a $175,000 gain on the
call of a security that did not reoccur in 1999. The decrease was partially
offset by a $194,000 increase in fee income (which includes servicing income and
other loan fees, and NOW account and other customer fees) which was $3.8 million
and $3.6 million for the 1999 and the 1998 periods, respectively.


                                       9
<PAGE>

OPERATING EXPENSE
Total operating expense increased $2.3 million to $23.0 million for the year
ended December 31, 1999 from $20.7 million for 1998. Employee compensation and
benefits increased by $1.6 million to $11.9 million during the year ended
December 31, 1999 from $10.3 million during 1998 primarily as a result of
increased staffing and compensation levels designed to maintain non-management
employee wages at competitive levels in the Association's market area and the
increased cost of the 1999 stock benefit programs. Occupancy and equipment
expense increased $521,000 to $6.0 million for the year ended December 31, 1999,
from $5.5 million for the 1998 period primarily as a result of increased
depreciation expense, repairs and maintenance costs, and real estate taxes,
offset in part by a decrease in lease expense. The increase in depreciation
expense and the decrease in lease expense are related to the relocation of two
branch offices from leased facilities to new buildings built by the Association
during the latter part of 1998, as well as by the closing during 1999 of a
leased branch office. In addition, miscellaneous expense (which includes but is
not limited to such expense items as legal, shareholder relations, accounting,
tax and regulatory services, stationery and supplies, postage, telephone, and
other miscellaneous expenses) increased $295,000 for the year ended December 31,
1999 as compared to 1998.

PROVISION FOR INCOME TAXES
The provision for income taxes increased $236,000 to $2.3 million for the year
ended December 31, 1999 from $2.1 million for 1998 due in part to higher taxable
income during the year ended December 31, 1998. The increase was partially
offset by the increased benefit from tax credits totaling $599,000 during the
year ended December 31, 1999 resulting from the Association's investment in
affordable housing partnerships, as compared to $320,000 for 1998.

RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997

GENERAL
Net income for the year ended December 31, 1998 decreased 6.8% to $5.0 million,
or $0.48 diluted earnings per share, compared to $5.4 million, or $0.52 diluted
earnings per share for 1997. Results for the year ended December 31, 1997
included a one-time $384,000 after tax gain on the sale of the stock of the
Association's data service bureau which did not reoccur during 1998. However,
during 1998, net interest income increased $1.4 million to $24.3 million from
$22.9 million for 1997 as described below and is shown in the tables in "Average
Balance Sheet" and "Rate Volume Analysis" on pp. 8-9. Other income and the
provision for income taxes decreased $379,000 and $823,000, respectively, during
1998 while operating expense increased $1.9 million during this time period.

INTEREST INCOME
Interest income for the year ended December 31, 1998 totaled $54.5 million, an
increase of $4.2 million, or 8.3%, from $50.3 million for 1997 reflecting, in
part, the implementation of the Association's growth strategy to expand the loan
and securities available for sale portfolios. The increase was due primarily to
a $68.8 million increase in average interest-earning assets of to $722.7 million
for the year ended December 31, 1998 from $653.8 million for 1997, partially
offset by a decrease in the average yield on average interest-earning assets to
7.54% for the year ended December 31, 1998 from 7.70% for 1997. Interest income
on loans increased $6.7 million, or 20.0%, to $40.2 million for the year ended
December 31, 1998 compared to $33.5 million for 1997. Interest income from
securities held to maturity and securities available for sale decreased by $3.2
million, or 21.5%, to $11.6 million for the year ended December 31, 1998 from
$14.9 million for 1997. The decrease in income from securities held to maturity
and securities available for sale was primarily caused by a $43.5 million
decrease in the average balance (invested in loans above) to $167.4 million for
the year ended December 31, 1998 from $210.9 million for 1997 as well as a
decrease in the average yield to 6.95% for the year ended December 31, 1998 from
7.05% for 1997.

INTEREST EXPENSE
Interest expense increased $2.8 million, or 10.2%, to $30.2 million for the year
ended December 31, 1998 from $27.4 million for 1997. Interest on deposits
increased $1.5 million, or 6.2%, to $24.1 million for the year ended December
31, 1998 from $22.6 million for 1997. The increase was due primarily to the
increase in the average balance of deposits of $40.6 million, or 7.5%, to $578.6
million during 1998 from $538.0 million during 1997 partially offset by a small
decrease in the average cost of deposits to 4.17% from 4.21%. In order to
increase its market share of total deposits during 1998 as well as to maintain
its existing deposit customers, the Association placed an increased emphasis on
competitively pricing its deposit products, including odd-term certificate of
deposit products, as well as existing certificate of deposit products, as part
of its asset liability strategy during 1998. Certificates of deposit typically
have a higher interest rate cost to the Association than transaction accounts.
Certificates of deposits and transaction accounts increased $10.1 million and
$33.6 million, respectively, at December 31, 1998 as compared to December 31,
1997. Interest expense attributable to borrowed funds increased $1.3 million, or
27.7%, to $6.1 million for the year ended December 31, 1998 from $4.7 million
for 1997, primarily due to an increase in the average balance of borrowed funds
to $90.9 million during 1998 from $61.6 million during the 1997 period,
partially offset by a decrease in the average cost of borrowed funds to 6.65%
for the year ended December 31, 1998 from 7.70% for the 1997 period. During
1998, additional advances from the FHLB were used primarily to fund the purchase
of securities which have higher yields than the interest cost of the FHLB
advances.

                                       10
<PAGE>

PROVISION FOR LOAN LOSSES
The provision for loan losses was $622,000 for the year ended December 31, 1998
as compared to $264,000 for 1997. The increase in the provision for loan losses
for 1998 was primarily attributable to management's assessment that the
allowance for loan losses needed to be increased to protect against the inherent
risk in the loan portfolio due to the $86.5 million increase in the loan
portfolio during this period. Management reviews the adequacy of its allowances
for loan losses monthly through asset classification review. The allowance for
loan losses as a percentage of net loans receivable at December 31, 1998 and
1997 was 0.58% and 0.59%, respectively.

OTHER INCOME
Other income consists of servicing income and fee income, service charges, gain
or loss on the sale or early maturity of securities available for sale, loans,
and other assets. Other income decreased $379,000 or 8.4%, to $4.1 million for
the year ended December 31, 1998 from $4.5 million for 1997. Net gain on sale of
other assets of $617,000 in the year ended December 31, 1997 represented the
one-time gain on the sale of stock of the Association's data service bureau. Fee
income (which includes servicing income and other loan fees, and NOW account and
other customer fees) was $3.6 million for both 1998 and 1997.

OPERATING EXPENSE
Total operating expense increased $1.9 million to $20.7 million for the year
ended December 31, 1998 from $18.8 million for 1997. Employee compensation and
benefits increased by $1.4 million to $10.3 million for the year ended December
31, 1998 from $8.9 million for 1997 primarily as a result of increased staffing
and compensation levels and increased cost of the stock benefit programs,
reflecting changes in the market value of Bankshares' common stock during 1998.
Occupancy and equipment expense increased $437,000 to $5.5 million for the year
ended December 31, 1998, from $5.1 million for 1997 primarily as a result of the
relocation of two branch offices, the exercise of options to purchase two
existing leaseholds, and increased depreciation expense. These events involved
construction costs, as well as increased depreciation expense related to new
hardware and software purchased for the Association's computer network.

PROVISION FOR INCOME TAXES
The provision for income taxes decreased $823,000 to $2.1 million for the year
ended December 31, 1998 from $2.9 million for the 1997 period due in part to
lower taxable income during the year ended December 31, 1998. The decrease also
reflected the increased benefit from tax credits totaling $320,000 for the year
ended December 31, 1998 resulting from the Association's investment in
affordable housing partnerships as compared to $197,000 for 1997.

FINANCIAL CONDITION
DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 1998

Total assets increased $49.0 million, or 6%, to $893.0 million at December 31,
1999 from $844.0 million at December 31, 1998. The increase in total assets was
primarily due to a $70.2 million increase in the loan portfolio funded in part
by a $71.8 million decrease in cash and cash equivalents. The 1999 business plan
included the prudent deployment of the capital raised in the second step
conversion, without an increase in high risk lending or investment activities.
As part of this effort, the loan portfolio was increased by $70.2 million, or
13%, by emphasizing the origination of residential and commercial real estate
loans secured by properties located in the Association's local market area
through its loan origination network while still maintaining its conservative
loan underwriting standards. The $70.2 million increase represented new loan
originations and purchases totaling $228.2 million and $6.1 million,
respectively, of which $151.0 million were one-to four-family residential loans,
$15.0 million were multi-family residential loans, $26.1 million were commercial
real estate loans, $1.9 million were commercial business loans, $37.4 million
were land loans and $2.9 million were consumer loans. These originations and
purchases were offset in part by sales, principal repayments, an increase in
loans in process and other adjustments totaling $6.0 million, $133.2 million,
$23.7 million and $1.2 million, respectively.

The securities portfolio, which includes securities both held to maturity and
available for sale, had a net increase for the year of $35.9 million. Investment
securities held to maturity decreased $13.8 million to $38.8 million at December
31, 1999 from $52.6 million at December 31, 1998. Securities available for sale
increased by $49.6 million to $144.8 million at December 31, 1999 from $95.2
million at December 31, 1998. Purchases of new securities totaled $74.2 million,
which included $29.4 million in U.S. Government and agency securities, $5.0
million in corporate debt, $10.0 million in mutual funds, and $29.8 million in
mortgage-backed securities. Of these new purchases, $35.7 million were financed
in leveraged transactions using FHLB advances. All of the securities purchased
were classified as available for sale. The purchases were offset in part by $5.0
million in calls and $33.3 million in principal repayments, amortization and
accretion. Included in the securities portfolio are Auto Bonds Receivables (the
"Auto Bonds") which are asset-backed securities secured by automobile loan
receivables During 1999, management determined that the decline in fair value on
the Association's investment in the Auto Bonds was other than temporary

                                       11
<PAGE>

resulting in a write down of $138,000 and a reclassification from held to
maturity to available for sale. The Auto Bonds are reported at their fair value
of $413,000 at December 31, 1999.

During July 1999, the Association formed a wholly-owned subsidiary, Palm River.
This subsidiary entered into a development agreement (the "Agreement") with a
local developer to construct and sell 17 single-family lots, 48 condominiums, 22
carriage homes and 116 patio homes on 117 acres of land in Indian River County,
Florida. Palm River's investment in and advances to this real estate venture
totaled $11.6 million at December 31, 1999.

Office properties and equipment increased by $795,000 to $24.9 million at
December 31, 1999 primarily as a result of the opening of a new branch office in
the Shoppes of Ibis. FHLB stock increased $2.3 million to $7.0 million at
December 31, 1999.

The increase in total assets was funded primarily by a $19.5 million increase in
deposits to $613.9 million at December 31, 1999 as compared to $594.4 million at
December 31, 1998. For most of 1999, management's policy was to maintain
existing deposit accounts when possible without matching competitor's rates on
certificates of deposit. However, during the last quarter of 1999, management
found it necessary to place an increased emphasis on competitively pricing its
deposit products, including odd-term certificate of deposit products, as well as
existing certificate of deposit products, in order to attract new deposits, and
to maintain its existing deposit customers. Because certificates of deposit
typically have a higher interest rate cost to the Association than core
accounts, an increased emphasis was placed on obtaining a checking account as
well as the certificate of deposit from new customers. As a result, core
deposits (which include passbooks and NOW, demand, statement and money market
accounts) increased $13.0 million, or 5.5%, and certificates of deposit
increased $6.5 million, or 1.8%. This resulted in an increase in the actual rate
paid on total deposits to 3.88% at December 31, 1999, from an average yield for
1999 of 3.71%. In addition, the Association used FHLB advances more extensively
to fund its asset growth. Such advances increased $48.3 million primarily due to
$65.0 million in new advances used to fund securities purchases and loan
originations, offset in part by $10.0 million and $6.7 million in calls and
normal repayments, respectively.

Shareholders' equity decreased to $115.7 million or $13.50 per share at December
31, 1999 from $133.3 million or $13.43 per share at December 31, 1998. This
decrease was due primarily to the repurchase during 1999 of 1,267,444 of
Bankshares' issued and outstanding common stock at a cost of approximately $15.9
million, in addition to the payment of dividends aggregating $0.44 per share.
The decrease also reflected the cost of the open market purchases of common
stock totaling $2.9 million which were used to fund grants in the 1995 and 1999
Recognition and Retention Plans, offset in part by net income for the year of
$6.5 million.

LIQUIDITY AND CAPITAL RESOURCES

The Association adjusts its liquidity levels in order to meet funding needs of
deposit outflows, payment of real estate taxes on mortgage loans, repayment of
borrowings and loan commitments. The Association also adjusts liquidity as
appropriate to meet its asset and liability management objectives. A major
portion of the Association's liquidity consists of cash and cash equivalents,
which are a product of its operating, investing and financing activities. The
Association is required to maintain minimum levels of liquid assets as defined
by OTS regulations. This requirement, which varies from time to time depending
upon economic conditions and deposit flows, is based upon a percentage of
deposits and short-term borrowings. The required ratio currently is 4.0%. The
Association's liquidity ratio averaged 12.2% during the month of December 31,
1999 and 14.7% for fiscal 1999.

The Association's primary sources of funds are deposits, amortization and
prepayment of loans and MBS, maturities of investment securities and other
short-term investments, FHLB advances, as well as earnings and funds provided
from operations. While scheduled principal repayments on loans and MBS, and
maturities of securities are relatively predictable sources of funds, deposit
flows and loan prepayments are greatly influenced by general interest rates,
economic conditions, and competition. The Association manages the pricing of its
deposits to maintain a desired deposit balance. In addition, the Association
invests funds in excess of its immediate needs in short-term interest-earning
deposits and other assets, which provide liquidity to meet lending requirements.
Short-term interest-bearing deposits with the FHLB of Atlanta amounted to $21.4
million at December 31, 1999. Other assets qualifying for liquidity outstanding
at December 31, 1999 amounted to $51.1 million. For additional information about
cash flows from operating, financing, and investing activities, see Consolidated
Statements of Cash Flows included in the Consolidated Financial Statements which
are part of this Annual Report.

Liquidity management is both a daily and long-term function of business
management. If funds are required beyond the ability to generate them
internally, borrowing agreements exist with the FHLB which provide an additional
source of funds. FHLB advances totaled $140.2 million at December 31, 1999. At
December 31, 1999, loan commitments totaled $5.3 million, the unfunded portion
of consumer lines of credit totaled $7.8 million, and available commercial lines
and letters of credit totaled $6.4 million. There were no commitments
outstanding to purchase loans at that date. Commitments to purchase
mortgage-backed securities totaled $1.1 million at December 31, 1999.
Certificates of deposit scheduled to mature in less than one year totaled $257.9
million at December 31, 1999. Based on prior experience, management believes
that a significant portion of such deposits will remain with the Association.

                                       12
<PAGE>

IMPACT OF INFLATION AND CHANGING PRICES

The consolidated financial statements of Bankshares and the accompanying notes
presented in this Annual Report, have been prepared in accordance with generally
accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars without
considering the change in the relative purchasing power of money over time and
due to inflation. The impact is reflected in the increased cost of Bankshares'
operations. Unlike most industrial companies, nearly all of the assets and
liabilities of Bankshares are monetary. As a result, interest rates have a
greater impact on Bankshares' performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services.

IMPACT OF NEW ACCOUNTING STANDARDS

For fiscal years beginning after June 15, 2000, a new accounting standard will
require all derivatives to be recorded at fair value. Unless designated as
hedges, changes in these fair values will be recorded in the income statement.
Fair value changes involving hedges generally will be recorded by offsetting
gains and losses on the hedge and on the hedged item, even if the fair value of
the hedged item is not otherwise recorded. This is not expected to have a
material effect on Bankshares' financial statements but the effect will depend
on the extent of Bankshares' derivative holdings, if any, when this standard
applies.

Mortgage loans originated in mortgage banking are converted into securities on
occasion. A new accounting standard effective in 1999 allows these securities to
be classified as available for sale, held to maturity, or trading instead of the
previous requirement to classify such assets as trading.

YEAR 2000 CONSIDERATIONS

Bankshares completed the change to January 1, 2000 on all of its systems with no
material problems. Management and staff will continue to monitor its systems and
to test date sensitive calculations throughout 2000.

FORWARD-LOOKING STATEMENTS

Certain information in this annual report may constitute forward-looking
information, as that term is defined in the Private Securities Litigation Reform
Act of 1995, that involves risks and uncertainties that could cause actual
results to differ materially from those estimated. Persons are cautioned that
such forward-looking statements are not guarantees of future performance and are
subject to various factors which could cause actual results to differ materially
from those estimated. These factors include, but are not limited to, changes in
general economic and market conditions, legislative and regulatory changes,
monetary and fiscal policies of the federal government, demand for loan and
deposit products and the development of an interest rate environment that
adversely affects the interest rate spread or other income from Bankshares'
investments and operations.

ASSET/LIABILITY MANAGEMENT

Since substantially all of Bankshares' interest-earning assets and
interest-bearing liabilities are held by the Association, Bankshares' interest
rate risk exposure primarily lies at the Association level. As a result, all
significant interest rate risk management procedures are performed by management
of the Association. Bankshares' balance sheet consists of investments in
interest-earning assets (primarily loans and securities) which are primarily
funded by interest-bearing liabilities (deposits and borrowings.) Such financial
instruments have varying levels of sensitivity to changes in market interest
rates resulting in market risk. All financial instruments are either classified
as held to maturity or available for sale. As of December 31, 1999, Bankshares
did not own any trading assets, nor did it have any hedging transactions in
place such as interest rate swaps and caps. Based upon the nature of Bankshares'
operations, it is not subject to foreign currency exchange or commodity price
risk. Bankshares' loan portfolio is secured by assets located primarily in Palm
Beach, Martin, St. Lucie, and Indian River counties in Florida and, therefore,
is subject to risks associated with those local economies.

Bankshares is subject to interest rate risk to the extent that its
interest-bearing liabilities with short and intermediate-term maturities reprice
more rapidly, or on a different basis, than its interest-earning assets.
Significant effort has been made to reduce the duration and average life of the
interest-earning assets. Bankshares continues to emphasize adjustable-rate loans
and to increase the amount of its consumer and commercial real estate and
business loans which are generally shorter term in nature than its mortgage
loans. In addition, the majority of all long-term, fixed-rate single-family
residential mortgages are underwritten in accordance with Fannie Mae ("FNMA")
guidelines, thereby allowing the flexibility to sell the assets into the
secondary market when market conditions are favorable. With respect to its

                                       13
<PAGE>

funding sources, management has attempted to reduce the impact of interest rate
changes by emphasizing longer term certificates of deposit and the use of longer
term advances from the FHLB.

Management measures Bankshares' interest rate risk by computing estimated
changes in net interest income and the net portfolio value ("NPV") of its cash
flows from assets and liabilities in the event of a range of assumed changes in
market interest rates. Bankshares' exposure to interest rate risk is reviewed on
a quarterly basis by the Board of Directors and by the Asset/Liability Committee
(the "ALCO") which is comprised of senior management of the Association. The
ALCO establishes policies to monitor and coordinate Bankshares' sources, uses,
and pricing of funds. Exposure to interest rate risk is measured with the use of
interest rate sensitivity analysis to determine the change in NPV in the event
of hypothetical changes in interest rates. If estimated changes to NPV and net
interest income are not within the limits established by the Board of Directors,
then the Board may direct management to adjust Bankshares' asset and liability
mix to bring interest rate risk within Board approved limits.

NPV represents the market value of assets less the market value of liabilities.
This analysis assesses the risk of loss in market risk sensitive instruments in
the event of sudden and sustained 1% to 4% increases and decreases in market
interest rates. The Association's Board of Directors has adopted an interest
rate risk policy which establishes maximum decreases in NPV in the event of such
changes in market interest rates.

The following table presents Bankshares' internal calculations of NPV at
December 31, 1999.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
       Change in Interest Rates                                                            NPV as % of
           in Basis Points          Estimated Net Market Value of Portfolio Equity     PV of Average Assets
            (Rate Shock)                  Amount     $ Change    % Change              NPV Ratio     Change
--------------------------------   ------------------------------------------------   ---------------------
                                              (Dollars in Thousands)                       (Basis Points)
<S>             <C>                      <C>         <C>          <C>                  <C>            <C>
                200                      $111,656    $(28,906)    (20.6)%              13.00%         (337)
                100                       125,361     (15,201)    (10.8)               14.60          (177)
               Static                     140,562          --        --                16.37            --
               (100)                      157,480      16,918      12.0                18.34           197
               (200)                      176,370      35,808      25.5                20.54           417
</TABLE>
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. The interest rates on certain types of assets and liabilities
may fluctuate in advance of changes in market interest rates, while interest
rates on other types may lag behind changes in market rates. Additionally,
certain assets, such as adjustable-rate mortgage loans have features which
restrict changes in interest rates both on a short-term basis and over the life
of the asset. In the event of a change in interest rates, expected rates of
prepayments on loans, decay rates of deposits and early withdrawals from
certificates could likely deviate significantly from those assumed in
calculating the table. Finally, the ability of many borrowers to service their
debt may decrease in the event of a significant interest rate increase.

In addition, the above table may not properly reflect the impact of general
interest rate movements on Bankshares' net interest income because the repricing
of certain categories of assets and liabilities are subject to competitive and
other pressures beyond Bankshares' control.

For information regarding the contractual maturities of the loan, securities,
deposit and borrowing portfolios, see the Notes to Consolidated Financial
Statements which are part of this Annual Report.


                                       14
<PAGE>

INDEPENDENT AUDITORS' REPORT


Community Savings Bankshares, Inc.:

We have audited the accompanying consolidated statements of financial condition
of Community Savings Bankshares, Inc. ("Bankshares") as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These consolidated financial statements are the
responsibility of Bankshares' management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial condition of Bankshares as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.






                                                   Crowe, Chizek and Company LLP
Grand Rapids, Michigan
February 18, 2000


                                       15
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY SAVINGS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
-----------------------------------------------------------------------------------------------------------------------
                                                                                                    December 31,
                                                                                               1999             1998
                                                                                           ------------    ------------
                                                                                                   (In Thousands)
<S>                                                                                        <C>             <C>
ASSETS
Cash and amounts due from depository institutions                                          $     22,057    $     15,305
Interest-earning deposits                                                                        23,182         101,710
                                                                                           ------------    ------------
    Cash and cash equivalents                                                                    45,239         117,015

Securities available for sale                                                                   144,840          95,151
Securities held to maturity  (Approximate fair value - 1999, $41,271; 1998, $57,303)             38,802          52,619
Loans receivable, net of allowance for loan losses                                              608,369         538,204
Accrued interest receivable                                                                       3,788           2,782
Federal Home Loan Bank stock - at cost                                                            7,009           4,722
Premises and equipment, net                                                                      24,939          24,144
Real estate held for investment                                                                   1,872           1,872
Investment in and advances to real estate venture                                                11,633              --
Real estate owned, net                                                                              494             522
Other assets                                                                                      5,989           7,010
                                                                                           ------------    ------------

    Total assets                                                                           $    892,974    $    844,041
                                                                                           ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
Deposits:
    Demand deposits                                                                        $     39,429    $     31,769
    NOW and statement savings                                                                    76,073          82,628
    Savings deposits                                                                             34,466          32,919
    Money market deposits                                                                       100,299          89,895
    Certificates of deposit                                                                     363,676         357,189
                                                                                           ------------    ------------
       Total deposits                                                                           613,943         594,400

Mortgage-backed bond, net                                                                        14,508          15,430
Advances from Federal Home Loan Bank                                                            140,186          91,920
Advances by borrowers for taxes and insurance                                                     1,403           1,208
Other liabilities                                                                                 7,233           7,797
                                                                                           ------------    ------------

       Total liabilities                                                                        777,273         710,755
                                                                                           ------------    ------------


SHAREHOLDERS' EQUITY
Preferred stock ($1 par value per share), 10,000,000 authorized shares, no shares issued             --              --
Common stock ($1 par value per share), 60,000,000 authorized shares: 1999, 9,319,873;
  1998, 10,548,884 shares issued and outstanding                                                 10,571          10,549
Additional paid-in capital                                                                       93,744          93,268
Retained income - substantially restricted                                                       37,869          35,545
Common stock purchased by Employee Stock Ownership Plan                                          (4,722)         (5,407)
Common stock issued to Recognition and Retention Plans                                           (2,586)           (237)
Accumulated other comprehensive income                                                           (3,358)           (432)
Treasury stock, at cost: 1999, 1,251,267 shares                                                 (15,817)             --
                                                                                           ------------    ------------
       Total shareholders' equity                                                               115,701         133,286
                                                                                           ------------    ------------

Total liabilities and shareholders' equity                                                 $    892,974    $    844,041
                                                                                           ============    ============
</TABLE>
  See notes to consolidated financial statements.

                                       16
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                                    For the Years Ended December 31,
                                                                 1999             1998             1997
                                                              ----------       ----------       ----------
                                                              (Dollars In Thousands Except Per Share Data)
<S>                                                           <C>              <C>              <C>
Interest income:
  Loans                                                       $   44,515       $   40,228       $   33,490
  Securities                                                      11,258           11,629           14,870
  Other interest and dividend income                               2,691            2,632            1,956
                                                              ----------       ----------       ----------
     Total interest income                                        58,464           54,489           50,316
                                                              ----------       ----------       ----------

Interest expense:
  Deposits                                                        21,987           24,082           22,648
  Advances from Federal Home Loan Bank and other                   7,548            6,077            4,742
                                                              ----------       ----------       ----------
     Total interest expense                                       29,535           30,159           27,390
                                                              ----------       ----------       ----------

Net interest income                                               28,929           24,330           22,926

Provision for loan losses                                            905              622              264
                                                              ----------       ----------       ----------

Net interest income after provision for loan losses               28,024           23,708           22,662
                                                              ----------       ----------       ----------

Other income:
 Servicing income and other fees                                     387              198              269
 NOW account and other customer fees                               3,446            3,441            3,339
 Net gain (loss) on sale and early maturities of securities           --              175               (8)
 Loss on impairment of securities                                   (138)              --               --
 Net (loss) gain on real estate owned                                (89)              18              112
 Gain on sale of other assets                                         --               --              617
 Miscellaneous                                                       232              233              115
                                                              ----------       ----------       ----------
   Total other income                                              3,838            4,065            4,444
                                                              ----------       ----------       ----------

Operating expense:
 Employee compensation and benefits                               11,853           10,307            8,892
 Occupancy and equipment                                           6,017            5,496            5,059
 Advertising and promotion                                           866              915              734
 Federal deposit insurance premium                                   342              342              270
 Miscellaneous                                                     3,907            3,612            3,865
                                                              ----------       ----------       ----------
   Total operating expense                                        22,985           20,672           18,820
                                                              ----------       ----------       ----------

Income before provision for income taxes                           8,877            7,101            8,286
                                                              ----------       ----------       ----------
Provision (benefit) for income taxes:
 Current                                                           2,668            2,872            3,042
 Deferred                                                           (325)            (765)            (112)
                                                              ----------       ----------       ----------
   Total provision for income taxes                                2,343            2,107            2,930
                                                              ----------       ----------       ----------

Net income                                                    $    6,534       $    4,994       $    5,356
                                                              ==========       ==========       ==========

Earnings per share - basic                                    $     0.67       $     0.49       $     0.53
                                                              ==========       ==========       ==========
Earnings per share - diluted                                  $     0.65       $     0.48       $     0.52
                                                              ==========       ==========       ==========
Weighted average common shares outstanding - basic             9,748,916       10,175,899       10,079,363
                                                              ==========       ==========       ==========
Weighted average common shares outstanding - diluted          10,123,717       10,448,327       10,334,647
                                                              ==========       ==========       ==========
</TABLE>

  See notes to consolidated financial statements.


                                       17
<PAGE>
<TABLE>
<CAPTION>

COMMUNITY SAVINGS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                                      ---------------------------------------------------------------------------------------------
                                                              Retained     Employee   Recognition Accumulated
                                                 Additional    Income-       Stock       and         Other
                                        Common    Paid-In  Substantially  Ownership   Retention  Comprehensive  Treasury
                                        Stock     Capital   Restricted      Plan        Plans       Income       Stock       Total
                                      ---------------------------------------------------------------------------------------------
                                                                            (In Thousands)
<S>                                   <C>         <C>        <C>         <C>          <C>        <C>          <C>         <C>
Balance - December 31, 1996           $   5,090   $ 29,920   $ 44,603    $  (1,818)   $  (608)   $  (1,068)   $     --    $  76,119
Net income for the year ended
   December 31, 1997                         --         --      5,356           --         --           --          --        5,356
Other comprehensive income:
Unrealized increase in market value
   of assets available for sale
   (net of income taxes)                     --         --         --           --         --          914          --          914
                                                                                                                          ---------
Comprehensive income                      6,270

Stock options exercised                       5         45         --           --         --           --          --           50
Shares committed to be released -
   Employee Stock Ownership Plan and
   Recognition and Retention Plan            --        313         --          394        185           --          --          892
Dividends declared                           --         --     (2,072)          --         --           --          --       (2,072)
                                      ---------   --------   --------    ---------    -------    ---------    --------    ---------

Balance - December 31, 1997               5,095     30,278     47,887       (1,424)      (423)        (154)         --       81,259
Net income for the year ended
   December 31, 1998                         --         --      4,994           --         --           --          --        4,994
Other comprehensive income:
Unrealized decrease in market value
   of assets available for sale
   (net of income taxes)                     --         --         --           --         --         (278)         --         (278)
                                                                                                                          ---------
Comprehensive income                      4,716

Stock options exercised                       9         92         --           --         --           --          --          101
Shares committed to be released -
   Employee Stock Ownership Plan and
   Recognition and Retention Plan            --        445         --          394        186           --          --        1,025
Merger of Mutual Holding Company
   pursuant to Reorganization                --         --        201           --         --           --          --          201
Exchange due to Reorganization           (5,104)   (30,815)   (14,863)          --         --           --          --      (50,782)
Issuance of common stock pursuant to
   Reorganization, net of costs of
   issuance of $1,672                    10,549     93,268         --           --         --           --          --      103,817
Purchase of common stock by Employee
   Stock Ownership Plan                      --         --         --       (4,377)        --           --          --       (4,377)
Dividends declared                           --         --     (2,674)          --         --           --          --       (2,674)
                                      ---------   --------   --------    ---------    -------    ---------    --------    ---------

BALANCE - DECEMBER 31, 1998              10,549     93,268     35,545       (5,407)      (237)        (432)         --      133,286
NET INCOME FOR THE YEAR ENDED
   DECEMBER 31, 1999                         --         --      6,534           --         --           --          --        6,534
OTHER COMPREHENSIVE INCOME:

UNREALIZED DECREASE IN MARKET VALUE
   OF ASSETS AVAILABLE FOR SALE
   (NET OF INCOME TAXES)                     --         --         --           --         --       (2,926)         --       (2,926)
                                                                                                                          ---------
COMPREHENSIVE INCOME                      3,608

STOCK OPTIONS EXERCISED                      22         99         --           --         --           --          88          209
SHARES COMMITTED TO BE RELEASED -
   EMPLOYEE STOCK OWNERSHIP PLAN AND
   RECOGNITION AND RETENTION PLANS           --        371         --          685        539           --          --        1,595
PURCHASE OF COMMON STOCK BY 1999 AND 1995
   RECOGNITION AND RETENTION PLANS           --         60        (95)          --     (2,888)          --          --       (2,923)
COST OF STOCK ISSUANCE                       --        (54)        --           --         --           --          --          (54)
PURCHASE OF TREASURY STOCK                   --         --         --           --         --           --     (15,905)     (15,905)
DIVIDENDS DECLARED                           --         --     (4,115)          --         --           --          --       (4,115)
                                      ---------   --------   --------    ---------    -------    ---------    --------    ---------
BALANCE - DECEMBER 31, 1999           $  10,571   $ 93,744   $ 37,869    $  (4,722)   $(2,586)   $  (3,358)   $(15,817)   $ 115,701
                                      =========   ========   ========    =========    =======    =========    ========    =========

</TABLE>

See notes to consolidated financial statements.

                                       18
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY SAVINGS BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------------------------------
                                                              For the Years Ended December 31,
                                                                1999        1998        1997
                                                              --------    --------    --------
                                                                        (In Thousands)
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                   $  6,534    $  4,994    $  5,356
 Adjustments to reconcile net income to net cash
   provided by (used for) operating activities:
     Depreciation and amortization                               2,297       1,523       1,993
     ESOP and Recognition and Retention Plans
        compensation expense                                     1,595       1,025         892
     Accretion of discounts, amortization of premiums,
        and other deferred yield items                          (1,572)     (1,731)     (1,915)
     Provision for loan losses                                     905         622         264
     Impairment loss on securities                                 138          --          --
     (Increase) decrease in other assets                         1,469        (686)     (2,983)
     Increase (decrease)  in other liabilities                    (369)     (4,859)      1,107
                                                              --------    --------    --------
        NET CASH FROM OPERATING ACTIVITIES                      10,997         888       4,714
                                                              --------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Net change in loans                                           (65,004)    (48,980)    (38,624)
 Principal payments, calls and maturities received
    on securities and FHLB stock                                35,091      88,983      35,555
 Purchases of:             Loans and participations             (6,066)    (38,354)    (24,455)
                           Securities available for
                              sale and FHLB stock              (76,167)    (26,544)    (46,711)
                           Office property and
                              equipment, net                    (2,628)     (7,236)     (5,172)
 Proceeds from sales of:   Securities available for sale            --          --       2,435
 Real estate held for investment                                    --      (1,872)         --
 Investment in real estate venture                             (11,633)         --          --
                                                              --------    --------    --------
      NET CASH FROM INVESTING ACTIVITIES                      (126,407)    (32,131)    (76,972)
                                                             ---------   ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Net increase in deposits                                       19,543      43,692      36,999
 Advances from FHLB                                             65,000      42,000      30,000
 Repayment of advances and calls from FHLB                     (16,734)     (7,421)     (7,425)
 Repayment of ESOP loan                                             --      (1,424)       (491)
 Sale of common stock-net of issuance costs                        (54)     53,236          --
 Purchase of common stock by Recognition
    and Retention Plans                                         (2,923)         --          --
 Purchase of treasury stock                                    (15,905)         --          --
 Purchase of ESOP shares                                            --      (4,377)         --
 Proceeds from exercise of stock options                           209         101          50
 Payments made on mortgage-backed bond                          (1,387)     (1,387)     (1,387)
 Dividends paid                                                 (4,115)     (2,116)     (1,976)
                                                             ---------   ---------   ---------
      NET CASH FROM FINANCING ACTIVITIES                        43,634     122,304      55,770
                                                             ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents           (71,776)     91,061     (16,488)
Cash and cash equivalents, beginning of period                 117,015      25,954      42,442
                                                             ---------   ---------   ---------
Cash and cash equivalents, end of period                     $  45,239   $ 117,015   $  25,954
                                                             =========   =========   =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid for income taxes                               $   1,829   $   2,943   $   2,836
    Cash paid for interest on deposits and
        other borrowings                                     $  28,774   $  29,749   $  27,959

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
    Real estate acquired in settlement of loans              $     656   $     713   $     558
    Transfer of securities from held to maturity
        to available for sale                                $     413   $      --   $      --
    Write-down of securities held to maturity
        for impairment                                       $     138   $      --   $      --

</TABLE>

See notes to consolidated financial statements.

                                       19
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997.

1.     SIGNIFICANT ACCOUNTING POLICIES

       On December 15, 1998, Community Savings Bankshares, Inc. ("Bankshares"),
       a Delaware corporation, became the holding company for Community Savings,
       F. A. (the "Association") as a result of the completion of the conversion
       and reorganization of the Association from the two-tier mutual holding
       company structure to the stock holding company structure and the related
       stock offering of Bankshares. In the course of this reorganization,
       ComFed, M. H. C. (the "Holding Company") and Community Savings
       Bankshares, Inc. (the "Mid-Tier Holding Company"), the Holding Company
       and mid-tier holding company, respectively, of the Association were
       merged with and into the Association. Such mergers were accounted for in
       a manner similar to a pooling of interests and did not result in any
       significant accounting adjustments.

       The Association is chartered and regulated by the Office of Thrift
       Supervision (the "OTS"). Bankshares' most significant asset is the common
       stock of the Association. Consequently, the majority of its net income is
       derived from the Association.

       The accounting and reporting policies of Bankshares, the Association, and
       the Association's wholly-owned subsidiaries ComFed, Inc. ("ComFed") and
       Palm River Development Co., Inc. ("Palm River") conform to generally
       accepted accounting principles and to general practices within the
       savings and loan industry. The following summarizes the more significant
       of these policies and practices:

       PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
       include the accounts of Bankshares, the Association, ComFed and Palm
       River. ComFed was formed for the purpose of operating an insurance
       agency, Community Insurance Agency. Palm River, incorporated in July
       1999, is engaged in a real estate development joint venture in Indian
       River County. (See Note 7.) All significant intercompany balances and
       transactions have been eliminated.

       USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
       preparation of financial statements in conformity with generally accepted
       accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities,
       disclosure of contingent assets and liabilities as of the date of the
       financial statements, and the reported amounts of revenues and expenses
       during the reporting period, as well as the disclosures provided. Areas
       involving the use of significant estimates and assumptions in the
       accompanying financial statements include the allowance for loan losses,
       fair values of securities and other financial instruments, determination
       and carrying value of impaired loans, the fair value of the investment in
       and advances to the real estate venture, and the determination of
       depreciation of premises and equipment recognized in Bankshares'
       financial statements. Actual results could differ from those estimates.
       Estimates associated with the allowance for loan losses and the fair
       values of securities and other financial instruments are particularly
       susceptible to material change in the near term.

       INTEREST RATE RISK - The Association is engaged principally in providing
       first mortgage loans (adjustable-, fixed- and hybrid-rate) to individuals
       and commercial enterprises. At December 31, 1999 and 1998, the
       Association's assets that earned interest at adjustable interest rates
       were 45.0% and 50.4%, respectively, of total interest-earning assets.
       Those assets were funded primarily with short-term liabilities that have
       interest rates that vary with market rates over time.

       CASH AND CASH EQUIVALENTS - Cash and cash equivalents are defined to
       include the Association's cash on hand, amounts due from financial
       institutions and short-term interest-earning deposits in other financial
       institutions with original maturities of 90 days or less. Bankshares
       reports net cash flows for customer loan and deposit transactions,
       advance payments by borrowers for taxes and insurance, and
       interest-earning time deposits in other financial institutions.

       SECURITIES - Bankshares classifies securities into held-to-maturity and
       available-for-sale categories. Held-to-maturity securities are those
       which Bankshares has the positive intent and ability to hold to maturity,
       and are reported at amortized cost. Available-for-sale securities are
       those Bankshares may decide to sell if needed for liquidity,
       asset-liability management or other reasons. Available-for-sale
       securities are reported at fair value, with unrealized gains and losses
       included as a separate component of shareholders' equity, net of tax,
       until realized or incurred. Securities are written down to fair value
       when a decline in fair value is determined not to be temporary.

       Realized gains and losses resulting from the sale of securities are
       computed by the specific identification method. Interest and dividend
       income, adjusted by amortization of purchase premium or discount, is
       included in earnings. Premiums and discounts are recognized in interest
       income using the interest method over the period to maturity.

                                       20
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       LOANS RECEIVABLE, NET - Loans receivable are reported at the unpaid
       principal balance, less the allowance for loan losses, deferred fees or
       costs on originated loans, and unamortized premiums or discounts on
       purchased loans.

       Discounts on mortgage loans are amortized to income using the level-yield
       method over the remaining period to contractual maturity, adjusted for
       anticipated prepayments. Interest income is reported on the interest
       method and includes amortization of net deferred fees and costs over the
       loan term. When full loan repayment is in doubt, interest income is not
       reported. Payments received on such loans are reported as principal
       reductions.

       Because some loans may not be repaid in full, an allowance for loan
       losses is recorded. The allowance for loan losses is increased by charges
       to income and decreased by charge-offs (net of recoveries). Estimating
       the risk of loss and the amount of loss on any loan is necessarily
       subjective. Accordingly, the allowance is maintained by management at a
       level considered adequate to cover losses that are currently anticipated.
       Management's periodic evaluation of the adequacy of the allowance is
       based on the Association's past loan loss experience, known and inherent
       risks in the portfolio, adverse situations that may affect the borrower's
       ability to repay, the estimated value of any underlying collateral, and
       current economic conditions. A loan is charged off against the allowance
       by management when deemed uncollectible, although collection efforts
       continue and future recoveries may occur. In addition, various regulatory
       agencies, as an integral part of their examination process, periodically
       review the Association's allowances for losses on loans and foreclosed
       real estate. Such agencies may require the Association to recognize
       additions to the allowances based on their judgments of information
       available to them at the time of their examination.

       Loan impairment is reported when full payment under the loan terms is not
       expected. Impairment is evaluated in the aggregate for smaller balance
       loans of similar nature such as residential mortgage, consumer and credit
       card loans, and on an individual loan basis for other loans. If a loan is
       impaired, a portion of the allowance is allocated so that the loan is
       reported, net, at the present value of estimated future cash flows using
       the loan's existing rate or at the fair value of the collateral if the
       loan is collateral dependent. Loans are evaluated for impairment when
       payments are delayed, typically 90 days or more, or when it is probable
       that all principal and interest amounts will not be collected according
       to the original terms of the loan. The Association's policy on interest
       income on impaired loans is to reverse all accrued interest against
       interest income if a loan becomes more than 90 days delinquent or if
       management determines at an earlier date that the loan is not performing
       and ceases accruing interest thereafter. Such interest ultimately
       collected is credited to income in the period of recovery. Cash receipts
       for impaired loans are used first to satisfy any outstanding interest
       due, and any amounts remaining are applied to the outstanding principal
       balance.

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

       OFFICE PROPERTIES AND EQUIPMENT - Office properties and equipment are
       carried at cost less accumulated depreciation. These assets are reviewed
       for impairment when events indicate the carrying amount may not be
       recoverable. Depreciation is computed on the straight-line method over
       the estimated useful lives of the assets which range from 13 to 50 years
       for buildings, executed lease terms for leasehold improvements, and from
       3 to 10 years for furniture and equipment.

       INVESTMENT IN REAL ESTATE VENTURE - The Association's wholly-owned
       subsidiary, Palm River, owns 100% of the River Club at Carlton real
       estate development and shares evenly in the profits and losses from the
       development with CRC Development Company. The Association accounts for
       Palm River's investment in the River Club at Carlton using the equity
       method. Further detail is provided in Note 7.

       REAL ESTATE OWNED - Real estate properties acquired through, or in lieu
       of, loan foreclosure are to be sold and are initially recorded at fair
       value at the date of acquisition, establishing a new cost basis. Any
       reduction to fair value from the carrying value of the related loan at
       the time of acquisition is accounted for as a loan loss and charged
       against the allowance for loan losses. After acquisition, the property is
       carried at the lower of cost or fair value, less estimated costs to sell.
       A valuation allowance is recorded through a charge to income for the
       amount of selling costs. Valuations are periodically performed by
       management and valuation allowances are adjusted through a charge to
       income for changes in fair value or estimated selling costs. Costs
       relating to improvement of the property are capitalized, whereas costs
       and revenues relating to the holding of the property are expensed.

                                       21
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       LIMITED PARTNERSHIP INVESTMENT IN QUALIFIED AFFORDABLE HOUSING PROJECT -
       The Association has an approximate 4% limited partner interest in three
       separate real estate partnerships that operate qualified affordable
       housing projects. The Association receives tax benefits from the
       partnerships in the form of tax deductions from operating losses and tax
       credits. The Association accounts for its investments in the partnerships
       on the effective yield method and is amortizing the cost over the
       estimated lives of the partnerships (15 years). The amortized cost of the
       investments at December 31, 1999 and 1998 was $3.9 million and $4.4
       million, respectively, and is included in other assets. Amortization for
       the year ended December 31, 1999 and 1998 was $496,000 and $246,000,
       respectively, and is included in miscellaneous expense. In addition to
       the tax benefit related to the amortization, tax credits of $600,000 and
       $320,000 were recognized for the years ended December 31, 1999 and 1998,
       respectively, as a reduction of the provision for income taxes.

       INCOME TAXES - The entities included in these consolidated financial
       statements file a consolidated federal income tax return. Bankshares
       records income tax expense based on the amount of taxes due on its tax
       return plus the change in deferred tax assets and liabilities computed
       based on the expected future tax consequences of temporary differences
       between the carrying amounts and tax bases of assets and liabilities,
       using enacted tax rates.

       EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP") - Bankshares accounts for its ESOP
       in accordance with AICPA Statement of Position 93-6. The cost of shares
       issued to the ESOP, but not yet allocated to participants, are presented
       as a reduction of shareholders' equity. Compensation expense is recorded
       based on the market price of the shares as they are committed to be
       released for allocation to participant accounts. The difference between
       the market price and the cost of shares committed to be released is
       recorded as an adjustment to additional paid-in capital. Dividends on
       allocated ESOP shares are recorded as a reduction of retained earnings;
       dividends on unearned ESOP shares are reflected as a reduction of debt
       and accrued interest.

       RECOGNITION AND RETENTION PLANS ("1995 RRP", "1999 RRP" OR COLLECTIVELY
       "RRPS") - The RRPs are stock award plans for which the measurement of
       total compensation cost is based upon the fair value of the shares on the
       date of grant. RRP awards vest in five equal annual installments from the
       date of grant, subject to the continuous employment of the recipients as
       defined under the RRPs. Compensation expense for the RRPs is recognized
       on a pro rata basis over the vesting period of the awards. The unearned
       compensation value of the RRP awards is shown as a reduction of
       shareholders' equity.

       STOCK OPTION PLANS ("1995 SOP" AND "1999 SOP" OR "SOPS") - Expense for
       employee compensation under the SOPs would be recognized only if options
       are granted below the market price at the grant date which the existing
       SOPs do not allow. As shown in a separate note, pro forma disclosures of
       net income and earnings per share are provided as if the fair value
       method were used for stock-based compensation.

       FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - The Association, in
       the normal course of business, makes commitments to make loans which are
       not reflected in the financial statements. A summary of these commitments
       is disclosed in Note 12.

       EARNINGS PER SHARE - Earnings per share are determined in accordance with
       the provisions of SFAS No. 128 "Earnings per Share" ("SFAS No. 128"). The
       weighted average number of shares of common stock used in calculating
       basic earnings per share was determined by reducing outstanding shares by
       unallocated ESOP shares and unvested RRP shares. Diluted earnings per
       share includes the maximum dilutive effect of common stock issuable upon
       exercise of common stock options and unallocated ESOP and RRP shares of
       common stock. The effect of common stock options on weighted average
       shares outstanding are calculated using the treasury stock method.

       COMPREHENSIVE INCOME - Under a new accounting standard, comprehensive
       income is now reported for all periods. Comprehensive income includes
       both net income and the change in unrealized gains and losses on
       securities available for sale.

       FAIR VALUES OF FINANCIAL INSTRUMENTS - Fair values of financial
       instruments are estimated using relevant market information and other
       assumptions. Fair value estimates involve uncertainties and matters of
       significant judgment regarding interest rates, credit risk, prepayments
       and other factors, especially in the absence of broad markets for
       particular items. Changes in assumptions or in market conditions could
       significantly affect the estimates. The fair value estimates of existing
       on- and off-balance-sheet financial instruments does not include the
       value of anticipated future business or the values of assets and
       liabilities not considered financial instruments.

       SEGMENT INFORMATION - While Bankshares' chief decision makers monitor the
       revenue streams of various products, and services, operations are managed
       and financial performance is evaluated on a company-wide basis.
       Accordingly, all of Bankshares' operations are considered by management
       to be aggregated in one reportable operating segment.

                                       22
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       IMPACT OF NEW ACCOUNTING ISSUES - For fiscal years beginning after June
       15, 2000, a new accounting standard will require all derivatives to be
       recorded at fair value. Unless designated as hedges, changes in these
       fair values will be recorded in the income statement. Fair value changes
       involving hedges will generally be recorded by offsetting gains and
       losses on the hedge and on the hedged item, even if the fair value of the
       hedged item is not otherwise recorded. This is not expected to have a
       material effect on Bankshares' financial statements but the effect will
       depend on Bankshares' derivative holdings, if any, when this standard is
       applied in January 2001.

       Mortgage loans originated in mortgage banking are converted into
       securities on occasion. A new accounting standard effective in 1999
       allows these securities to be classified as available for sale, held to
       maturity or trading, instead of the previous requirement to classify such
       assets as trading.

       RECLASSIFICATIONS - Certain items in the 1998 and 1997 financial
       statements and the notes thereto have been reclassified to conform with
       the 1999 presentation.

2.     SECURITIES AVAILABLE FOR SALE

       Securities available for sale at December 31, 1999 and 1998 are
       summarized as follows:
<TABLE>
<CAPTION>

       ----------------------------------------------------------------------------------------------------
                                                                          Gross         Gross
                                                            Amortized   Unrealized    Unrealized    Fair
                                                              Cost        Gains         Losses      Value
                                                            ---------   ----------    ----------   --------
                                                                            (In Thousands)
<S>                                                         <C>          <C>           <C>         <C>
       DECEMBER 31, 1999:
          EQUITY SECURITIES                                 $     32     $     18      $     --    $     50
          UNITED STATES GOVERNMENT AND AGENCY OBLIGATIONS     34,385           --          (906)     33,479
          MUTUAL FUNDS                                        51,000           --        (1,155)     49,845

          CORPORATE DEBT ISSUES:
            BEAR STEARNS CORPORATE BOND                        4,890           --          (437)      4,453
            AUTO BONDS RECEIVABLE CORP                           413           --            --         413
                                                            --------     --------      --------    --------
            TOTAL CORPORATE DEBT ISSUES                        5,303           --          (437)      4,866
                                                            --------     --------      --------    --------

          MORTGAGE-BACKED AND RELATED SECURITIES:
            GNMA II PASS-THROUGH CERTIFICATES                 46,172           --        (1,862)     44,310
            COLLATERALIZED MORTGAGE OBLIGATIONS               12,635            1          (346)     12,290
                                                            --------     --------      --------    --------
            TOTAL MORTGAGE-BACKED AND RELATED SECURITIES      58,807            1        (2,208)     56,600
                                                            --------     --------      --------    --------

            TOTAL SECURITIES AVAILABLE FOR SALE             $149,527     $     19      $ (4,706)   $144,840
                                                            ========     ========      ========    ========



       December 31, 1998:
          Equity securities                                 $      7     $     23      $     --    $     30
          United States Government and agency obligations      9,976           96            --      10,072
          Mutual funds                                        41,000           17          (630)     40,387

          Mortgage-backed and related securities:
            GNMA II pass-through certificates                 19,666          124            --      19,790
            Collateralized mortgage obligations               24,837          124           (89)     24,872
                                                            --------     --------      --------    --------
            Total mortgage-backed and related securities      44,503          248           (89)     44,662
                                                            --------     --------      --------    --------

            Total securities available for sale             $ 95,486     $    384      $   (719)   $ 95,151
                                                            ========     ========      ========    ========
</TABLE>


                                       23
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below sets forth the contractual maturity distribution of securities
available for sale at December 31, 1999.

------------------------------------------------------------------------------
                                                        DECEMBER 31, 1999
                                                    AMORTIZED          FAIR
                                                      COST             VALUE
                                                    ---------       ----------
                                                            (In Thousands)

        Due in one year or less                     $     413       $      413
        Due after one year through five years          34,385           33,479
        Due after five years through ten years             --               --
        Due after ten years                             4,890            4,453
        Mortgage-backed and related securities         58,807           56,600
        Equity securities                              51,032           49,895
                                                    ---------       ----------
        Total                                       $ 149,527       $  144,840
                                                    =========       ==========

       Proceeds from the sale of securities available for sale were $0, $0, and
       $2,435,000, during the years ended December 31, 1999, 1998 and 1997,
       respectively. For the year ended December 31, 1997, sales resulted in
       gross losses of $8,000. There were no gross realized gains or losses
       during the years ended December 31, 1999 and 1998.

       Securities, with carrying values of approximately $7,940,000 and
       $10,797,000 at December 31, 1999 and 1998, were pledged as collateral for
       purposes required or permitted by law.

       During the quarter ended December 31, 1999, management determined that
       the decline in fair value on the Association's investment in Auto Bond
       Receivables was other than temporary resulting in a write down of
       $138,000 and a reclassification from held to maturity to available for
       sale.


                                       24
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     SECURITIES HELD TO MATURITY

       Securities held to maturity at December 31, 1999 and 1998 are summarized
       as follows:
<TABLE>
<CAPTION>

       ------------------------------------------------------------------------------------------------
                                                                         Gross       Gross
                                                           Amortized   Unrealized  Unrealized    Fair
                                                             Cost        Gains       Losses      Value
                                                            -------     -------      -------    -------
                                                                          (In Thousands)
<S>                                                  <C>         <C>          <C>        <C>
       DECEMBER 31, 1999:
         UNITED STATES GOVERNMENT AND
            AGENCY OBLIGATIONS                              $14,564     $ 2,502      $    --    $17,066

         MORTGAGE-BACKED AND RELATED SECURITIES:
            UNITED STATES AGENCY PASS THROUGH
                CERTIFICATES                                  6,322          59          (84)     6,297
            AGENCY FOR INTERNATIONAL DEVELOPMENT
                PASS THROUGH CERTIFICATES                       141          --           --        141
            COLLATERALIZED MORTGAGE OBLIGATIONS              11,829           5         (253)    11,581
            CMO RESIDUAL INTEREST BONDS                           2          --           --          2
                                                            -------     -------      -------    -------
            TOTAL MORTGAGE-BACKED AND RELATED SECURITIES     18,294          64         (337)    18,021
                                                            -------     -------      -------    -------

         CORPORATE DEBT ISSUES:
            CHASE FEDERAL MORTGAGE-BACKED BOND                5,944         240           --      6,184
                                                            -------     -------      -------    -------

        TOTAL SECURITIES HELD TO MATURITY                   $38,802     $ 2,806      $  (337)   $41,271
                                                            =======     =======      =======    =======

       December 31, 1998:
         United States Government and agency
            obligations                                     $13,088     $ 4,547      $    --    $17,635

         Mortgage-backed and related securities:
            United States agency pass through
                certificates                                  9,018         118          (12)     9,124
            Agency for International Development
                pass through certificates                       188          --           --        188
            Collateralized mortgage obligations              23,186          56         (300)    22,942
            CMO residual interest bonds                           4          --           --          4
                                                            -------     -------      -------    -------
             Total mortgage-backed and related securities    32,396         174         (312)    32,258
                                                            -------     -------      -------    -------

         Corporate debt issues:
            Chase Federal mortgage-backed bond                6,420         275           --      6,695
            Auto Bond Receivables Corp.                         715          --           --        715
                                                            -------     -------      -------    -------
             Total corporate debt issues                      7,135         275           --      7,410
                                                            -------     -------      -------    -------

        Total securities held to maturity                   $52,619     $ 4,996      $  (312)   $57,303
                                                            =======     =======      =======    =======
</TABLE>

The table below sets forth the contractual maturity distribution of the
securities held to maturity at December 31, 1999.

-----------------------------------------------------------------------------
                                                         DECEMBER 31, 1999
                                                      CARRYING         FAIR
                                                       VALUE           VALUE
                                                      --------        -------
                                                           (In Thousands)

        Due in one year or less                       $    --         $    --
        Due after one year through five years          11,629          13,706
        Due after five years through ten years          8,880           9,544
        Mortgage-backed and related securities         18,293          18,021
                                                      -------         -------
        Total                                         $38,802         $41,271
                                                      =======         =======


                                       25
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       Securities held to maturity were called during the year ended December
       31, 1998 which resulted in a gain of $175,000. There were no sales of
       securities held to maturity during the years ended December 31, 1999,
       1998 and 1997. The fair value of securities held to maturity is based on
       quoted market prices.

       Mortgage-backed securities represent participating interest in pools of
       long-term first mortgage loans. Although mortgage-backed securities are
       initially issued with a stated maturity date, the underlying mortgage
       collateral may be prepaid by the mortgagee and, therefore, such
       certificates may not reach their maturity date.

       The Association also invests in mortgage-related securities such as
       collateralized mortgage obligations ("CMOs"), CMO residual interest
       bonds, and real estate mortgage investment conduits ("REMICs"). These
       securities are generally divided into tranches whereby principal
       repayments from the underlying mortgages are used sequentially to retire
       the securities according to the priority of the tranches. The Association
       invests primarily in senior sequential tranches of CMOs. Such tranches
       have stated maturities ranging from 6.5 years to 30 years; however,
       because of prepayments, the expected weighted average life of these
       securities is less than the stated maturities. At December 31, 1999, the
       Association had $11,829,000 in such mortgage-related securities, which
       were held for investment and had a fair value of $11,581,000. The
       fixed-rate CMOs have coupon rates ranging from 6.0% to 10.0%.

       FEDERAL HOME LOAN BANK STOCK - At December 31, 1999 and 1998, the
       Association held $7,009,000 and $4,722,000, respectively, of FHLB Stock,
       which approximates fair value. FHLB Stock is not readily marketable as it
       is not traded on a registered security exchange.

4.     LOANS RECEIVABLE

       Loans receivable consisted of the following:

       -----------------------------------------------------------------
                                              December 31,  December 31,
                                                  1999          1998
                                              ------------  ------------
                                                    (In Thousands)
       Real estate loans:
         Residential 1-4 family                $ 432,301     $ 421,766
         Residential construction                110,710        54,391
         Nonresidential construction                  --         6,292
         Land                                     40,399        14,624
         Multi-family                              5,845         8,392
         Commercial                               58,492        46,118
                                               ---------     ---------
           Total real estate loans               647,747       551,583
                                               ---------     ---------

       Non-real estate loans:
         Consumer                                 13,484        15,015
         Commercial business                       6,520         6,635
                                               ---------     ---------
           Total non-real estate loans            20,004        21,650
                                               ---------     ---------
           Total loans receivable                667,751       573,233

       Less:
         Undisbursed loan proceeds                56,948        33,202
         Unearned discount and premium and
            net deferred loan fees and costs      (1,489)       (1,333)
         Allowance for loan losses                 3,923         3,160
                                               ---------     ---------
       Total loans receivable, net             $ 608,369     $ 538,204
                                               =========     =========

       LOANS SERVICED FOR OTHERS - Mortgage loans serviced for others are not
       included in the accompanying consolidated statements of financial
       condition. The unpaid balances of these loans at December 31, 1999, 1998
       and 1997 were $11,277,000, $14,173,000, and $18,967,000, respectively.
       Custodial escrow balances maintained in connection with the foregoing
       loan servicing were $54,000, $53,000, and $47,000, respectively.

                                       26
<PAGE>
COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       LOANS HELD FOR SALE - The Association originates both adjustable- and
       fixed-rate loans. Adjustable- rate as well as fixed-rate loans with
       original maturities of 15 years or less are held in the Association's
       portfolio. Based on management's assessment of current portfolio mix and
       Board of Directors' established limits, fixed-rate loans with maturities
       greater than 15 years are either held in the portfolio or sold in the
       secondary market when originated, except those originated for special
       financing on low income housing. There were no loans held for sale
       included in loans receivable at December 31, 1999 and 1998.

       An analysis of the changes in the allowance for loan losses for the years
       ended December 31, 1999, 1998 and 1997, is as follows:

       -----------------------------------------------------------------------
                                              For the Years Ended December 31,
                                               1999         1998         1997
                                              ------       ------       ------
                                                        (In Thousands)

        Balance, beginning of period          $3,160       $2,662       $2,542
        Provision charged to income              905          622          264
        Losses charged to allowance            (146)        (376)        (144)
        Recoveries                                 4          252           --
                                              ------       ------       ------
        Balance, end of year                  $3,923       $3,160       $2,662
                                              ======       ======       ======

       IMPAIRED LOANS - An analysis of the recorded investment in impaired loans
       is as follows:

       -------------------------------------------------------------------------
                                          At or for the Years Ended December 31,
                                               1999         1998         1997
                                              ------       ------       ------
                                                        (In Thousands)

       Impaired loan balance                  $    5       $   25       $1,044
       Related allowance                          --           --          252
       Average impaired loan balance              71           13        1,057
       Interest income recognized                 --            1           91

       NON-PERFORMING LOANS AND REAL ESTATE OWNED - The following table sets
       forth information regarding non-accrual loans delinquent 90 days or more,
       and real estate acquired or deemed acquired by foreclosure at the dates
       indicated. When a loan is delinquent 90 days or more, all accrued
       interest on such loans is fully reserved and the loan ceases to accrue
       interest thereafter.

       -----------------------------------------------------------------------
                                                        At December 31,
                                               1999         1998         1997
                                              ------       -------      ------
                                                    (Dollars In Thousands)
       Non-performing loans:
          One- to four-family residential     $1,015       $ 1,537      $1,289
          Commercial and multi-family
             real estate                           5            52          --
          Consumer and commercial business
             loans                                12            67          55
          Land                                     7            12          35
                                              ------       -------      ------
       Total non-performing loans              1,039         1,668       1,379
       REO                                       494           522         592
       Other repossessed assets                   --            22          --
                                              ------       -------      ------
       Total non-performing assets, net
          of specific valuation allowances    $1,533       $ 2,212      $1,971
                                              ======       =======      ======

       Total non-performing loans to net
          loans receivable                      0.17%         0.31%       0.31%
       Total non-performing loans to
          total assets                          0.12          0.20        0.19
       Total non-performing assets to
          total assets                          0.17          0.26        0.27


                                       27
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       LOANS TO OFFICERS AND DIRECTORS - The Association offers loans to its
       employees, including directors and executive officers, at prevailing
       market interest rates. For adjustable-rate loans, employees are offered a
       50 basis point reduction from the margin. However, employees pay points
       based on current loan terms. These loans are made in the ordinary course
       of business and on substantially the same terms and collateral
       requirements as those of comparable transactions prevailing at the time.
       The total loans to such persons did not exceed 5% of shareholders' equity
       at December 31, 1999. At December 31, 1999 and 1998, the total amount of
       loans to directors, executive officers, and associates of such persons
       was $834,000 and $867,000, respectively. During 1999, principal advances
       and repayments on loans to officers and directors totaled $79,000 and
       $112,000, respectively,

5.     PLEDGED ASSETS

       In the normal course of doing business, the Association is required to
       comply with certain collateral requirements. The following tables set
       forth amounts of various asset components, as of December 31, 1999 and
       1998, which were pledged as collateral.
<TABLE>
<CAPTION>

       ----------------------------------------------------------------------------------
                                                               December 31,  December 31,
                                                                  1999           1998
                                                               ------------  ------------
                                                                     (In Thousands)
<S>                                                             <C>            <C>
        Real estate loans (unpaid principal balance)            $133,047       $87,109
        FHLB stock and accrued dividends                           7,139         4,811
                                                                --------       -------
        Total pledged to the FHLB                               $140,186       $91,920
                                                                ========       =======

        Other pledged assets:
        Deposits of public funds - State of Florida
          Mortgage-backed and related securities                $  5,840       $ 8,697
        Line of credit - Federal Reserve Bank of Atlanta

          United States Government and agency obligations          1,800         1,800
        Treasury tax and loan deposits
          United States Government and agency obligations            300           300
        Mortgage-backed bond
          Unpaid principal balance of loans                       33,642        32,046
                                                                --------       -------
        Total of other pledged assets                           $ 41,582       $42,843
                                                                ========       =======
</TABLE>
       FHLB ADVANCES - The Association has a security agreement with the FHLB
       which includes a blanket floating lien that requires the Association
       maintain as collateral for its advances, the Association's FHLB capital
       stock and first mortgage loans equal to 100% of the unpaid amount of FHLB
       advances outstanding.

6.     PREMISES AND EQUIPMENT

       Premises and equipment at December 31, 1999 and 1998 are summarized as
       follows:
<TABLE>
<CAPTION>
       ----------------------------------------------------------------------------------
                                                               December 31,  December 31,
                                                                  1999           1998
                                                               ------------  ------------
                                                                     (In Thousands)
<S>                                                             <C>             <C>
        Land                                                    $ 8,801         $6,419
        Buildings and improvements                               18,641         19,245
        Furniture and equipment                                  16,404         16,951
                                                                -------        -------
        Total                                                    43,846         42,615
        Less accumulated depreciation                           (18,907)       (18,471)
                                                                -------        -------
        Total office properties and equipment - net             $24,939        $24,144
                                                                =======        =======
</TABLE>

                                       28
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.     INVESTMENT IN AND ADVANCES TO REAL ESTATE VENTURE

       On July 12, 1999, the Association's wholly-owned subsidiary, Palm River,
       entered into a development agreement (the "Agreement") with CRC
       Development Company ("CRC") to construct and sell 17 single family lots,
       48 condominiums, 22 carriage homes and 116 patio homes on 117 acres of
       land in Indian River County, Florida. The joint venture is known as the
       River Club at Carlton (the "River Club").

       The terms of the Agreement provide for Palm River to fund all
       construction and development costs, via advances from the Association to
       Palm River, including the costs of acquiring the land, and to receive
       interest on any outstanding funding. Such loans are included within
       "Investment in and Advances to Real Estate Venture" in the Consolidated
       Statements of Financial Condition. Profits from home and lot sales, after
       interest, are to be split evenly between CRC and Palm River. Cash flows
       are first allocated to Palm River to pay off any outstanding funding and
       interest, then split evenly between the parties. Since the substance of
       the Agreement is that of a joint venture, the Association accounts for it
       as such.

       The condensed financial information for the River Club is as follows:

       -------------------------------------------------------------------------
                                                               DECEMBER 31,
       Balance Sheet                                               1999
       -------------------------------------------------------------------------
                                                              (In Thousands)
       Assets:
          Cash                                                  $      59
          Land                                                     10,764
          Construction in progress                                    461
          Receivables from partners                                    22
                                                                ---------
       Total assets                                             $  11,306
                                                                =========

       Liabilities and partners' capital:
          Advances and interest due to Palm River               $  11,900
          Other liabilities                                            18
       Partners' capital:
          Palm River                                                 (311)
          CRC                                                        (301)
                                                                ---------
       Total liabilities and partners' capital                  $  11,306
                                                                =========

       -------------------------------------------------------------------------
                                                            FOR THE YEAR ENDED
       Summary of Operations                                DECEMBER 31, 1999
       -------------------------------------------------------------------------
                                                              (In Thousands)
       Income:
          Sales                                                 $      --
          Miscellaneous                                                --
                                                                ---------
          Total income                                                 --
                                                                ---------

       Expenses:
          Cost of sales                                               233
          General and administrative                                  389
                                                                ---------
          Total expenses                                              622
                                                                ---------
       Net loss                                                 $    (622)
                                                                =========

       -------------------------------------------------------------------------
       Statement of Changes in Partners' Capital
       -------------------------------------------------------------------------
                                                               (In Thousands)
                                                          PALM RIVER      CRC

       Balance - December 31, 1998                         $   --       $    --
       Cash contributed by CRC                                               10
       Net loss for the year ended December 31, 1999         (311)         (311)
                                                           ------       -------
       Balance - December 31, 1999                         $ (311)      $  (301)
                                                           ======       =======

                                       29
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.     DEPOSITS

       Individual deposits greater than $100,000 at December 31, 1999 and 1998
       aggregated approximately $112,003,000, and $86,669,000, respectively.
       Deposits in excess of $100,000 are not insured.

       The total of related party deposits owned by directors, executive
       officers, and associates of such persons was $3,071,000 and $2,913,000 at
       December 31, 1999 and 1998, respectively.

       Scheduled maturities of certificate accounts at December 31, 1999 and
       1998 were as follows:

       -------------------------------------------------------------------------
                                                            DECEMBER 31,
                                                      1999               1998
                                                   ----------         ---------
                                                            (In Thousands)

        Maturity:
        Less than 1 year                           $  257,928          $277,254
        1 year - 2 years                               70,015            37,790
        2 years - 3 years                              15,743            15,943
        3 years - 4 years                               9,856            14,790
        4 years - 5 years                               9,963            10,621
        Thereafter                                        171               791
                                                   ----------         ---------
        Total certificates of deposit              $  363,676         $ 357,189
                                                   ==========         =========

9.       ADVANCES FROM FEDERAL HOME LOAN BANK

       At December 31, 1999 and 1998, outstanding advances from the FHLB totaled
       $140,186,000 and $91,920,000, respectively.

       Scheduled maturities of FHLB advances at December 31, 1999 were as
       follows:

       -------------------------------------------------------------------------
            YEARS ENDING               AVERAGE INTEREST          AMOUNT
            DECEMBER 31,                     RATE               MATURING
       -------------------------------------------------------------------------
                                                         (Dollars in Thousands)

               2000                          4.96%             $ 25,400
               2001                          6.41                 8,500
               2002                          6.18                20,000
               2003                          6.69                 4,286
               2004                          5.76                35,000
               2008                          5.37                37,000
               2009                          5.06                10,000
                                                               --------
               TOTAL FHLB ADVANCES           5.59%             $140,186
                                             ====              ========

       Prepayment of certain remaining advances is permitted only upon the
       Association's termination of its FHLB membership, while others are
       subject to prepayment penalties under the provisions and conditions of
       the credit policy of the FHLB. The Association did not incur prepayment
       penalties for the years ended December 31, 1999, 1998 and 1997.

10.    MORTGAGE-BACKED BOND

       On September 30, 1983, the Association sold two of its branch offices to
       another financial institution with the approval of the Federal Home Loan
       Bank Board ("FHLBB"), the predecessor to the OTS. Under terms of the
       sale, the Association issued a 10.94%, 30-year term mortgage-backed bond
       (the "Bond") for approximately $41,601,000. The Bond issue has a stated
       interest rate which was less than the market rate (assumed to have been
       17.53%) for similar debt at the effective date of the sale. Accordingly,
       the Association recorded a discount on the Bond which is being accreted
       on the interest method over the life of the Bond.

                                       30
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       The Bond bears an interest rate that is adjustable semi-annually, on
       April 1 and October 1, to reflect changes in the average of the United
       States 10-year and 30-year long-term bond rates. The Bond's interest rate
       on December 31, 1999 and 1998 was 5.27% and 4.28%, respectively. The
       unamortized discount at December 31, 1999 and 1998 was $4,491,000 and
       $4,955,000, respectively. Principal and interest payments are due
       quarterly. During the years ended December 31, 1999, 1998 and 1997,
       approximately $464,000, $484,000, and $490,000, respectively, of the
       discount was accreted.

       At December 31, 1999 and 1998, the Association held $14,316,000 and
       $13,088,000 (net of discounts of $7,484,000 and $8,712,000),
       respectively, of Salomon Brothers Certificates of Accrual on Treasury
       Securities ("CATS") which were purchased at the time of issuing the Bond.
       The accrual of interest on the CATS offsets the discount amortization of
       the Bond. The CATS are included in United States Government and agency
       obligations described in Note 3 to the consolidated financial statements.

       At December 31, 1999, the Bond was repayable as follows:

       -------------------------------------------------------------------------
               YEARS ENDING
                DECEMBER 31,                                     AMOUNT
       -------------------------------------------------------------------------
                                                             (In Thousands)

                   2000                                         $ 1,387
                   2001                                           1,387
                   2002                                           1,387
                   2003                                           1,387
                   2004                                           1,387
              2005 AND AFTER                                     12,064
                                                                -------
                  TOTAL                                          18,999

         LESS UNAMORTIZED DISCOUNT                                4,491
                                                                -------
         TOTAL MORTGAGE-BACKED BOND                             $14,508
                                                                =======

11.    INCOME TAXES

       In accordance with SFAS No. 109, deferred income tax assets and
       liabilities are computed annually for differences between financial
       statement and tax basis of assets and liabilities that will result in
       taxable or deductible amounts in the future based on enacted tax laws and
       rates applicable to periods in which the differences are expected to
       affect taxable income. Valuation allowances are established, when
       necessary, to reduce deferred tax assets to the amount expected to be
       realized. Income tax expense is the tax payable or refundable for the
       period adjusted for the change during the period in deferred tax assets
       and liabilities.

       The income tax provision consists of the following components for the
       years ended December 31, 1999, 1998 and 1997.

       -------------------------------------------------------------------------
                                           For the Years Ended December 31,
                                            1999         1998        1997
                                           ------       ------      ------
                                                  (In Thousands)

        Current - federal                  $2,250       $2,640      $2,745
        Current - state                       418          232         297
                                           ------       ------      ------
        Total current                       2,668        2,872       3,042

        Deferred - federal and state         (325)        (765)       (112)
                                           ------       ------      ------
        Total provision for income taxes   $2,343       $2,107      $2,930
                                           ======       ======      ======

                                       31
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       Bankshares' provision for income taxes differs from the amounts
       determined by applying the statutory federal income tax rate to income
       before income taxes for the following reasons:
<TABLE>
<CAPTION>

       ---------------------------------------------------------------------------------------------------
                                                             For the Years Ended December 31,
                                                    1999                  1998                  1997
                                             -----------------     -----------------     -----------------
                                              Amount       %        Amount      %         Amount        %
                                             -------    ------     -------    ------     -------      ----
                                                                    (In Thousands)
<S>                                          <C>          <C>      <C>          <C>      <C>          <C>
       Tax at federal tax rate               $ 3,107      35.0%    $ 2,485      35.0%    $ 2,900      35.0%
          State income taxes, net of
               federal income tax benefits       257       2.9         123       1.7         281       3.3
          Low income housing credits            (600)     (6.8)       (320)     (4.5)         --        --
          Other                                 (333)     (3.8)       (110)     (1.5)       (168)     (2.0)
       Benefit of graduated tax rate             (88)     (0.9)        (71)     (1.0)        (83)     (1.0)
                                             -------    ------     -------    ------     -------      ----
       Total provision for income taxes      $ 2,343      26.4%    $ 2,107      29.7%    $ 2,930      35.3%
                                             =======    ======     =======    ======     =======      ====

       The tax effect of temporary differences that gave rise to deferred tax
       assets and deferred tax liabilities are presented below:

       ---------------------------------------------------------------------------------------
                                                              For the Years Ended December 31,
                                                                 1999       1998       1997
                                                               -------    -------    -------
                                                                         (In Thousands)
<S>                                                            <C>        <C>        <C>
       Deferred tax liabilities:
        Depreciation                                           $   995    $   631    $   582
        Loan fee income                                             23         22        170
        FHLB stock dividends                                       424        458        457
        Deferred loan costs                                        881        711        467
        Unamortized discount on mortgage-backed bond             1,690      1,865      2,112
        Book over tax on investments in partnerships                --         55      1,003
        Other                                                       61         13         --
                                                               -------    -------    -------
       Gross deferred tax liabilities                            4,074      3,755      4,791
                                                               -------    -------    -------

       Deferred tax assets:
        Excess of book bad debt reserve over tax reserve         1,337        978      1,043
        Retirement plans                                           479        360        586
        Unrealized loss on decrease in fair value
         of securities available for sale                        1,329        126         33
        Deferred loss on loans held for sale                        36         39         43
        Deferred compensation                                      129        140        130
        Investment in partnerships                                 137         --         --
        Other                                                      136         93         19
                                                               -------    -------    -------
       Gross deferred tax assets                                 3,583      1,736      1,854
                                                               -------    -------    -------
       Valuation allowance on unrealized loss on decrease in
        fair value of securities available for sale               (428)      (222)       (99)
                                                               -------    -------    -------
       Gross deferred tax assets - net of valuation allowance    3,155      1,514      1,755
                                                               -------    -------    -------
       Net deferred tax liability                              $   919    $ 2,241    $ 3,036
                                                               =======    =======    =======
</TABLE>

       Under the Internal Revenue Code, the Association may, for tax purposes,
       deduct a provision for bad debts in excess of such provisions recorded in
       the financial statements. Retained earnings at December 31, 1999 includes
       approximately $11,388,000, consisting of bad debt deductions accumulated
       prior to 1988, on which no provision for federal income taxes has been
       made. The related amount of unrecognized deferred tax liability was
       approximately $4,285,000.

                                       32
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.    COMMITMENTS AND CONTINGENCIES

       LOAN COMMITMENTS - In the normal course of business, the Association
       makes commitments to extend credit. Commitments to extend credit are
       agreements to lend to a customer as long as there is no violation of any
       condition established in the contract. The interest rates on both fixed-
       and variable-rate loans are based on the market rates in effect on the
       date of closing.

       Commitments generally have fixed expiration dates of 30 to 60 days and
       other termination clauses. Since many of the commitments are expected to
       expire without being drawn upon, the total commitment amounts do not
       necessarily represent future cash requirements. Each customer's
       creditworthiness is evaluated on a case-by-case basis. The amount of
       collateral obtained if deemed necessary by the Association upon extension
       of credit is based on management's credit evaluation of the customer.
       Collateral held varies, but may include single-family homes, marketable
       securities and income-producing residential and commercial properties.
       Credit losses may occur when one of the parties fails to perform in
       accordance with the terms of the contract. The Association's exposure to
       credit risk is represented by the contractual amount of the commitments
       to extend credit. Commitments to extend credit for real estate loans,
       excluding undisbursed portions of loans in process, were approximately
       $5,053,000 and $14,086,000 at December 31, 1999 and December 31, 1998,
       respectively. Commitments to originate non-mortgage loans were
       approximately $250,000 and $840,000 at December 31, 1999 and 1998,
       respectively.

       At December 31, 1999, the $5,053,000 of real estate loan commitments were
       comprised of approximately $1,945,000 of fixed-rate commitments and
       $3,108,000 of variable-rate commitments. These commitments are at
       prevailing market rates and terms. Interest rates on fixed-rate loan
       commitments were from 7.00% to 8.75%. No value is placed on the
       commitments as the borrower is required to close at the market rates in
       effect on the date of closing. No fees are received in connection with
       such commitments.

       Unused consumer lines of credit totaled $7,788,000 and $6,703,000 at
       December 31, 1999 and 1998, respectively. Commercial lines and letters of
       credit and other loan commitments totaled $6,381,000 at December 31,
       1999. There were no commitments to sell or purchase loans at December 31,
       1999 and 1998. Commitments to purchase mortgage-backed securities totaled
       $1,063,000 at December 31, 1999. There were no commitments to purchase
       securities at December 31, 1998.

       LEASE COMMITMENTS - The Association leases various properties for
       original periods ranging from 2 to 25 years. Rent expense for the years
       ended December 31, 1999, 1998 and 1997 was approximately $498,000,
       $633,000, and $626,000, respectively. At December 31, 1999, future
       minimum lease payments under these operating leases were as follows:

       -------------------------------------------------------------------------
               YEARS ENDING
                DECEMBER 31,                                     AMOUNT
       -------------------------------------------------------------------------
                                                             (In Thousands)

                   2000                                         $   446
                   2001                                             321
                   2002                                             145
                   2003                                             145
                   2004                                              73
                                                                -------
                   TOTAL                                        $ 1,130
                                                                =======

       LINE OF CREDIT - The Association has a $1,800,000 available line of
       credit with the Federal Reserve Bank of Atlanta which is secured by
       United States Government and agency obligations (see Note 5). At December
       31, 1999 and 1998, the Association had no outstanding advances.

       CASH RESTRICTIONS - The Association maintained a $625,000 required
       two-week average balance in a clearing account held at the Federal
       Reserve Bank of Atlanta at both December 31, 1999 and 1998.

                                       33
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       13. BENEFIT PLANS

       PENSION PLAN - The Association has a noncontributory, qualified pension
       plan covering substantially all employees. The plan calls for benefits to
       be paid to eligible employees at retirement based primarily upon years of
       service with the Association and compensation rates during those years.
       Currently, the Association's policy is to fund the qualified retirement
       plan in an amount that is determined in accordance with the minimum
       funding standards of the Employee Retirement Income Security Act, but
       falls below the maximum tax deductible contribution. Plan assets consist
       primarily of corporate and government agency bonds, mutual funds, common
       stock, and managed funds.

       Information about the pension plan was as follows:

       -------------------------------------------------------------------------
                                                  December 31,      December 31,
                                                      1999              1998
                                                  -----------       -----------
                                                          (In Thousands)
          Change in benefit obligation:
               Beginning benefit obligation         $ 8,889           $  7,077
               Service cost                             725                609
               Interest cost                            598                494
               Actuarial gain                           165                864
               Benefits paid                           (280)               (155)
                                                    -------           ---------
               Ending benefit obligation             10,097               8,889
                                                    -------           ---------

          Change in plan assets, at fair value:
               Beginning plan assets                 10,791               9,644
               Actual return                            588                 578
               Employer contribution                    179                 724
               Benefits paid                           (280)               (155)
                                                    -------            --------
               Ending plan assets                    11,278              10,791
                                                    -------            --------

          Funded status                               1,181               1,902
          Unrecognized net actuarial gain            (1,741)             (2,251)
          Unrecognized prior service cost                21                  25
                                                    -------            --------
          Accrued benefit cost                      $  (539)           $   (324)
                                                    =======            ========

       The components of pension expense and related actuarial assumptions were
       as follows:
<TABLE>
<CAPTION>
       ---------------------------------------------------------------------------------------
                                                              For the Years Ended December 31,
                                                                 1999       1998       1997
                                                                -----       ----      -----
                                                                   (Dollars In Thousands)
<S>                                                             <C>         <C>       <C>
          Service cost                                          $ 725       $609      $ 550
          Interest cost                                           598        494        447
          Expected return on plan assets                         (807)      (818)      (626)
          Amortization of prior service cost                      (69)       (68)       (68)
          Recognized net actuarial gain                           (52)      (132)       (52)
                                                                -----       ----      -----
              Net                                               $ 395       $ 85      $ 251
                                                                =====       ====      =====

          Discount rate on benefit obligation                    6.75%      7.00%      6.75%
          Long-term expected rate of return on plan assets       7.50%      8.50%      8.50%
          Rate of compensation increase                          5.00%      5.00%      5.00%
</TABLE>


       For the years ended December 31, 1999, 1998, and 1997, pension expense
       amounts were based upon actuarial computations.

                                       34
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       SUPPLEMENTAL RETIREMENT INCOME PLAN ("SERP") - During 1989, the
       Association's Board of Directors established a supplemental nonqualified
       unfunded defined benefit plan for certain officers. For the years ended
       December 31, 1999, 1998 and 1997, the net periodic expense for the
       officers' plan totaled $114,000, $76,000, and $54,000, respectively.

       Information about the SERP was as follows:

       -------------------------------------------------------------------------
                                                     December 31,   December 31,
                                                        1999            1998
                                                     ------------   ------------
                                                           (In Thousands)
          Change in benefit obligation:
               Beginning benefit obligation            $  683          $  479
               Service cost                                72              51
               Interest cost                               46              33
               Actuarial (loss) gain                      (65)            136
               Benefits paid                              (16)            (16)
                                                       ------          ------
               Ending benefit obligation               $  720          $  683
                                                       ======          ======

       The actuarial assumptions were as follows:

       ---------------------------------------------------------------
                                            Years Ended December 31,
                                       -------------------------------
                                       1999         1998          1997
                                       ----         ----          ----
            Discount rate              7.25%        6.75%         7.00%
            Salary scale               5.00%        5.00%         5.00%

       Bankshares and the Association do not provide any other material
       postretirement or postemployment benefits.

       EMPLOYEE STOCK OWNERSHIP PLAN - As of December 31, 1999, the ESOP has
       outstanding loan balances of $637,000 (Loan I) and $4,085,000 (Loan II)
       related to the purchases of 389,248 shares and 437,652 shares of common
       stock, respectively, in the open market. Collateral for the loans is the
       common stock purchased by the ESOP. Payment of the loans is principally
       from the Association's contributions to the ESOP over a period of up to
       seven years and 15 years, respectively. Interest on ESOP Loan I is a
       fixed interest rate of 8.50% for the term of loan. Interest on ESOP Loan
       II is a fixed rate of 7.75% for the term of the loan. Contributions of
       principal and interest for the years ended December 31, 1999, 1998 and
       1997 totaled $1,092,000, $510,000, and $525,000, respectively.

       Statement of Position 93-6 "Employers' Accounting for Employee Stock
       Ownership Plan" ("SOP 93-6") requires that the Association reflect shares
       allocated to employees under the ESOP as compensation expense at their
       fair value, rather than cost. The difference between the cost of such
       shares and their fair value is treated, net of tax, as an adjustment of
       additional paid-in capital. Contributions to the ESOP will be in an
       amount proportional to the repayment of the ESOP loans, and will be
       allocated among participants on the basis of compensation in the year of
       allocation, up to an annual adjusted maximum level of compensation. In
       accordance with generally accepted accounting principles, the unallocated
       shares held by the ESOP are shown as a deduction from shareholders'
       equity.

       Information related to the ESOP was as follows:

       ------------------------------------------------------------------------
                                               For the Years Ended December 31,
                                                1999        1998        1997
                                             ---------    --------    --------
       Number of shares allocated               84,784      55,610      55,610
       Average fair value per share          $   12.45    $  15.08    $  12.71
                                             ---------    --------    --------
       Compensation expense                  1,056,000    $839,000    $707,000
                                             =========    ========    ========

       Number of shares distributed             14,386      11,216       4,034
                                             =========    ========    ========

                                       35
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       Shares held by the ESOP were as follows:

       -------------------------------------------------------------------------
                                                December 31,        December 31,
                                                   1999                 1998
                                                ------------        ------------

          Allocated to participants                297,403              227,005
          Unallocated                              498,549              583,333
                                                ----------           ----------
          Total ESOP shares                        795,952              810,338
                                                ==========           ==========
          Fair  value of unallocated shares     $6,262,000           $6,271,000
                                                ==========           ==========

       RECOGNITION AND RETENTION PLANS - Bankshares has two RRPs for the benefit
       of the Association's directors, officers, and other key employees. Under
       these plans, the fair value of the shares on the date of award is being
       recognized as compensation expense over the vesting period. The vesting
       period for both plans is five years.

       1995 RRP - In January 1995, the shareholders of the Association approved
       the 1995 RRP for certain officers and non-employee directors of the
       Association. Concurrent with such approval, such officers and directors
       were awarded 181,756 shares of common stock, which vest over a five year
       period beginning in January 1996. To fund the 1995 RRP, 181,756 shares
       were issued from authorized but unissued shares of common stock in July
       1995. Certain of these shares were forfeited. 2,044 of the forfeited
       shares were granted to an officer in January 1996. These shares began
       vesting January 1997. In May 1999, the remaining 8,525 forfeited shares
       as well as 12,868 shares purchased in the open market were awarded to
       certain officers, key employees and non-employee directors of the
       Association. These shares vest over a five year period beginning in May
       2000.

       1999 RRP - In June 1999, the shareholders of Bankshares approved the 1999
       RRP for certain officers, key employees and non-employee directors of the
       Association. Concurrent with such approval, such officers, key employees
       and directors were awarded 218,826 shares of common stock, which vest
       over a five year period beginning in June 2000. To fund the 1999 RRP,
       218,826 shares of Bankshares' common stock were purchased in the open
       market.

       Unamortized deferred compensation of $2,586,000 at December 31, 1999 is
       reflected as a reduction of shareholders' equity for the RRPs.
       Compensation expense related to the RRPs was $539,000, $186,000, and
       $185,000 for the years ended December 31, 1999, 1998 and 1997,
       respectively.

       STOCK OPTION PLANS - Bankshares has two stock option plans for the
       benefit of the Association's directors, officers, and other key
       employees. Under these plans, the option exercise price cannot be less
       than the fair value of the underlying common stock as of the date of the
       option grant and the maximum option term cannot exceed ten years.

       1995 SOP - The number of shares of Bankshares' common stock reserved for
       issuance under the 1995 SOP was equal to 486,561 shares or 10% of the
       total number of common shares issued to persons other than the Mid-Tier
       Holding Company, pursuant to the Association's conversion to the stock
       form of ownership in 1994. The stock options granted to the directors,
       officers, and employees in 1995 vest in five equal annual installments.
       The first installment became exercisable on January 18, 1996. An
       additional grant of options was made to directors, officers and employees
       on May 19, 1999. These grants will vest over five years. The first
       installment is exercisable on May 19, 2000.

       1999 SOP - The number of shares of Bankshares' common stock reserved for
       issuance under the 1999 SOP was equal to 547,065 shares which was equal
       to 10% of the shares of common stock sold by Bankshares in the
       Reorganization. The stock options granted to the directors, officers, and
       employees vest in five equal annual installments. The first installment
       becomes exercisable on June 18, 2000.

                                       36
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       Below is a summary of options transactions:

       -----------------------------------------------------------------------
                                                           Option Price
                                                    --------------------------
                                     Number  of        Average      Aggregate
                                       Options      Exercise Price   Exercise
                                     Outstanding      Per Share       Price
                                     -----------    -------------- -----------
       Options Outstanding:
       Balance - December 31, 1997      438,228                    $ 2,444,000
             Granted                         --
             Exercised                  (18,482)       $ 5.441        (101,000)
             Canceled                        --             --              --
                                       --------                    -----------
       Balance - December 31, 1998      419,746                      2,343,000
             Granted                    582,578         12.200       7,107,000
             Exercised                  (38,433)         5.441        (209,000)
             Canceled                   (10,631)        12.188        (130,000)
                                       --------                    -----------
       Balance - December 31, 1999      953,260                    $ 9,111,000
                                       ========                    ===========


       Options exercisable at December 31, 1999, 1998, and 1997, totaled
       288,330, 234,396, and 163,271, respectively. Bankshares adopted the
       disclosure-only option under SFAS No. 123, "Accounting for Stock-based
       Compensation" as of January 1, 1997. The fair value of options granted
       under the stock option plans during the years ended December 31, 1999 and
       1997 was estimated using the Binary Option Pricing Model with the
       following assumptions used:
<TABLE>
<CAPTION>
                       Number of    Exercise     Fair Value       Risk Free        Expected      Expected     Dividend
         Grant date     Options       Price      of Options     Interest Rate    Life (Years)   Volatility      Yield
         ----------    ---------    -------      ----------     -------------    ------------   ----------    --------
<S>                     <C>          <C>            <C>             <C>               <C>         <C>           <C>
          01/18/97      15,333       $   9.30       $2.57           6.37%             5           15.36%        2.67%
          05/19/99      35,513       $ 12.375       $2.20           5.66%             5           18.10%        3.57%
          06/18/99     547,065       $ 12.188       $2.03           5.76%             5           16.46%        3.57%
</TABLE>
       Had compensation cost for the stock options been determined based on the
       fair value at the grant date for awards under those plans consistent with
       the method of SFAS No. 123, Bankshares' net income and earnings per
       shares for the years ended December 31, 1999 and 1998 would have been
       reduced to the pro forma amounts indicated below:

       --------------------------------------------------------------------
                                           For the Years Ended December 31,
                                             1999                  1998
                                          ----------           -----------
       Net income
             As reported                  $6,534,000           $ 4,994,000
             Pro forma                    $6,381,000           $ 4,989,000
       Earnings per share
             As reported - basic          $     0.67           $      0.49
             Pro forma - basic            $     0.65           $      0.49
             As reported - diluted        $     0.65           $      0.48
             Pro forma - diluted          $     0.63           $      0.48

14.    REGULATORY RESTRICTIONS ON RETAINED INCOME AND REGULATORY CAPITAL
       REQUIREMENT

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

                                       37
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       Quantitative measures established by regulation to ensure capital
       adequacy require the Association to maintain minimum amounts and ratios
       of tangible capital of not less that 1.5% of adjusted total assets, total
       capital to risk-weighted assets of not less that 8.0%, Tier I capital
       equal to adjusted total assets of 3.0%, and Tier I capital to
       risk-weighted assets of 4.0% (as defined in the regulations). Management
       believes, as of December 31, 1999, that the Association meets all capital
       adequacy requirements to which it is subject.

       As of December 31, 1999, the most recent notification from the OTS
       categorized the Association as "Well Capitalized" under the framework for
       prompt corrective action. To be considered well capitalized under Prompt
       Corrective Action Provisions, the Association must maintain total
       risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in
       the following table. There are no conditions or events since that
       notification that management believes have changed the Association's
       categorization.

       The Association is required to report capital ratios unconsolidated with
       Bankshares. The Association's actual capital amounts and ratios are
       presented in the following tables:
<TABLE>
<CAPTION>

       -----------------------------------------------------------------------------------------------------------------------
                                                                                                            To be Considered
                                                                                          For               Well Capitalized
                                                                                    Capital Adequacy     for Prompt Corrective
                                                                   Actual               Purposes            Action Provisions
                                                              ----------------------------------------------------------------
                                                              Ratio      Amount     Ratio     Amount       Ratio      Amount
                                                              -----      ------     -----     ------       -----      ------
                                                                                    (Dollars in Thousands)
<S>                                                           <C>       <C>           <C>     <C>           <C>       <C>
       AS OF DECEMBER 31, 1999:
       TOTAL RISK-BASED CAPITAL (TO RISK-WEIGHTED ASSETS)     17.84%    $ 84,710      8.0%    $37,989       10.0%     $47,486
       CORE (TIER 1) CAPITAL (TO ADJUSTED TANGIBLE ASSETS)     9.20       80,787      4.0      35,140        5.0       43,925
       CORE (TIER 1) CAPITAL (TO RISK-WEIGHTED ASSETS)        17.01       80,787      4.0      18,994        6.0       28,491

       As of December 31, 1999, adjusted tangible assets and risk-weighted
       assets were $878,501,000 and $474,857,000, respectively.

       As of December 31, 1998:
       Total Risk-Based Capital ( to Risk-weighted Assets)    25.0%     $111,398      8.0%    $35,647       10.0%     $44,559
       Core (Tier 1) Capital (to Adjusted Tangible Assets)    12.8       108,238      3.0      25,352        5.0       42,253
       Core (Tier 1) Capital (to Risk-weighted Assets)        24.3       108,238      N/A         N/A        6.0       26,736
</TABLE>

       As of December 31, 1998, adjusted tangible assets and risk-weighted
       assets were $845,054,000 and $445,592,000, respectively.

       At the close of the conversion and reorganization of the Association in
       December 1998, a liquidation account in the amount of $50,800,000 was
       established. The liquidation account will be maintained for the benefit
       of eligible depositors who continue to maintain their accounts at the
       Association after December 15, 1998. The liquidation account is to be
       reduced annually to the extent that eligible depositors have reduced
       their qualifying deposits. The balance of the liquidation account was
       $25,322,000 at December 31, 1999. Subsequent increases of such deposits
       will not restore an eligible depositor's interest in the liquidation
       account. In the event of a complete liquidation, each eligible depositor
       will be entitled to receive a distribution from the liquidation account
       in an amount proportionate to the current adjusted qualifying balances
       for accounts then held. The Association may not pay dividends that would
       reduce shareholder's equity below the required liquidation account
       balance.

15.    FAIR VALUE OF FINANCIAL INSTRUMENTS

       The following methods and assumptions were used to estimate the fair
       value of each major classification of financial instruments at December
       31, 1999 and 1998:

       CASH AND CASH EQUIVALENTS - The carrying amounts reported in the
       Statement of Financial Condition for cash and cash equivalents
       approximates their fair value.

       SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE - Fair
       value is determined by reference to quoted market prices or by use of
       broker price estimates.

                                       38
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

       LOANS RECEIVABLE, NET - The fair value of loans was estimated by using a
       method which approximates the effect of discounting the estimated future
       cash flows over the expected repayment periods using rates which consider
       credit risk and other relevant factors.

       FHLB STOCK - The carrying amount of FHLB stock is a reasonable estimate
       of fair market value.

       ACCRUED INTEREST RECEIVABLE - The carrying amount of accrued interest
       receivable is a reasonable estimate of fair market value.

       DEPOSITS - Current carrying amounts approximate estimated fair value of
       deposits with no stated maturity, including demand deposits, interest
       bearing NOW accounts, passbooks and statement accounts, and money market
       accounts. Fair value for fixed maturity certificate of deposit accounts
       was estimated by discounting the contractual cash flow using a rate which
       reflects the Association's cost of funds and other relevant factors.

       ADVANCES FROM FEDERAL HOME LOAN BANK - The fair value of advances from
       FHLB is estimated using the Association's cost of funds and other
       relevant factors.

       MORTGAGE-BACKED BOND - The fair value of the Bond is estimated using the
       Association's cost of funds and other relevant factors.

       ACCRUED INTEREST PAYABLE - The carrying amount of accrued interest
       payable is a reasonable estimate of fair market value.

       COMMITMENTS TO EXTEND CREDIT - At December 31, 1999 and 1998, the fair
       value of commitments to extend credit was considered insignificant due to
       the short-term nature of the commitments.

       The estimated fair values of the financial instruments were as follows:
<TABLE>
<CAPTION>

       --------------------------------------------------------------------------------------
                                          December 31, 1999             December 31, 1998
                                     ---------------------------   --------------------------
                                     Carrying Value   Fair Value   Carrying Value  Fair Value
                                     --------------   ----------   --------------  ----------
                                                           (In Thousands)
<S>                                    <C>           <C>           <C>            <C>
       Financial assets:
       Cash and cash equivalents        $ 45,239      $ 45,239      $ 117,015      $117,015
       Securities held to maturity        38,802        41,271         52,619        57,303
       Securities available for sale     144,840       144,840         95,151        95,151
       Loans receivable, net             608,369       600,315        538,204       552,735
       FHLB stock                          7,009         7,009          4,722         4,722
       Accrued interest receivable         3,788         3,788          2,782         2,782

       Financial liabilities:
       Deposits                         $613,943      $617,889      $ 594,400      $592,085
       Advances from FHLB                140,186       136,653         91,920        90,157
       Mortgage-backed bond               14,508        14,661         15,430        15,446
       Accrued interest payable              612           612            403           403
</TABLE>
                                       39
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.    CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS

       The following are condensed statements of financial condition as of
       December 31, 1999 and 1998, and condensed statements of operations and
       cash flows for the years ended December 31, 1999, 1998 and 1997. Since
       the reorganization of Bankshares and the Association was accounted for in
       a manner similar to a pooling of interests, these statements have been
       presented as if Bankshares was in existence for all periods covered by
       the consolidated financial statements.

       STATEMENTS OF FINANCIAL CONDITION
       ------------------------------------------------------------------------
                                                           At December 31,
                                                        1999              1998
                                                     ---------         --------
                                                            (In Thousands)
       Assets:
            Cash and cash equivalents                $     101         $    212
            Investment in the Association               89,162          107,808
            Loans to the Association                    15,640           21,000
            Loans to the ESOP                            4,722            5,407
            Real estate loans                            6,000               --
            Other assets                                 1,101               64
                                                     ---------         --------
       Total assets                                  $ 116,726         $134,491
                                                     =========         ========

       Liabilities                                   $   1,025         $  1,205
       Shareholders' equity                            115,701          133,286
                                                     ---------         --------
       Total liabilities and shareholders' equity    $ 116,726         $134,491
                                                     =========         ========
<TABLE>
<CAPTION>

       STATEMENTS OF OPERATIONS
       ---------------------------------------------------------------------------------------
                                                             For the Years Ended December 31,
                                                             1999          1998          1997
                                                           -------       -------       -------
                                                                     (In Thousands)
<S>                                                       <C>           <C>           <C>
       Income                                              $ 1,630       $    90       $    --
       Expenses                                                519             5            41
                                                           -------       -------       -------
       Income (loss) before income taxes and
           equity in earnings of the Association             1,111            85           (41)
       Income tax expense (provision) benefit                 (418)          (32)           15
                                                           -------       -------       -------
       Income (loss) before equity in earnings
           of the Association                                  693            53           (26)
       Equity in earnings of the Association                 5,841         4,941         5,382
                                                           -------       -------       -------
       Net income                                            6,534         4,994         5,356
                                                           -------       -------       -------
       Other comprehensive income, net of tax:
           Change in unrealized gain (loss) in market
                value of securities available for sale      (2,926)         (278)          914
                                                           -------       -------       -------
       Comprehensive income, net of income taxes           $ 3,608       $ 4,716       $ 6,270
                                                           =======       =======       =======
</TABLE>

                                       40
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

       STATEMENTS OF CASH FLOWS
       ----------------------------------------------------------------------------------------------
                                                                     For the Years Ended December 31,
                                                                       1999        1998        1997
                                                                     --------    --------    --------
                                                                              (In Thousands)
<S>                                                                 <C>         <C>         <C>
       Cash flows from operating activities:
        Net income                                                   $  6,534    $  4,994    $  5,356
        Adjustments to reconcile net income to net cash used
             for operating activities:
             Equity in undistributed earnings of the Association       (2,541)     (4,941)     (5,382)
             Other                                                       (243)        819         (15)
                                                                     --------    --------    --------
       Net cash from operating activities                               3,750         872         (41)
                                                                     --------    --------    --------
       Cash flows from investing activities:
             Loans to subsidiaries                                      6,045     (26,407)         --
             Real estate loans                                         (6,000)         --          --
             Dividends received from the Association                   15,905          --      13,260
             Investment in Association through proceeds from
                 stock sale                                                --     (32,340)         --
                                                                     --------    --------    --------
       Net cash from investing activities                              15,950     (58,747)     13,260
                                                                     --------    --------    --------
       Cash flows from financing activities:
             Proceeds from sale of stock, net of issuance costs            --      53,236          --
             Dividends paid                                            (4,115)     (2,116)     (1,976)
             Purchase of treasury stock                               (15,905)         --          --
             Purchase of ESOP shares                                       --      (4,377)         --
             Proceeds from exercise of stock options                      209         101          --
                                                                     --------    --------    --------
       Net cash from financing activities                             (19,811)     46,844      (1,976)
                                                                     --------    --------    --------
       (Decrease) increase in cash and cash equivalents                  (111)    (11,031)     11,243
       Cash and cash equivalents, beginning of period                     212      11,243          --
                                                                     --------    --------    --------
       Cash and cash equivalents, end of period                      $    101    $    212    $ 11,243
                                                                     ========    ========    ========
</TABLE>

OTS regulations place certain restrictions on the amount of dividends an
association can pay to its holding company. Under the most restrictive of these
dividends limitations, $7,118,000 was available at December 31, 1999 to the
Association for payment of dividends to Bankshares during 2000 without prior
regulatory approval.

                                       41
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.    EARNINGS PER SHARE

       A reconciliation of the numerators and denominators of basic and diluted
       earnings per share for the years ended December 31, 1999, 1998 and 1997,
       was as follows:
<TABLE>
<CAPTION>

       ------------------------------------------------------------------------------------------------------------
                                                                             For the Years Ended December 31,
                                                                         1999              1998             1997
                                                                     ------------      -----------      -----------
                                                                      (Dollars In Thousands except per share data)
<S>                                                               <C>               <C>              <C>
       Basic earnings per share
           Net income available to common shareholders               $      6,534      $     4,994      $     5,356
           Weighted average common shares outstanding                   9,748,916       10,175,899       10,079,363
                                                                     ------------      -----------      -----------
           Basic earnings per share                                  $       0.67      $      0.49      $      0.53
                                                                     ============      ===========      ===========

       Diluted earnings per share
           Net income available to common shareholders               $      6,534      $     4,994      $     5,356
                                                                     ------------      -----------      -----------
           Weighted average common shares outstanding                   9,748,916       10,175,899       10,079,363
             Add:  dilutive effects of assumed exercise of stock
            Stock options                                                 216,482          271,205          255,284
            RRP shares                                                    158,319            1,223               --
                                                                     ------------      -----------      -----------
             Weighted average common and dilutive potential
                         common shares outstanding                     10,123,717       10,448,327       10,334,647
                                                                     ------------      -----------      -----------
           Diluted earnings per share                                $       0.65      $      0.48      $      0.52
                                                                     ============      ===========      ===========

       RRP shares were not considered in the computation of diluted earnings per
       share for the year ended December 31, 1997, as they were antidilutive.

18.    OTHER COMPREHENSIVE INCOME

       Other comprehensive income components and related taxes were as follows:

       -------------------------------------------------------------------------------------------------------
                                                                           For the Years Ended December 31,
                                                                       1999             1998             1997
                                                                     -------           ------           ------
                                                                                  (In Thousands)
<S>                                                               <C>               <C>              <C>
       Unrealized holding gains and losses on available-for-sale
            securities                                               $(4,691)          $ (621)          $1,473
       Less reclassification adjustments for gains and losses
            later recognized in income                                    --              175               (8)
                                                                     -------           ------           ------
       Net unrealized gains and losses                                (4,691)            (446)           1,465
       Tax effect                                                      1,765              168             (551)
                                                                     -------           ------           ------

       Other comprehensive income                                    $(2,926)          $ (278)          $  914
                                                                     =======           ======           ======
</TABLE>
                                       42
<PAGE>

COMMUNITY SAVINGS BANKSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
19.    QUARTERLY FINANCIAL DATA (UNAUDITED)
       -----------------------------------------------------------------------------------------
                                                                 Quarter Ended
                                           March 31,     June 30,    September 30,  December 31,
                                           ---------     --------    -------------  ------------
                                                            (Dollars in Thousands)
<S>                                        <C>           <C>           <C>           <C>
       Year Ended December 31, 1999:
            Interest Income                $14,002       $14,484       $14,742       $15,236
            Interest Expense                 7,146         7,096         7,311         7,982
                                           -------       -------       -------       -------
                 Net Interest Income         6,856         7,388         7,431         7,254

            Provision for Loan Losses          322           195           193           195
            Other Income                       978           994         1,045           821
            Operating Expense                5,601         5,702         5,926         5,756
            Provision for Income Taxes         526           760           679           378
                                           -------       -------       -------       -------
            Net Income                     $ 1,385       $ 1,725       $ 1,678       $ 1,746
                                           =======       =======       =======       =======

            Basic Earnings Per Share       $  0.14       $  0.17       $  0.17       $  0.19
                                           =======       =======       =======       =======
            Diluted Earnings Per Share     $  0.14       $  0.17       $  0.16       $  0.18
                                           =======       =======       =======       =======

       -----------------------------------------------------------------------------------------
                                                                 Quarter Ended
                                           March 31,     June 30,    September 30,  December 31,
                                           ---------     --------    -------------  ------------

       Year ended December 31, 1998
            Interest income                $13,358       $13,469       $13,763       $13,899
            Interest expense                 7,299         7,356         7,741         7,763
                                           -------       -------       -------       -------
                 Net interest income         6,059         6,113         6,022         6,136

            Provision for loan losses          117            96           223           186
            Other income                       947           928           966         1,224
            Operating expense                4,976         4,989         5,126         5,581
            Provision for income taxes         681           677           401           348
                                           -------       -------       -------       -------
            Net income                     $ 1,232       $ 1,279       $ 1,238       $ 1,245
                                           =======       =======       =======       =======

            Basic earnings per share       $  0.12       $  0.13       $  0.12       $  0.12
                                           =======       =======       =======       =======
            Diluted earnings per share     $  0.12       $  0.12       $  0.12       $  0.12
                                           =======       =======       =======       =======
</TABLE>

                                       43
<PAGE>

                            COMMUNITY SAVINGS, F. A.
                               CORPORATE DIRECTORY


BOARD OF DIRECTORS
--------------------------------------------------------------------------------
Frederick A. Teed, Chairman of the Board
Forest C. Beaty, Jr., Director
Robert F. Cromwell, Director and Chairman Emeritus of the Board
Karl D. Griffin, Director and Secretary Emeritus of the Board
James B. Pittard, Jr., President and Chief Executive Officer
Harold I. Stevenson, CPA, Director

ADMINISTRATIVE DIVISION
--------------------------------------------------------------------------------
James B. Pittard, Jr., President and Chief Executive Officer
Judith M. Hogan, Compliance Officer
Joe L. Knorr, Internal Auditor
Deborah M. Rousseau, Corporate Secretary

FINANCE DIVISION
--------------------------------------------------------------------------------
Larry J. Baker, CPA, Chief Financial Officer, Division Director
Donna L. Sheppard, CPA, Controller
Bruce C. Tissot, Staff Accountant

HUMAN RESOURCES, MARKETING & TRAINING DIVISION
--------------------------------------------------------------------------------
Feriel G. Hughes, Division Director
Cynthia J. Cullen, Training Manager
Jane H. Ryder, Personnel Manager
Juanita Swinton. Marketing Manager

LOAN DIVISION
--------------------------------------------------------------------------------
Cecil F. Howard, Jr., Division Director
J. Cary Allen, Jr., Commercial Lending Manager
Jamonica Gay Barnes, Commercial Loan Officer
Priscilla Clancy, Commercial Loan Officer
Thomas Eby, Lending Sales Manager
Charles J. Gifford, New Loan Operations Manager
Mildred C. Lodge, Consumer/Residential Loan Officer
Johnny L. Morris, Lending Sales Manager
Lisa M. Rhodes, Loan Servicing Manager

OPERATIONS DIVISION
--------------------------------------------------------------------------------
Mary L. Kaminske, Division Director
Theresa J. Brooks, Regional Branch Manager
Douglas S. Clive, Corporate Security Officer
Elizabeth A. DeLosh, Branch Operations Manager
Rizwana Khalid, Deposit Products Manager
Cindy L. Sheppard, Information Systems Manager
Eileen St. Denis, Regional Branch Manager

PROPERTIES & INSURANCE DIVISION
--------------------------------------------------------------------------------
Michael E. Reinhardt, Division Director
Larry F. Koerner, Facilities Manager

                                       44
<PAGE>

                                Community Savings

                             21 CONVENIENT LOCATIONS

--------------------------------------------------------------------------------
This is a map of Florida showing the branches of Community Savings, FA and the
counties where they are located
--------------------------------------------------------------------------------

                                  HOME OFFICE
                                North Palm Beach
                                  561-881-4800
                                  800-432-1911


                                PALM BEACH COUNTY

                     Bluffs (Jupiter), 3950 U.S. Highway One
                  Maplewood (Jupiter), 1570 W. Indiantown Road
                  Toney Penna (Jupiter), 520 Toney Penna Drive
                     North Palm Beach, 660 U. S. Highway One
                 Shoppes on the Green( PGA), 7102 Fairway Drive
                    Palm Beach Gardens, 9600 N. Alternate A1A
                          Riviera Beach, 2600 Broadway
                   Singer Island, 1100 E. Blue Heron Boulevard
                       Tequesta, 101 N. U. S. Highway One
                  Gallery Square (Tequesta), 389 Tequesta Drive
            Village Commons (West Palm Beach), 971 Village Boulevard
                        Lake Worth, 5702 Lake Worth Road
                Ibis (West Palm Beach), 10100 Northlake Boulevard

                                  MARTIN COUNTY

                      Hobe Sound, 11400 SE Federal Highway
                  Jensen Beach, 1170 NE Jensen Beach Boulevard
              Martin Downs (Palm City), 3102 Martin Downs Boulevard
                      Port Salerno, 5545 SE Federal Highway

                                ST. LUCIE COUNTY

                        Fort Pierce, 1050 Virginia Avenue
                 Port St. Lucie, 147 SW Port St. Lucie Boulevard
                  St. Lucie West, 1549 St. Lucie West Boulevard

                               INDIAN RIVER COUNTY
                      Vero Beach, 6030 20th Street (SR 60)


                                       45
<PAGE>

--------------------------------------------------------------------------------
                                CMSV NASDAQ LOGO
--------------------------------------------------------------------------------


              WE WOULD LIKE TO THANK OUR CUSTOMERS AND SHAREHOLDERS
                   FOR THEIR CONTINUED SUPPORT, CONFIDENCE AND
                                   FRIENDSHIP.

--------------------------------------------------------------------------------
                                      Logo
--------------------------------------------------------------------------------


                                Community Savings
                                Bankshares, Inc.
    P. O. Box 14547, 660 U. S. Highway One, North Palm Beach, Florida 33408
                            www.communitysavings.com


                                       46
<PAGE>


                       Community Savings Bankshares, Inc.
                                 P. O. Box 14547
                              660 U.S. Highway One
                         North Palm Beach, Florida 33408
                            www.communitysavings.com


                                       47