<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                   UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                     FORM 10-KSB

/X/  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

/ /  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1945 FOR THE TRANSITION PERIOD FROM __________ TO __________

                            COMMISSION FILE NUMBER 0-28894

                             ACCESS ANYTIME BANCORP, INC.

                    (Name of small business issuer in its charter)

               DELAWARE                                     85-0444597
     (State or other jurisdiction of                    (I.R.S. Employer
      incorporation or organization)                   Identification No.)

                      801 PILE STREET, CLOVIS, NEW MEXICO  88101
                 (Address of principal executive offices)  (Zip Code)

           Issuer's telephone number, including area code:  (505) 762-4417

     SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:  NONE

     SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                            COMMON STOCK $.01 PAR VALUE
                            ---------------------------
                                   (Title of class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

                              Yes /X/        No / /

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

     The issuer's revenues for the year ended December 31, 1998, were
$9,788,325.

     The aggregate market value of the voting stock held by non-affiliates of
the issuer, computed by reference to the average of the closing bid and asked
prices of such stock on the Nasdaq Small-Cap Market as of March 9, 1999 was
approximately $8,340,158.  (The exclusion from such amount of the market value
of the shares owned by any person shall not be deemed an admission by the issuer
that such person is an affiliate of the issuer.)

     As of March 9, 1999, the issuer had outstanding 1,235,579 shares of Common
Stock, par value $0.01 per share, its only class of Common Stock.

                         DOCUMENTS INCORPORATED BY REFERENCE

     The following document is incorporated by reference into Part III of this
Annual Report on Form 10-KSB: Definitive Proxy Statement for the issuer's 1999
Annual Meeting of Stockholders.

     Transitional Small Business Disclosure Format (check one): Yes / /  No /X/
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

                                  TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
                                        PART I

Item 1.  Description of Business . . . . . . . . . . . . . . . . . . . . .    4
         Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    4
         Lending Activities. . . . . . . . . . . . . . . . . . . . . . . .    4
           General . . . . . . . . . . . . . . . . . . . . . . . . . . . .    4
           Loan Portfolio Composition. . . . . . . . . . . . . . . . . . .    6
           One-to-Four Family Residential Mortgage Lending . . . . . . . .    8
           Multi-Family and Commercial Real Estate Lending . . . . . . . .    9
           Commercial Business Lending . . . . . . . . . . . . . . . . . .   10
           Construction Lending. . . . . . . . . . . . . . . . . . . . . .   10
           Consumer Lending. . . . . . . . . . . . . . . . . . . . . . . .   10
           Loan Servicing. . . . . . . . . . . . . . . . . . . . . . . . .   11
         Originations, Purchases and Sales of Loans. . . . . . . . . . . .   11
         Asset Quality . . . . . . . . . . . . . . . . . . . . . . . . . .   12
           Delinquent Loans. . . . . . . . . . . . . . . . . . . . . . . .   12
           Non-Performing Assets . . . . . . . . . . . . . . . . . . . . .   13
           Criticized Assets . . . . . . . . . . . . . . . . . . . . . . .   14
           Allowance for Loan Losses . . . . . . . . . . . . . . . . . . .   14
         Investment Activities . . . . . . . . . . . . . . . . . . . . . .   16
           General . . . . . . . . . . . . . . . . . . . . . . . . . . . .   16
           Other Investments . . . . . . . . . . . . . . . . . . . . . . .   18
         Sources of Funds. . . . . . . . . . . . . . . . . . . . . . . . .   18
           The Company . . . . . . . . . . . . . . . . . . . . . . . . . .   18
           The Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . .   18
           Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . .   22
         Subsidiary of the Bank. . . . . . . . . . . . . . . . . . . . . .   22
         Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . .   22
           General . . . . . . . . . . . . . . . . . . . . . . . . . . . .   22
           Regulation of the Company . . . . . . . . . . . . . . . . . . .   23
           Federal Securities Law. . . . . . . . . . . . . . . . . . . . .   24
           Insurance of Accounts and Regulations by the FDIC . . . . . . .   24
           Regulatory Capital Requirements . . . . . . . . . . . . . . . .   25
           Limitations on Dividends and Other Capital Distributions. . . .   27
           Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . .   27
           Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . .   27
           Qualified Thrift Lender Test. . . . . . . . . . . . . . . . . .   27
           Community Reinvestment Act. . . . . . . . . . . . . . . . . . .   28
           Transactions with Affiliates. . . . . . . . . . . . . . . . . .   28
           Federal Home Loan Bank System . . . . . . . . . . . . . . . . .   28
           Regulatory Environment for 1999 . . . . . . . . . . . . . . . .   29
         Federal and State Taxation. . . . . . . . . . . . . . . . . . . .   30
           Federal Taxation. . . . . . . . . . . . . . . . . . . . . . . .   30
           State Taxation. . . . . . . . . . . . . . . . . . . . . . . . .   32
         New Accounting Standards. . . . . . . . . . . . . . . . . . . . .   32
         Competition . . . . . . . . . . . . . . . . . . . . . . . . . . .   32
         Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . .   33

                                     (Continued)


                                          2
<PAGE>

                                  TABLE OF CONTENTS
                                     (CONTINUED)

<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Item 2.  Description of Property . . . . . . . . . . . . . . . . . . . . .   33

Item 3.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .   33

Item 4.  Submission of Matters to a Vote of Security Holders . . . . . . .   33

                                       PART II

Item 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . .   34

Item 6.  Management's Discussion and Analysis or Plan of Operation . . . .   35
           Selected Consolidated Financial Highlights. . . . . . . . . . .   35
           General . . . . . . . . . . . . . . . . . . . . . . . . . . . .   37
           Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . .   38
           Results of Operations . . . . . . . . . . . . . . . . . . . . .   39
             Comparison of Years Ended December 31, 1998 and 1997. . . . .   41
             Comparison of Years Ended December 31, 1997 and 1996. . . . .   41
           Asset/Liability Management and Interest Rate Sensitivity. . . .   42
           Liquidity and Capital Resources . . . . . . . . . . . . . . . .   45
           Asset Quality . . . . . . . . . . . . . . . . . . . . . . . . .   46
             Allowance for Loan Losses . . . . . . . . . . . . . . . . . .   46
             Non-Performing Assets . . . . . . . . . . . . . . . . . . . .   48
             Investment Securities . . . . . . . . . . . . . . . . . . . .   48
           Off-Balance Sheet Financial Instruments . . . . . . . . . . . .   48
           Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .   49
           Impact of Inflation and Changing Prices . . . . . . . . . . . .   49
           Impact of New Accounting Standards. . . . . . . . . . . . . . .   49
           Impact of Year 2000 . . . . . . . . . . . . . . . . . . . . . .   51
           Forward-Looking Information . . . . . . . . . . . . . . . . . .   53

Item 7.  Financial Statements. . . . . . . . . . . . . . . . . . . . . . .   54

Item 8.  Changes In and Disagreements with Accountants on Accounting
         and Financial Disclosures . . . . . . . . . . . . . . . . . . . .   54

                                       PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act . . . . . . . .   54

Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . . .   54

Item 11. Security Ownership of Certain Beneficial Owners and Management. .   54

Item 12. Certain Relationships and Related Transactions. . . . . . . . . .   54

Item 13. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . .   55

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   57

Index to Consolidated Financial Statements . . . . . . . . . . . . . . . .  F-1

Glossary of Certain Terms. . . . . . . . . . . . . . . . . . . . . . . . .  G-1
</TABLE>


                                          3
<PAGE>

                                        PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

PLEASE REFER TO THE GLOSSARY OF CERTAIN TERMS (PAGE G-1) FOR DEFINITIONS OF
VARIOUS TERMS.

OVERVIEW

     Access Anytime Bancorp, Inc. (the "Company") is a Delaware corporation
which was organized in 1996 for the purpose of becoming the thrift holding
company of First Savings Bank, F.S.B. renamed FirstBank (the "Bank").  The
Company owns all of the outstanding stock of the Bank, which is the Company's
principal asset. The Bank was originally chartered by the FHLBB in 1934.
Currently, deposits with the Bank are insured to maximum extent permitted by the
SAIF, which is under the supervision of the FDIC.  The Bank is a member of the
FHLB system and the Company and the Bank are subject to comprehensive
regulation, examination, and supervision of the OTS and the FDIC.

     The Bank is the second largest financial institution headquartered in
Clovis, New Mexico, with approximately $122 million in assets.  The Bank
conducts full service banking operations through three offices located in Clovis
and Portales, New Mexico and through a loan production office in Rio Rancho, New
Mexico, near Albuquerque.  The Company's executive offices are located at 801
Pile Street, Clovis, New Mexico.  The telephone number at that address is (505)
762-4417.  In general, the Bank has a normal lending territory, as defined by
federal regulations, that includes all areas within the State of New Mexico,
Arizona, and a 100 mile radius from the Company's main office in Clovis, New
Mexico, which extends into the State of Texas.  The primary service area's
economic base is derived from Cannon Air Force Base, a regional switching
headquarters for the Burlington Northern Santa Fe Railroad, Eastern New Mexico
University, and farming and ranching.

     The Company's and the Bank's revenues are derived principally from interest
on loans and securities, servicing fee income, income from deposit account
service charges and gains on the sale of loans.  The results of operations of
the Company and the Bank, in general, are significantly influenced by general
economic conditions, the monetary and fiscal policies of the federal government,
competition in the Company's and the Bank's market area, and the policies of
financial institution regulatory authorities.

     The Bank, since 1991, has engaged in the business of attracting deposits
from the general public, making loans secured by first liens on single-family
homes (primarily for sale into the secondary market), consumer and commercial
loans, and investing in mortgage related securities.  The principal sources of
funds for the Bank's lending and investing activities include the sale of loans,
principal payments and prepayments on loans and mortgage related securities, and
deposits.  The Bank's primary sources of income are income on loans and
securities, loan servicing fees, income from deposit account service charges,
and gains on the sale of loans and loan servicing.  Its principal expenses are
interest paid on deposits and borrowings and general operating expenses.  The
earnings of the Bank depend primarily on the differences between its income from
lending and investment activities and the interest cost of its deposits and
borrowings.

LENDING ACTIVITIES

     GENERAL.  The Bank has historically originated fixed-rate and
adjustable-rate mortgage loans.  In order to reduce its exposure to changes in
interest rates, it has also, since the early 1980's, emphasized the origination
and retention of ARM loans.  Management's strategy has been to increase assets
in its portfolio which more frequently reprice or which have shorter maturities.
In response to customer demand, however, the Bank continues to originate
conventional fixed-rate mortgages.  Since interest rates on fixed-rate mortgage
loans are low on a historical basis, it has become difficult to originate ARM
loans.

     The Bank's balanced focus in lending activities is on the origination of
loans secured by first mortgages on owner-occupied, one-to-four family
residences, and consumer and commercial loans.  The Bank also originates
residential construction, commercial real estate and consumer loans in its
market area.  Most


                                          4
<PAGE>

residential mortgage loans originated by the Bank are in conformity with FHLMC,
FNMA and GNMA loan underwriting standards so that they may be sold in the
secondary market.  Mortgage loans made by the Bank are generally long-term
loans, amortized on a monthly basis, with principal and interest due each month.
The initial contractual loan payment period for residential loans typically
ranges from 15 to 30 years.  The Bank's experience indicates, however, that real
estate loans remain outstanding for significantly shorter periods than their
contractual terms.  Borrowers may refinance or prepay loans at their option,
subject to any prepayment penalty provisions, if included in the note.  Most
mortgage loans are underwritten and approved by the Bank's loan committee.

     All of the Bank's lending is subject to written underwriting standards and
to loan origination procedures.  Decisions on loan applications are made on the
basis of detailed applications and property valuations (consistent with the
Bank's written appraisal policy) by independent appraisers.  The loan
applications are designed primarily to determine the borrower's ability to repay
and the more significant items on the application are verified through use of
credit reports, financial statements, tax returns and/or confirmations.

     In connection with the loan approval process, the Bank's loan personnel
analyze the loan application and the property involved.  All real estate loans
are processed and presented by the officers to the loan committee. Consumer
loans are approved by loan committee and/or individual loan officers, in
accordance with policies established by the Bank's Board of Directors.

     Loan applicants are notified of the Bank's decision setting forth the terms
and conditions of the decision.  If approved, these terms and conditions include
the amount of the loan, interest rate, amortization term, a brief description of
the real estate to be mortgaged to the Bank, and the requirement of fire and
casualty insurance coverage to be maintained to protect the Bank's interest.

     It is the policy of the Bank to obtain a title insurance policy insuring
that it has a valid lien on all property securing real estate loans.  Hazard
insurance or homeowner's policies must be obtained by the borrower prior to
closing.  If required by federal rules and regulations, flood insurance policies
are obtained.  Upon closing, most borrowers are required to advance funds for
the establishment of a mortgage escrow account. Thereafter, the borrower makes
contributions to this account along with monthly principal and interest
payments. Disbursements are made from this account for items such as real estate
taxes, hazard insurance premiums, and private mortgage insurance premiums.

     The Bank receives loan origination fees for originating loans and also
receives commitment fees for making commitments to originate construction,
residential, commercial, and multi-family residential loans, as well as various
fees and charges related to existing loans, which include late charges and
assumption fees.

     As part of the loan application, the borrower pays the Bank for its
out-of-pocket costs in reviewing the application, such as the appraisal fee,
whether or not the borrower closes the loan.  The interest rate charged is
normally the prevailing rate at the time the loan application is approved.  In
the case of larger construction loans, the Bank normally charges a 1% commitment
fee, which may be included in the loan origination charge when the loan is made.
Commitment fees and other terms of commercial and multi-family residential loans
are individually negotiated.

     In order to monitor the adequacy of cash flows on income-producing
properties, the borrower or lead lender is notified periodically and asked to
provide financial information including rental rates and income, maintenance
costs and an update of real estate property tax payments.

     The aggregate amount of loans that the Bank is permitted to make under
applicable federal regulations to any one borrower, including related entities,
is limited generally to the greater of 15% of unimpaired capital and surplus or
$500,000.  At December 31, 1998, the maximum amount which the Bank could have
lent to any one borrower and the borrower's related entities was approximately
$1,543,000.  The Bank had no loans in excess of $1,543,000 at December 31, 1998.


                                          5
<PAGE>

     LOAN PORTFOLIO COMPOSITION.  The following table shows the composition of
the Bank's loan portfolio in dollar amounts and in percentages as of dates
indicated.

<TABLE>
<CAPTION>
                                                                             December 31
                                         -------------------------------------------------------------------------------------
                                                    1998                         1997                         1996
                                         ---------------------------  ---------------------------  ---------------------------
                                            Amount        Percent        Amount        Percent        Amount        Percent
                                         -------------  ------------  -------------  ------------  -------------  ------------
                                                                            (In Thousands)
<S>                                      <C>            <C>           <C>            <C>           <C>            <C>
Real estate loans (a):
   Residential mortgage loans:
     One-to-four family.............     $    63,491       69.72 %    $    37,875       63.45 %    $    26,921       56.76 %
     Multi-family...................             918        1.01              942        1.58              961        2.03
     Other dwelling units...........             539         .59              762        1.28            1,060        2.23
   Commercial.......................          12,555       13.79            8,741       14.64            9,260       19.52
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total real estate loans......          77,503       85.11           48,320       80.95           38,202       80.54
                                         -------------  ------------  -------------  ------------  -------------  ------------

Other loans:
   Savings accounts.................             596         .65              627        1.05              867        1.83
   Other consumer items (b).........          12,964       14.24           10,750       18.00            8,360       17.63
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total other loans............          13,560       14.89           11,377       19.05            9,227       19.46
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total loans..................          91,063      100.00 %         59,697      100.00 %         47,429      100.00 %
                                                        ------------                 ------------                 ------------
                                                        ------------                 ------------                 ------------

Less:
   Loans in process.................             947                          535                        1,077
   Discounts,  deferred  loan fees
      and other...................               706                          463                          327
   Allowance for loan losses........             601                          527                          429
                                         -------------                -------------                -------------

       Total loans receivable, net..     $    88,809                  $    58,172                  $    45,596
                                         -------------                -------------                -------------
                                         -------------                -------------                -------------
</TABLE>

(a)  Includes construction loans to be converted to permanent loans and
     refinanced loans.
(b)  Includes, among other things, automobile, credit card and home improvement
     loans.


                                          6
<PAGE>

     The following table shows the composition of the Bank's loan portfolio by
fixed- and adjustable-rate categories at the dates indicated.

<TABLE>
<CAPTION>
                                                                             December 31
                                         -------------------------------------------------------------------------------------
                                                    1998                         1997                         1996
                                         ---------------------------  ---------------------------  ---------------------------
                                            Amount        Percent        Amount        Percent        Amount        Percent
                                         -------------  ------------  -------------  ------------  -------------  ------------
                                                                            (In Thousands)
<S>                                      <C>            <C>           <C>            <C>           <C>            <C>
Fixed-rate loans:
Real estate (a):
   Residential mortgage loans:
     One-to-four family.............     $    53,549       58.81%     $    27,835       46.63%     $    15,345       32.35 %
     Multi-family...................             632        0.69              626        1.05              573        1.21
     Other dwelling units...........             125        0.14              317        0.53              321        0.68
   Commercial.......................          10,941       12.01            5,669        9.50            4,518        9.52
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total real estate loans......          65,247       71.65           34,447       57.71           20,757       43.76
                                         -------------  ------------  -------------  ------------  -------------  ------------

Other :
   Savings accounts.................             596        0.65              627        1.05              867        1.83
   Consumer (b).....................          12,371       13.59           10,681       17.89            8,038       16.95
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total other loans............          12,967       14.24           11,308       18.94            8,905       18.78
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total fixed-rate loans.......          78,214       85.89           45,755       76.65           29,662       62.54
                                         -------------  ------------  -------------  ------------  -------------  ------------

Adjustable-rate loans:
Real estate (a):
   Residential mortgage loans:
     One-to-four family.............           9,942       10.93           10,040       16.82           11,576       24.40
     Multi-family...................             286        0.31              316        0.53              388        0.82
     Other dwelling units...........             414        0.45              445        0.75              739        1.56
   Commercial.......................           1,614        1.77            3,072        5.14            4,742       10.00
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total real estate loans......          12,256       13.46           13,873       23.24           17,445       36.78

Consumer (b)........................             593        0.65               69        0.11              322        0.68
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total adjustable-rate loans..          12,849       14.11           13,942       23.35           17,767       37.46
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total loans receivable.......          91,063      100.00 %         59,697      100.00 %         47,429      100.00 %
                                                        ------------                 ------------                 ------------
                                                        ------------                 ------------                 ------------

Less:
   Loans in process.................             947                          535                        1,077
   Discounts,  deferred  loan fees
      and other...................               706                          463                          327
   Allowance for loan losses........             601                          527                          429
                                         -------------                -------------                -------------

       Total loans receivable, net..     $    88,809                  $    58,172                  $    45,596
                                         -------------                -------------                -------------
                                         -------------                -------------                -------------
</TABLE>

(a)  Includes construction loans to be converted to permanent loans and
     refinanced loans.
(b)  Includes, among other things, automobile, credit card and home improvement
     loans.


                                          7
<PAGE>

     The following table outlines the specific loan types with contractual
maturity dates as of December 31, 1998.  Loans which have adjustable or
renegotiable rates are shown as maturing during the period when the contract is
due.  This schedule does not reflect the effects of possible principal
prepayments by the borrower.

<TABLE>
<CAPTION>
                                  Real Estate                                 Non-Real Estate
                  --------------------------------------------  --------------------------------------------
                       Mortgages             Construction             Consumer         Commercial Business           Total
                  ---------------------  ---------------------  ---------------------  ---------------------  ---------------------
                              Weighted               Weighted               Weighted               Weighted               Weighted
                              average                average                average                average                average
                   Amount       rate      Amount      rate       Amount       rate      Amount       rate      Amount       rate
                  ----------  ---------  ---------- ----------  ----------  ---------  ----------  ---------  ----------  ---------
                                                                   (In Thousands)
<S>               <C>         <C>        <C>        <C>         <C>         <C>        <C>         <C>        <C>         <C>
Within one year   $   2,909      8.83%   $   1,330     9.05%    $   1,150      9.53%   $     476      8.96%   $   5,865      9.03%
More than one
   year
   through two
   years                334      8.74           --      --            914     10.03          491      8.32        1,739      9.30
More than two
   years
   through
   three years          814      8.94           --      --          2,790      9.54          266      8.88        3,870      9.37
More than
   three years
   through
   five years         3,339      8.99           --      --          5,542      9.42          300      9.67        9,181      9.28
More than five
   years
   through ten
   years              5,609      8.50           --      --          1,210      9.08          423      9.03        7,242      8.63
More than ten
   years
   through
   fifteen
   years             42,916      7.12           --      --             --       --            --       --        42,916      7.12
More than
   fifteen
   years             20,250      7.50           --      --             --       --            --       --        20,250      7.50
                  ----------  ---------  ---------- ----------  ----------  ---------  ----------  ---------  ----------  ---------

Total loans
   receivable     $  76,171      7.50%   $   1,330     9.05%    $  11,606      9.47%   $   1,956      8.92%   $  91,063      7.81%
                  ----------  ---------  ---------- ----------  ----------  ---------  ----------  ---------  ----------  ---------
                  ----------  ---------  ---------- ----------  ----------  ---------  ----------  ---------  ----------  ---------
</TABLE>


     As of December 31, 1998, the total amount of loans with maturities longer
than one year which had fixed interest rates was approximately $79 million and
with floating or adjustable interest rates was approximately $12 million.

     ONE-TO-FOUR FAMILY RESIDENTIAL MORTGAGE LENDING.  The primary lending
activity of the Bank has been the granting of conventional loans to enable
borrowers to purchase new or existing homes or refinance their current home.
The Bank also originates VA-guaranteed and FHA-insured loans.  Residential loan
originations are generated by the Bank's marketing efforts, its present
customers, walk-in customers and referrals from realtors and builders.  The Bank
has focused its lending efforts primarily on the origination of loans secured by
first mortgages on owner-occupied, single-family residences in its market area.

     During 1998, the Bank increased its loans receivable because of the
increased volume in 15 year mortgage loan originations.  Late in the last
quarter of 1998, the Bank changed strategy to sell all mortgage loan
originations and servicing rights for 15 and 30 year originations.  Shorter term
originations were put into loans held-to-maturity.

     The Bank's fixed-rate loans generally conform to secondary market standards
(I.E., FHLMC, FNMA and GNMA standards) and, since 1991, have been primarily
originated for sale in the secondary market.  A portion of these loans has been
originated pursuant to forward sales commitments.  Most of the Bank's fixed-rate
residential loans have contractual terms to maturity of 15 years.  As a part of
its asset/liability management strategy and in response to an increase in
refinancing activity, the Bank also originates 15 year fixed-rate, fully
amortizing loans.  Since 1996, the Bank began to put these 15 year fixed-rate
loans in the loan portfolio, while continuing to sell the 30 year fixed-rate
loans.  During the fourth quarter of 1998, the Bank continued to hold


                                          8
<PAGE>

some 15 and 30 year loans, as well as loans with original maturity less than 15
years.  The Bank anticipates selling newly originated 15 and 30 year loans in
1999.

     The Bank has offered ARM loans at rates, terms and fees determined in
accordance with market and competitive factors.  The programs currently offered
primarily meet the standards and requirements of the secondary market for
residential loans.  The Bank's current one-to-four family residential ARM loans
are fully amortizing loans with contractual maturities of up to 30 years.  The
interest rates on the ARM loans originated by the Bank are subject to adjustment
at stated intervals and are subject to annual and lifetime adjustment limits
below and above the initial rate.  Most of the Bank's ARM loans have interest
rates which adjust annually based on a margin over one of several indices.
These loans' annual and lifetime caps on interest rate increases may reduce the
extent to which they can help protect the Bank against interest rate risk.  The
Bank has from time to time offered ARM loans at below the fully-indexed rate;
however, borrowers of ARM loans are qualified at the fully-indexed rates.

     The Bank retains ARM loans in its portfolio consistent with its ongoing
asset/liability objectives.  ARM loans decrease the risks associated with
changes in interest rates but involve other risks, primarily because as interest
rates rise, the payment by the borrower rises to the extent permitted by the
terms of the loan, thereby increasing the potential for default.  At the same
time, the marketability of the underlying property may be adversely affected by
higher interest rates.  The Bank believes that these risks, which have not had a
material adverse effect on the Bank to date, generally are less than the risks
associated with holding fixed-rate loans in a rising interest rate environment.
In this regard, the Bank's delinquency experience on its ARM loans has generally
been similar to its experience on fixed-rate residential loans.

     The Bank evaluates both the borrower's ability to make principal, interest
and escrow payments and the value of the property that will secure the loan.
The Bank originates residential mortgage loans with loan-to-value ratios up to
95%.  On any mortgage loan exceeding an 80% loan-to-value ratio at the time of
origination, the Bank will generally require private mortgage insurance in an
amount intended to reduce the Bank's exposure to 80% or less of the appraised
value of the underlying property, unless otherwise approved by the Bank's Board
of Directors.

     The Bank's residential mortgage loans customarily include a due-on-sale
clause giving the Bank the right to declare the loan immediately due and payable
in the event that, among other things, the borrower sells or otherwise disposes
of the property subject to the mortgage and the loan is not repaid.  The Bank
has generally enforced due-on-sale clauses in its mortgage loan contracts.
Yield increases may be obtained through the authorization of assumptions of
existing loans at higher rates of interest, assuming the current rates are
higher than the existing note rate, and the imposition of assumption fees.  ARM
loans may be assumed provided home buyers meet the Bank's underwriting standards
and the applicable fees are paid.

     MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING.  The Bank's multi-family
and commercial real estate loan portfolio includes loans secured by apartment
buildings, office buildings, retail stores and other properties, most of which
are located in the Bank's normal lending territory.  The Bank intends to
originate multi-family and commercial real estate loans in the future, subject
to regulatory restrictions.  Multi-family and commercial real estate loans
generally are originated in amounts up to 75% of the appraised value of the
property securing the loan.  Commercial and multi-family loans are made at both
fixed and adjustable interest rates for terms of up to 25 years.  The terms and
conditions of multi-family and commercial real estate loans are negotiated on a
case-by-case basis.

     Appraisals on properties securing multi-family and commercial real estate
loans originated by the Bank are performed by an independent appraiser subject
to regulatory guidelines at the time the loan is made.  All appraisals on
multi-family and commercial real estate loans are reviewed by the Bank's
management.  In addition, the current underwriting procedures require
verification of the borrower's credit history, income and financial statements,
banking relationships, references and income projections for the property.
Personal guarantees are generally obtained for the Bank's multi-family and
commercial real estate loans.


                                          9
<PAGE>

     Multi-family and commercial real estate lending affords the Bank an
opportunity to receive interest at rates higher than those generally available
from one-to-four family residential lending.  Nevertheless, loans secured by
such properties are generally larger and involve a greater degree of risk than
one-to-four family residential mortgage loans.  Because payments on loans
secured by multi-family and commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be subject to adverse conditions in the real estate market or
the economy.  If the cash flow from the project is reduced (for example, if
leases are not obtained or renewed), the borrower's ability to repay the loan
may be impaired.  In addition, adjustable-rate multi-family and commercial real
estate loans are subject to increased risk of delinquency or default as interest
rates increase.  The Bank has attempted to minimize these risks through its
underwriting standards and by lending primarily on existing income-producing
properties.

     COMMERCIAL BUSINESS LENDING.  The Bank began offering commercial business
loans guaranteed by the SBA in 1991.  The SBA program provides lenders with the
ability to offer flexible terms and longer maturities on loans to small
businesses and professionals.  The program provides the lender a guaranteed
portion (generally 75%-80%) of principal and interest.  Since these loans are
guaranteed, they generally offer minimal risk to the Bank.  These loans are made
with adjustable and fixed interest rates with maturities of up to 25 years,
depending on the underlying collateral.  The loans are approved by the SBA.  The
Bank intends to expand its commercial lending by utilizing the SBA program.

     The Bank intends to provide short and medium term credit to businesses in
the Bank's primary lending territory.  Commercial loans include revolving credit
lines and term loans, or a combination thereof, and are generally secured by
equipment, accounts receivable, inventories, real estate or other business
assets or a combination thereof.  Commercial business loans are made pursuant to
specified loan approval limits set by the Bank's Board of Directors.  The Bank
usually requires that business borrowers maintain their operating accounts with
the Bank in the form of demand deposits.  Loans made to corporations are
generally personally guaranteed by the principals of the corporation.

     CONSTRUCTION LENDING.  The Bank originates loans to finance the
construction of single-family residences and commercial businesses.  Many of
these loans are made to individuals who will ultimately be the owner-occupants
of the residence.  Such loans are generally made, although not required, with
permanent financing on the constructed property to be provided by the Bank.
Construction loans are generally made with a six month term on a fixed-rate,
interest-only basis.  Residential construction loans to owner-occupants are
generally underwritten using the same criteria as for one-to-four family
residential loans.  Commercial construction loans are generally made with 12 to
24 month maturities.  Loan proceeds are disbursed in increments as construction
progresses and inspections warrant.

     Construction loans afford the Bank the opportunity to charge loan
origination fees, to increase the frequency of repricing of its loan portfolio
and to earn yields higher than those obtainable on loans secured by existing
one-to-four family residential properties.  The higher yields reflect the higher
risks associated with construction lending, which include principally the
difficulty in evaluating accurately the total funds required to complete a
project and the post-completion value of the project.  As a result, the Bank
places a strong emphasis upon the borrower's ability to repay and the experience
and expertise of the builder who has contracted to construct the property.

     CONSUMER LENDING.  Management considers consumer lending to be an important
component of its strategic plan.  Specifically, consumer loans generally have
shorter terms to maturity (thus reducing the Bank's exposure to changes in
interest rates) and carry higher rates of interest than do one-to-four family
residential mortgage loans. In addition, management believes that the offering
of consumer loan products helps to expand and create stronger ties to its
existing customer base by increasing the number of customer relationships and
providing cross-marketing opportunities.  Under applicable federal laws, the
Bank is authorized to invest up to 35% of its assets in consumer loans excluding
credit card and education loans.


                                          10
<PAGE>

     The Bank offers a variety of secured consumer loans, including home
improvement loans, auto loans, personal lines of credit, equity lines of credit
and loans secured by savings deposits.  The Bank also offers a limited amount of
unsecured and credit card loans.  The Bank currently originates all of its
consumer loans in its market area.  Consumer loan terms vary according to the
type of collateral, length of contract and creditworthiness of the borrower.
The Bank's consumer loans generally have fixed rates of interest.

     The Bank currently has several arrangements to originate consumer
automobile loans on an indirect basis (I.E., where loan contracts are purchased
from automobile retailers which have extended credit to their customers).  The
Bank applies the underwriting standards mentioned below in the approval process
of purchasing these contracts.  These loans have a fixed interest rate and
maturities of 6 years or less.  As of December 31, 1998, the Bank had $6,115,861
in indirect automobile contracts or 6.7% of its loan portfolio before net items.

     The underwriting standards employed by the Bank for consumer loans include
a determination of the applicant's payment history on other debts and an
assessment of the ability to meet existing obligations and payments on the
proposed loan.  Although creditworthiness of the applicant is a primary
consideration, the underwriting process also includes a comparison of the value
of the security, if any, in relation to the proposed loan amount.

     Consumer loans may entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured, or secured by
rapidly depreciable assets, such as automobiles.  In such cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation.  In addition, consumer loan collections are
dependent on the borrower's continuing financial stability, and thus are more
likely to be affected by adverse personal circumstances.  Furthermore, the
application of various federal and state laws, including bankruptcy, may limit
the amount which can be recovered on such loans.  Although the level of
delinquencies in the Bank's consumer loan portfolio has generally been low (at
December 31, 1998, approximately $283,000, or 2.09% of the consumer loan
portfolio, was 60 days or more delinquent), there can be no assurance that
delinquencies will not increase in the future.

     LOAN SERVICING.  In December 1998, the Bank sold its loan servicing
portfolio of approximately $100 million to a New Mexico loan servicer.  On
future loans, servicing will be sold to private investors.  The fee for selling
loans with servicing released is generally 1/4% to 1 3/4%.


ORIGINATIONS, PURCHASES AND SALES OF LOANS

     As described previously, the Bank originates loans through its marketing
efforts, its existing customer base, walk-in customers, and real estate brokers
and builders.  Commercial real estate loan originations are obtained by direct
solicitation.  The Bank originates both adjustable-rate and fixed-rate loans.
Its ability to originate loans is dependent upon the relative customer demand in
the origination market which is affected by market conditions such as short-term
and long-term interest rates as well as the expected future level of interest
rates.

     The Bank made no purchases or sales of pooled whole loans in 1998 and had
no commitments to purchase any loans or mortgage-backed securities at December
31, 1998.  At the same date, the Bank had loan origination commitments of
$2,057,237 and commitments to sell residential loans of $2,912,495.  The Bank
expects to continue to sell most of its residential mortgage loans in order to
enhance liquidity and to maintain its risk-based capital position.  This has
generally been the procedure since 1991.


                                          11
<PAGE>

     The following table sets forth the principal amount of the Bank's loan
origination, purchase and sales activity for the periods indicated.


<TABLE>
<CAPTION>
                                                                                             Year Ended December 31
                                                                                    ------------------------------------------
                                                                                        1998          1997           1996
                                                                                    -------------  ------------  -------------
                                                                                                 (In Thousands)
<S>                                                                                 <C>            <C>           <C>
Originations by loan type
Fixed-rate:
    Construction loans.................................................             $    1,888     $    1,214    $    2,026
    Mortgage loans.....................................................                 41,518         16,446        14,581
    Consumer loans.....................................................                  9,671          7,680         7,146
    Loans refinanced...................................................                 11,214         10,624         5,628
Adjustable-rate:
    Mortgage loans.....................................................                  1,507            616           612
    Consumer loans.....................................................                  1,084              1            18
    Loans refinanced...................................................                    765             46           207
                                                                                    -------------  ------------  -------------

          Total loans originated.......................................                 67,647         36,627        30,218
                                                                                    -------------  ------------  -------------

Purchases:
    Loans purchased....................................................                     --             --            --
                                                                                    -------------  ------------  -------------

Sales and repayments:
    Sales (1)..........................................................                 13,128          8,770         8,913
    Principal repayments...............................................                 22,595         15,239        10,602
                                                                                    -------------  ------------  -------------

          Total reductions.............................................                 35,723         24,009        19,515
                                                                                    -------------  ------------  -------------

Increase (decrease) in other items, net................................                   (730)          (308)          264
                                                                                    -------------  ------------  -------------

          Net increase ................................................             $   31,194     $   12,310    $   10,967
                                                                                    -------------  ------------  -------------
                                                                                    -------------  ------------  -------------
</TABLE>

(1) Consists entirely of one-to-four family fixed-rate loans


ASSET QUALITY

     DELINQUENT LOANS.  When a borrower fails to make a required payment on a
loan, the Bank attempts to cause the delinquency to be cured by contacting the
borrower.  In the case of residential loans, a late notice is sent 16 days after
the due date.  If the delinquency is not cured by the thirtieth day, contact
with the borrower is made by telephone or a letter is sent.  Additional written
and verbal contacts are made with the borrower between 35 and 70 days after the
due date.

     In the event a real estate loan payment is past due for 45 days or more,
the Bank performs an in-depth review of the loan status, the condition of the
property and circumstances of the borrower.  Based upon the results of its
review, the Bank may negotiate and accept a repayment program with the borrower,
accept a voluntary deed in lieu of foreclosure or when deemed necessary,
initiate foreclosure proceedings.  If foreclosed on, real property is sold at a
public sale and the Bank may bid on the property to protect its interest.  A
decision as to whether and when to initiate foreclosure proceedings is based on
such factors as the amount of the outstanding loan in relation to the original
indebtedness, the extent of delinquency and the borrower's ability and
willingness to cooperate in curing delinquencies.

     Delinquent consumer loans are handled in a generally similar manner, except
that contacts are made beginning when the payment is 10 days past due.  If these
efforts fail to bring the loan current, appropriate action


                                          12
<PAGE>

may be taken to collect any loan payment that remains delinquent.  The Bank's
procedures for repossession and sale of consumer collateral are subject to
various requirements under New Mexico consumer protection laws.  Loans are
generally placed on non-accrual status after 90 days delinquency or notice of
bankruptcy.

     The following table sets forth the Bank's loan delinquencies by type,
amount, and percentage of type at December 31, 1998.

<TABLE>
<CAPTION>
                                                    Loans Delinquent For
                               --------------------------------------------------------------
                                                                                                  Total Loans Delinquent
                                         60-89 Days                   90 Days And Over                60 Days or More
                               ------------------------------  ------------------------------  -----------------------------
                                                    Percent                         Percent                         Percent
                                                    of loan                         of loan                         of loan
                                Number     Amount   category    Number    Amount    category    Number    Amount    category
                               ---------  --------- ---------  --------- ---------  ---------  --------  ---------  --------
                                                                      (In Thousands)
<S>                            <C>        <C>       <C>        <C>       <C>        <C>        <C>       <C>        <C>
Mortgage loans:
    One-to-four family...             7   $   128     0.20%           6  $   199       0.32%         13  $   327      0.52%
    Other dwelling units.            --        --        --          --       --         --          --       --        --
    Commercial real      
    estate...............            --        --        --           1      140       2.01           1      140      2.01
Consumer loans...........            28       273     2.01            1       10       0.08          29      283      2.09
                               ---------  ---------            --------- ---------             --------  ---------

Total loans..............            35   $   401     0.44%           8  $   349       0.39%         43  $   750      0.83%
                               ---------  ---------            --------- ---------             --------  ---------
                               ---------  ---------            --------- ---------             --------  ---------
</TABLE>


     NON-PERFORMING ASSETS.  Non-performing assets consist of loans on which
interest is no longer being accrued, troubled debt restructurings, real estate
acquired by foreclosure or deed-in-lieu of foreclosure and repossessed assets.

     The following table sets forth the amounts and categories of non-performing
assets in the Bank's portfolio.  Loans are generally placed on non-accrual
status after 90 days delinquency.

<TABLE>
<CAPTION>
                                                                                                   December 31
                                                                                    ------------------------------------------
                                                                                        1998          1997           1996
                                                                                    -------------  ------------  -------------
                                                                                                 (In Thousands)
<S>                                                                                 <C>            <C>           <C>
Non-accrual loans (1)..................................................             $      349     $        7    $       53
Past due 90 days or more and still accruing............................                     --             --            --
Renegotiated loans (2) ................................................                     --             --         1,573
Real estate owned (3)..................................................                    166             76            86
                                                                                    -------------  ------------  -------------

Total non-performing assets............................................             $      515     $       83    $    1,712
                                                                                    -------------  ------------  -------------
                                                                                    -------------  ------------  -------------

Ratio of non-performing assets to total assets.........................                 0.42%          0.08%         1.60%
                                                                                    -------------  ------------  -------------
                                                                                    -------------  ------------  -------------
</TABLE>

(1)  Generally refers to loans that are contractually delinquent (i.e.,
     payments were due and unpaid for more than 90 days).

(2)  The Bank's largest restructured note of approximately $1,533,000 originated
     in 1987 for $2,000,000 as a permanent loan on a shopping center of 47,457
     square feet, located on 56,943 square feet of land in Santa Fe, New Mexico.
     The terms of the note were modified in 1992 and an additional borrowers
     were added to the loan. The interest rate of 5% in 1995 increased to 6% in
     1996 and escalated to 7% in 1997 with interest due monthly and principal
     reductions due at the end of each year.  The loan was renewed in 1997 at a
     market rate and not considered a classified loan at December 31, 1997, and
     was paid off during 1998.

(3)  Refers to real estate acquired by the Bank through foreclosure or voluntary
     deed in lieu of loan foreclosure.


                                          13
<PAGE>

     For the year ended December 31, 1998, gross interest income which would
have been recorded had the non-accruing loans and renegotiated loans been
current in accordance with their original terms amounted to $28,589.  The amount
that was included in interest income on such loans was $0 for the year ended
December 31, 1998.

     CRITICIZED ASSETS.  Federal regulations provide for the classification of
loans and other assets, such as debt and equity securities considered by the OTS
to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered "substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "doubtful" have all of the weaknesses
inherent in those classified "substandard," with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable."  Assets classified as "loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.  Assets which do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories, but possess weaknesses,
are required to be designated "special mention" by management.

     When an insured institution classifies problem assets as either substandard
or doubtful, it may establish general allowances for loan losses in an amount
deemed prudent by management.  General allowances represent loss allowances
which have been established to recognize the inherent risk associated with
lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets.  When an insured institution classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to
charge-off such amount.  An institution's determination as to the classification
of its assets and the amount of its valuation allowances is subject to review by
the regulatory authorities, who may order the establishment of additional
general or specific loss allowances.

     In connection with the filing of its periodic reports with the OTS and in
accordance with its classification of assets policy, the Bank regularly reviews
the problem loans in its portfolio to determine whether any loans require
classification in accordance with applicable regulations.  Criticized assets of
the Bank at December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                                             December 31, 1998
                                                           --------------------
                                                              (In Thousands)
<S>                                                        <C>
Substandard.................................               $             882
Doubtful....................................                              --
Loss........................................                              --
                                                           --------------------

Total classified assets.....................                             882
Special mention assets......................                           1,225
                                                           --------------------

Total criticized assets.....................               $           2,107
                                                           --------------------
                                                           --------------------
</TABLE>

     ALLOWANCE FOR LOAN LOSSES.  The allowance for loan losses is established
through a provision for loan losses based on management's quarterly asset
classification review and evaluation of the risk inherent in its loan portfolio
and changes in the nature and volume of its loan activity.  Such evaluation,
which includes a review of all loans of which full collectibility may not be
reasonably assured, considers among other matters, the estimated value of the
underlying collateral, economic conditions, cash flow analyses, historical loan
loss experience,


                                          14
<PAGE>

discussions held with delinquent borrowers and other factors that warrant
recognition in providing for an adequate loan allowance.  Although management
believes it uses the best information available to make such determinations,
future adjustments to reserves may be necessary, and net income could be
significantly affected, if circumstances differ substantially from the
assumptions used in making the initial determinations.  The Bank's quarterly
asset classification review determines which loans to charge-off.

     The following table sets forth an analysis of the Bank's allowance for loan
losses for the years indicated.


<TABLE>
<CAPTION>
                                                                                Year ended December 31
                                                       -----------------------------------------------------------------------
                                                           1998          1997            1996          1995           1994
                                                       -------------  ------------  -------------  ------------  -------------
                                                                                    (In Thousands)
<S>                                                    <C>            <C>           <C>            <C>           <C>
Balance at beginning of year..............             $      527     $      429    $      428     $      461    $      509

Provision charged (credited)..............                    238            118            14            (15)            4

Charge-offs:
Mortgage loans:
    Single family.........................                     --             (2)           --             --           (50)
    Commercial real estate................                     --             --            --             --            --
Consumer loans............................                   (190)           (60)          (18)           (21)           (3)

Recoveries:
Mortgage loans:
    Single family.........................                     --             21             2             --            --
    Commercial real estate................                     --             --            --             --            --
Consumer loans............................                     26             21             3              3             1
                                                       -------------  ------------  -------------  ------------  -------------

Balances at end of year...................             $      601     $      527    $      429     $      428    $      461
                                                       -------------  ------------  -------------  ------------  -------------
                                                       -------------  ------------  -------------  ------------  -------------

Ratio of net charge-offs during the period
    to average loans outstanding during
    the period............................                  0.22%          0.04%         0.03%          0.05%         0.14%
                                                       -------------  ------------  -------------  ------------  -------------
                                                       -------------  ------------  -------------  ------------  -------------

Allowance for loan losses to
    non-performing loans, at the end of
    the period............................                116.62%        634.94%        25.06%         25.37%        12.29%
                                                       -------------  ------------  -------------  ------------  -------------
                                                       -------------  ------------  -------------  ------------  -------------

Allowance for loan losses to total loans,
    at end of period......................                  0.68%          0.91%         0.94%          1.25%         1.29%
                                                       -------------  ------------  -------------  ------------  -------------
                                                       -------------  ------------  -------------  ------------  -------------
</TABLE>


                                          15
<PAGE>

INVESTMENT ACTIVITIES

     GENERAL.  The Bank has maintained levels of investments that qualify as
liquid assets under OTS regulations.  Liquidity may increase or decrease
depending upon the availability of funds and comparative yields on investments
in relation to the return on loans.  Historically, the Bank has maintained
liquid assets at levels above the minimum requirements imposed by the OTS
regulations and at levels believed adequate to meet the requirements of normal
operations, including repayments of maturing debt and potential deposit
outflows.  Cash flow projections are regularly reviewed and updated to assure
that adequate liquidity is maintained.  For the month of December 1998, the
Bank's liquidity ratio (liquid assets as a percentage of net withdrawable
savings deposits and current borrowings) was 6.13%.

     Federally chartered thrift institutions have the authority to invest in
various types of liquid assets, including United States Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements and federal funds. Subject to various restrictions, federally
chartered thrift institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally chartered thrift institution is otherwise
authorized to make directly.

     Generally, the investment policy of the Bank is to invest funds among
various categories of investments and maturities based upon the Bank's
asset/liability management policies, investment quality and marketability,
liquidity needs and performance objectives.

     The Bank has a substantial portfolio of mortgage-backed securities.
Historically, most of the Bank's mortgage-backed securities were long-term,
fixed-rate federal agency securities.  In recent years, the Bank purchased other
types of mortgage-backed securities consistent with its asset/liability
management and balance sheet objectives.  At December 31, 1998, approximately
$13 million or 67% of the Bank's mortgage-backed securities carried adjustable
rates of interest.  The Bank's recent policy is to reduce mortgage-backed
securities balances and increase loans for yield enhancement.  The Bank also has
pooled fixed-rate loans in its existing loan portfolio to create mortgage-backed
securities.

     Under the OTS' risk-based capital requirements, GNMA mortgage-backed
securities have a zero percent risk-weighting and FNMA, FHLMC and AA- or higher
rated mortgage-backed securities have a 20% risk-weighting.  None of the
mortgage-backed securities held by the Bank had a risk-weight for regulatory
capital purposes above 20%.

     All of the Bank's mortgage-backed securities are backed by FHLMC, GNMA or
FNMA, or rated AA or higher.  Accordingly, management believes that the Bank's
mortgage-backed securities generally are resistant to credit problems.

     The Bank's holdings of mortgage-backed securities have decreased in recent
years primarily as a result of increase in the Bank's loan portfolio.  FHLMC,
GNMA and FNMA mortgage-backed securities generally carry a yield approximately
50 to 100 basis points below that of the corresponding type of residential loan
(due to the insurance or guarantee feature of such securities and the retention
of a servicing spread by the loan servicer), and the Bank's other
mortgage-backed securities also carry lower yields (because such securities tend
to have shorter actual durations than 30-year loans).  The Bank will continue to
evaluate mortgage-backed securities purchases and loan securitizations of its
existing loans in the future based on its strategic and asset/liability
objectives, market conditions and alternative investment opportunities.


                                          16
<PAGE>

     The following table sets forth the composition of the Bank's investment
portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                             December 31
                                         -------------------------------------------------------------------------------------
                                                    1998                         1997                         1996
                                         ---------------------------  ---------------------------  ---------------------------
                                           Carrying        % of         Carrying        % of         Carrying        % of
                                            value          total         value          total         value          total
                                         -------------  ------------  -------------  ------------  -------------  ------------
                                                                            (In Thousands)
<S>                                      <C>            <C>           <C>            <C>           <C>            <C>
Available-for-sale:
Mortgage-backed securities:
   GNMA adjustable rate.............     $    11,426      100.0%      $    15,032      100.0%      $    23,640       100.0%
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total available-for-sale.....     $    11,426      100.0%      $    15,032      100.0%      $    23,640       100.0%
                                         -------------  ------------  -------------  ------------  -------------  ------------
                                         -------------  ------------  -------------  ------------  -------------  ------------

Held-to-maturity:
Mortgage-backed securities:
   FNMA participation certificates..     $     2,861       38.0%      $     4,362       23.0%      $     5,355        18.4%
   FHLMC participation certificates.           3,356       44.6            12,942       68.3            21,896        75.2
   FHLMC adjustable rate............           1,311       17.4             1,643        8.7             1,862         6.4
                                         -------------  ------------  -------------  ------------  -------------  ------------

       Total held-to-maturity.......           7,528      100.0%           18,947      100.0%           29,113       100.0%
                                         -------------  ------------  -------------  ------------  -------------  ------------
                                                        ------------                 ------------                 ------------

FHLB stock..........................             790                        1,667                        1,572
                                         -------------                -------------                -------------


Other interest-earning assets:
   Interest-bearing deposits with banks        2,590                        1,530                          381
                                         -------------                -------------                -------------

       Total........................     $    22,334                  $    37,176                  $    54,706
                                         -------------                -------------                -------------
                                         -------------                -------------                -------------

Average remaining life excluding
   other-interest-earning assets and
   FHLB
   stock (does not include prepayment        14 years                     12 years                     14 years
   assumptions)
</TABLE>

     The following table sets forth the composition and contractual maturities
of the Bank's investment securities.

<TABLE>
<CAPTION>
                                                                     December 31, 1998
                              -------------------------------------------------------------------------------------------------
                                                                                                         Total investment
                                                                                                            securities
                                                                                                     --------------------------
                                Within        1 to 5        5 to 10       10 to 20       Over 20      Amortized      Market
                               one year        years         years         years          years         cost          value
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------
                                                                       (In Thousands)
<S>                           <C>           <C>           <C>           <C>            <C>           <C>           <C>
Available-for-sale:
Mortgage-backed securities:
  GNMA adjustable rate....    $        --   $        --   $        --   $     2,948    $     8,478   $    11,488   $    11,426
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------

    Total securities
      available-for-sale..    $        --   $        --   $        --   $     2,948    $     8,478   $    11,488   $    11,426
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------

Weighted average yield....             --%           --%           --%        6.19%          6.48%         6.41%
                              ------------  ------------  ------------  -------------  ------------  ------------
                              ------------  ------------  ------------  -------------  ------------  ------------
</TABLE>


                                          17
<PAGE>

<TABLE>
<CAPTION>
                                                                     December 31, 1998
                              -------------------------------------------------------------------------------------------------
                                                                                                         Total investment
                                                                                                            securities
                                                                                                     --------------------------
                                Within        1 to 5        5 to 10       10 to 20       Over 20      Amortized      Market
                               one year        years         years         years          years         cost          value
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------
                                                                       (In Thousands)
<S>                           <C>           <C>           <C>           <C>            <C>           <C>           <C>
Held-to-maturity:
Mortgage-backed securities:
  FNMA participation
   certificates...........    $       463   $     2,398   $        --   $        --    $        --   $     2,861   $     2,852
  FHLMC participation
   certificates...........            505         2,851            --            --             --         3,356         3,359
  FHLMC adjustable-rate
   certificates...........             --            --            --            --          1,311         1,311         1,297
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------

    Total securities
      held-to-maturity....    $       968   $     5,249   $        --   $        --    $     1,311   $     7,528   $     7,508
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------
                              ------------  ------------  ------------  -------------  ------------  ------------  ------------

Weighted average yield....          6.01%         5.63%          --  %         --  %         5.90%         5.73%
                              ------------  ------------  ------------  -------------  ------------  ------------
                              ------------  ------------  ------------  -------------  ------------  ------------
</TABLE>

     OTHER INVESTMENTS.  At December 31, 1998, the Bank's interest bearing
deposits with banks was $2,590,000 or 2.13% of total assets.  As of such date,
the Bank also had a $790,233 investment in FHLB stock.  At December 31, 1998,
the Bank's investment in stock of the FHLB was deficient by approximately
$44,000.  It is the Bank's general policy to purchase investment securities,
which are U.S. Government securities and federal agency obligations, and other
issues that are rated investment grade or have credit enhancements.  The Bank's
investment securities portfolio at December 31, 1998 was entirely comprised of
securities issued by the United States Government, or its agencies.

SOURCES OF FUNDS

     THE COMPANY.  The Company's primary source of funds are dividends from the
Bank, of which $98,956 were paid in 1998, borrowings from the Bank in the form
of advances (none at December 31, 1998), and outside borrowings.

     At December 31, 1998 and 1997, the Company had lines of credit totaling
$200,000 and $100,000 respectively, from other banks. The lines of credit bear
market rates of interest and borrowings, thereunder, if any, are to be used for
general Company purposes.  These borrowings mature between July 16, 1999 and
June 5, 2001.

     THE BANK.  The Bank's primary sources of funds are deposits, amortization
and prepayment of loan principal, sales or maturities of loans, investment
securities, mortgage-backed securities and short-term investments, borrowings
and funds provided from operations.

     Borrowings, predominantly from the FHLB of Dallas, may be used on a
short-term basis to compensate for seasonal reductions in deposits or deposit
inflows at less than projected levels, and may be used in the future on a
longer-term basis to support lending and investing activities.

     The Bank offers a variety of deposit accounts having a wide range of
interest rates and terms.  The Bank's deposits consist of statement savings, NOW
accounts and money market accounts and CDs.  The Bank relies primarily on
advertising, competitive pricing policies and customer service to attract and
retain these deposits. The Bank solicits deposits from its primary market area
only and does not use brokers to obtain deposits.


                                          18
<PAGE>

     The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition.  To maintain proper capital ratios and improve its net interest
margin, management decided in 1995 to be less aggressive in bidding for public
fund deposits and the decline in deposits is partially attributed to that
strategic plan as well as management's overall strategy to change the product
mix offered to its customers.  The policy was discontinued during 1997 as the
capital ratios of the Bank improved.  During 1998, the Bank increased its
deposits in order to increase loans receivable.

     Management believes that customers continue to place a value on federal
insurance on deposit accounts and that, to the extent the Bank maintains
competitive rates, it will be able to maintain its deposit and liquidity levels.
The Bank manages the pricing of its deposits in keeping with its asset/liability
management and profitability objectives.

     Based on its experience, the Bank believes that its savings accounts,
interest-bearing and non-interest-bearing checking accounts are relatively
stable sources of deposits.  However, the ability of the Bank to attract and
maintain CDs, and the rates paid on these deposits, has been and will continue
to be significantly affected by market conditions.

     The following tables set forth the deposits in the various programs offered
by the Bank at the dates indicated:

<TABLE>
<CAPTION>
                 Balance                          Balance                           Balance                          Balance
                 at          % of      Increase   at          % of      Increase    at          % of      Increase   at
                 December    deposits  (decrease) December    deposits  (decrease)  December    deposits  (decrease) December
                 31, 1998                          31, 1997                         31, 1996                          31, 1995
                 ----------  --------  ---------- ----------- --------- ----------- ----------  --------  ---------- -----------
                                                                  (In Thousands)
<S>              <C>         <C>       <C>        <C>         <C>       <C>         <C>         <C>       <C>        <C>
Transactional
  accounts       $  11,905     11.34%  $   1,920  $   9,985     10.25%  $   1,569   $   8,416      8.57%  $     453  $   7,963
Jumbo CDs            9,321      8.87       1,025      8,296      8.52         574       7,722      7.87      (5,173)    12,895
Savings
  accounts           6,338      6.03        (589)     6,927      7.11      (1,394)      8,321      8.48        (960)     9,281
Money market
  deposit
  accounts          18,754     17.85       3,043     15,711     16.13       5,200      10,511     10.71        (903)    11,414
IRA accounts         9,541      9.08          90      9,451      9.70        (360)      9,811      9.99        (512)    10,323
Other CDs           49,186     46.83       2,144     47,042     48.29      (6,341)     53,383     54.38      (5,374)    58,757
                 ----------  --------  ---------- ----------- --------- ----------- ----------  --------  ---------- -----------

                 $ 105,045    100.00%  $   7,633  $  97,412    100.00%  $    (752)  $  98,164    100.00%  $ (12,469) $ 110,633
                 ----------  --------  ---------- ----------- --------- ----------- ----------  --------  ---------- -----------
                 ----------  --------  ---------- ----------- --------- ----------- ----------  --------  ---------- -----------
</TABLE>


                                          19
<PAGE>

<TABLE>
<CAPTION>
                                      December 31, 1998               December 31, 1997                December 31, 1996
                               -------------------------------- ------------------------------- --------------------------------
                               Weighted                         Weighted                        Weighted
                               average               Percentage average               Percentageaverage               Percentage
  Minimum                      interest              of total   interest              of        interest              of total
  amount         Category        rate      Balance   deposits     rate     Balance    total       rate      Balance   deposits
                                                                                      deposits
------------ ----------------- ---------- ---------- ---------- --------- ----------- --------- ---------- ---------- ----------
                                                                        (In Thousands)
<S>          <C>               <C>        <C>        <C>        <C>       <C>         <C>       <C>        <C>        <C>
$    100     Transactional
              accounts              0.00% $   4,474      4.26%     0.00%   $  3,226       3.32%     0.00%  $   1,516      1.54%
              zero-rate
     100     Transactional
              accounts              1.11      7,431      7.08      1.12       6,759       6.94      1.63       6,900      7.03
   1,000     Money market           2.81      5,837      5.55      3.05       6,030       6.19      3.06       9,647      9.83
     100     Savings accounts       2.25      6,338      6.03      2.50       6,927       7.11      2.50       8,321      8.48
   2,500     Access money
              market                4.26     12,917     12.30      4.50       9,681       9.94      4.57         864      0.88

             Certificates of
              Deposit
   1,000     30-60 day CDs          4.80      2,576      2.45      3.04          63       0.06      3.03         175      0.18
   1,000     91 day CDs             3.94        828      0.79      3.65         599       0.61      3.71       1,110      1.13
   1,000     6 month CDs            4.83     12,591     11.99      4.66      13,864      14.23      4.60      15,407     15.70
   1,000     1 year CDs             5.01     17,667     16.82      4.88      17,127      17.59      4.82      18,164     18.51
   1,000     18 month CDs           5.19      2,322      2.21      4.95       1,607       1.65      5.05       1,662      1.69
   1,000     2 year CDs             5.09      4,255      4.05      4.96       3,656       3.75      5.54       4,574      4.66
   1,000     30 month CDs           5.08      2,799      2.66      5.19       3,068       3.15      5.81       4,265      4.34
   1,000     4 year CDs             5.74      2,104      2.00      5.69       2,371       2.43      5.59       3,045      3.10
   1,000     5 year CDs             5.81      4,044      3.86      5.70       4,687       4.81      5.77       4,981      5.07
  90,000     Jumbo CDs              5.29      9,321      8.87      5.27       8,296       8.52      5.01       7,722      7.87
     100     IRA floating rate      4.81      4,024      3.82      5.05       4,217       4.33      5.05       4,733      4.82
     100     1 year IRA             5.09      2,041      1.94      5.04       2,024       2.08      5.03       1,993      2.03
     100     2 year IRA             5.45         81      0.08      5.57          94       0.10       --           --       --
     100     3 year IRA             5.30        921      0.88      5.72       1,154       1.18      5.40       1,582      1.61
     100     5 year IRA             5.91      2,474      2.36      5.87       1,962       2.01      5.85       1,503      1.53
                               ---------- ---------- ---------- --------- ----------- --------- ---------- ---------- ----------

                                    4.21% $ 105,045    100.00%     4.24%   $ 97,412     100.00%     4.31%  $  98,164    100.00%
                               ---------- ---------- ---------- --------- ----------- --------- ---------- ---------- ----------
                               ---------- ---------- ---------- --------- ----------- --------- ---------- ---------- ----------
</TABLE>

     The following table sets forth the savings flows of the Bank during the
periods indicated.  Net deposits (withdrawals) refer to the amount of deposits
during a period less the amount of withdrawals during the same period.  Deposit
flows at savings institutions may also be influenced by external factors such as
governmental credit policies and, particularly in recent periods, depositors'
perceptions of the adequacy of federal insurance of accounts.

<TABLE>
<CAPTION>
                                                                                             Year Ended December 31
                                                                                    ------------------------------------------
                                                                                        1998          1997           1996
                                                                                    -------------  ------------  -------------
                                                                                                 (In Thousands)
<S>                                                                                 <C>            <C>           <C>
Net deposits (withdrawals) before interest credited....................             $    3,358     $   (3,783)   $  (17,178)
Interest credited......................................................                  4,275          3,031         4,709
                                                                                    -------------  ------------  -------------

          Net increase (decrease) in savings deposits..................             $    7,633     $     (752)   $  (12,469)
                                                                                    -------------  ------------  -------------
                                                                                    -------------  ------------  -------------

Percent increase (decrease)............................................                 7.84%         (0.77)%      (11.27)%
</TABLE>


                                          20

<PAGE>

     The following table shows interest rate and maturity information for the
Bank's CDs as of December 31, 1998.

<TABLE>
<CAPTION>
                                  0.00-           3.00-           5.00-            7.00-                          Percent
                                  2.99%           4.99%           6.99%            8.99%           Total         of total
                              --------------  --------------  --------------   --------------  --------------  --------------
                                                                      (In Thousands)
<S>                           <C>             <C>             <C>              <C>             <C>             <C>
Certificate accounts
maturing in quarter
ending:
-------------------------

March 31, 1999...........     $          31   $      12,778   $       7,406    $         322   $      20,537        30.18%
June 30, 1999............                --          10,087           6,314               --          16,401        24.10
September 30, 1999.......                --           1,499           8,041               --           9,540        14.02
December 31, 1999........                --           4,113           4,310               --           8,423        12.38
March 31, 2000...........                --             685           1,308              183           2,176         3.20
June 30, 2000............                --             467           1,440               50           1,957         2.88
September 30, 2000.......                --             115           1,032               --           1,147         1.69
December 31, 2000........                --             350           1,179               --           1,529         2.25
March 31, 2001...........                --              12             582               --             594         0.87
June 30, 2001............                --              71             919               --             990         1.45
September 30, 2001.......                --               6             261               --             267         0.39
December 31, 2001........                --              24             740               --             764         1.12
Thereafter...............                --              17           3,706               --           3,723         5.47
                              --------------  --------------  --------------   --------------  --------------  --------------

     Total                    $          31   $      30,224   $      37,238    $         555   $      68,048       100.00%
                              --------------  --------------  --------------   --------------  --------------  --------------
                              --------------  --------------  --------------   --------------  --------------  --------------

     Percent of total                  0.04%          44.42%          54.72%            0.82%         100.00%
                              --------------  --------------  --------------   --------------  --------------
                              --------------  --------------  --------------   --------------  --------------
</TABLE>

     The following table indicates the amount of the Bank's CDs by size or from
public entities, by time remaining until maturity as of December 31, 1998.

<TABLE>
<CAPTION>
                                                                         Maturity
                                              ---------------------------------------------------------------
                                                                  Over             Over
                                                3 months         3 to 6           6 to 12          Over
                                                 or less         months           months         12 months         Total
                                              --------------  --------------   --------------  --------------  --------------

                                                                              (In Thousands)
<S>                                           <C>             <C>              <C>             <C>             <C>
CDs of $100,000 or less...............        $      17,782   $      14,488    $      17,416   $      11,948   $      61,634

CDs over $100,000.....................                  998             940              546           1,199           3,683

Public funds(1).........................              1,758             973               --              --           2,731
                                              --------------  --------------   --------------  --------------  --------------

Total CDs and public funds............        $      20,538   $      16,401    $      17,962   $      13,147   $      68,048
                                              --------------  --------------   --------------  --------------  --------------
                                              --------------  --------------   --------------  --------------  --------------
</TABLE>

----------------
(1)  Certificates of deposit from government and other public entities.


                                          21
<PAGE>

     From time to time, the Bank has had greater amounts of public funds.  The
amount of public funds held by the Bank at December 31, 1998 and 1997 was
$3,294,961 and $2,129,114, respectively.  The Bank is required to pledge
collateral against such funds equal to 100% of such funds.

     BORROWINGS.  Although deposits are the Bank's primary source of funds, the
Bank's policy has been to utilize borrowings when there is a net outflow of
deposits, when advances are a less costly source of funds or when funds from
advances can be invested at a positive spread.  In addition, the Bank has relied
upon selected borrowings for short-term liquidity needs.

     The Bank may obtain advances from the FHLB of Dallas upon the security of
its capital stock of the FHLB of Dallas and certain of its mortgage loans,
investment securities and mortgage-backed securities.  Such advances may be made
pursuant to several different credit programs, each of which has its own
interest rate and range of maturities.  At December 31, 1998, the Bank had
$5,750,000 FHLB borrowings outstanding, which allowed the Bank to increase the
amount of its loans receivable.

     During fiscal 1998, the Bank utilized advances from FHLB of Dallas to cover
funding of loans.

     The following table sets forth maximum balance, average balance, and
average rate paid on FHLB advances for the period indicated.


<TABLE>
<CAPTION>
                                                                                             Year ended December 31
                                                                                    ------------------------------------------
                                                                                        1998          1997           1996
                                                                                    -------------  ------------  -------------
                                                                                                 (In Thousands)
<S>                                                                                 <C>            <C>           <C>
Maximum amount of borrowings outstanding...............................             $    5,750     $    4,100    $    3,900

Approximate average borrowings outstanding.............................             $    4,786     $      231    $      459

Approximate weighted average interest rate paid........................                  5.49%          5.64%         5.38%
</TABLE>

SUBSIDIARY OF THE BANK

     In 1974, the Bank incorporated First Equity Development Corporation
("FEDCO"), a New Mexico corporation, as a wholly-owned subsidiary of the Bank.
The directors and officers of FEDCO also serve as officers of the Bank.  Prior
to 1991, FEDCO's primary business was real estate acquisition, development and
construction, and investment in the Bank's former data processing service
bureau.  FEDCO had $967 and $913 in cash at December 31, 1998 and 1997,
respectively, and no other assets or liabilities and is currently an inactive
corporation.  Thrift institutions are permitted to invest an amount equal to 2%
of their assets, through a subsidiary, with an additional investment of 1% of
assets where such investment serves primarily community, inner-city and
community development purposes.


REGULATION

     GENERAL.  The Bank is subject to extensive regulation, examination and
supervision by the OTS, as its chartering agency, and the FDIC, as its deposit
insurer.  The Bank's deposit accounts are insured up to applicable limits by the
SAIF administered by the FDIC, and it is a member of the FHLB of Dallas.  The
Bank must file reports with the OTS and the FDIC concerning its activities and
financial condition, and it must obtain regulatory approvals prior to entering
into certain transactions, such as mergers with, or acquisitions of, other
depository institutions.  The OTS and the FDIC conduct periodic examinations to
assess the Bank's compliance with various regulatory requirements.  Such
regulation and supervision establish a comprehensive framework of activities in
which an institution may engage and are intended primarily for the protection of
the insurance fund and depositors.  The Company, as a unitary thrift holding
company, is required to file certain reports with, and otherwise comply with,
the rules and regulations of the OTS and of the Securities and Exchange
Commission ("Commission") under the federal securities laws.


                                          22
<PAGE>

     The OTS and the FDIC have significant discretion in connection with their
supervisory and enforcement activities and examination policies, including
policies with respect to the classification of assets and the establishment of
adequate loan loss reserves for regulatory purposes.  Any change in such
regulation and policies, whether by the OTS, the FDIC or action of the United
States Congress, could have a material adverse impact on the Company, the Bank
and the operations of both.

     The Bank was subject to an Amended Prompt Corrective Action Directive dated
August 1994 and a Supervisory Agreement dated June 1996 mainly directed to the
improvement of capital ratios, plan and asset/liability management issues.
These agreements were terminated by the OTS in November 1997.

     REGULATION OF THE COMPANY.  The Company, as a unitary thrift holding
company, is a savings and loan holding company within the meaning of HOLA.  As
such, the Company is required to register with the OTS and is subject to OTS
regulations, examinations, supervision and reporting requirements.  In addition,
the OTS has enforcement authority over the Company and its non-thrift
subsidiaries, if any.  Among other things, this authority permits the OTS to
restrict or prohibit activities that are determined to be a serious risk to the
financial safety, soundness or stability of a subsidiary savings association.

     Except under limited circumstances, thrift holding companies are prohibited
from acquiring, without prior approval of the OTS, control of any other savings
institutions or thrift holding company or substantially all the assets thereof
or more than five percent of the voting shares of a thrift institution or
holding company thereof which is not a subsidiary.  In evaluating an application
by a holding company to acquire a thrift association, the OTS must consider the
financial and managerial resources and future prospects of the company and
thrift association involved, the effect of the acquisition on the risk to the
insurance funds, the convenience and needs of the community and competitive
factors.  Acquisitions which result in a thrift holding company controlling
thrift associations in more than one state are generally prohibited except in
supervisory transactions involving failing savings associations or based on
specific state authorization to permit such acquisitions.

     Federal law also requires OTS approval prior to any change of control of
the Company or the Bank. Under OTS regulations, "control" is presumed to exist
if an individual or company acquires more than twenty-five percent of any class
of voting stock of a thrift association or holding company.  Control is also
presumed to exist, subject to being rebutted, if a person acquires more than ten
percent of any class of voting stock (or more than twenty-five percent of any
class of non-voting stock) and is subject to any of several control factors,
including, among other matters, the relative ownership position of a person, the
existence of control agreements and other factors.

     As a unitary thrift holding company, the Company generally will not be
restricted under existing laws to the types of business activities in which it
may engage, provided that the Bank continues to satisfy the QTL test. Upon any
non-supervisory acquisition by the Company of another thrift or savings bank
that meets the QTL test and is deemed to be a savings association by the OTS and
that will be held as a separate subsidiary, the Company would become a multiple
thrift holding company and would be subject to limitations on the types of
business activities in which it could engage.  HOLA generally limits the
activities of a multiple thrift holding company and its non-insured association
subsidiaries primarily to activities permissible for bank holding companies
under the Bank Holding Company Act, subject to the prior approval of the OTS,
and to other activities authorized by OTS regulation.

     A thrift association or a thrift holding company is required to give 30
days prior written notice to the OTS of any proposed appointment of a director
or senior executive officer if the institution has been chartered less than two
years, has undergone a change in control within the preceding two years, or is
not in compliance with the minimum capital requirements or otherwise is in a
troubled condition.  The OTS then has the opportunity to disapprove any such
appointment.

     Transactions between the Bank and the Company and its other subsidiaries
are subject to various conditions and limitations.  Well run, healthy thrift
institutions that satisfy certain criteria would be permitted to file with the
OTS schedules of proposed capital distributions over a specified period not to
exceed 12 months.


                                          23
<PAGE>

The Bank being a wholly owned subsidiary of a thrift holding company must file a
notice with the OTS of anticipated distributions of capital.

     FEDERAL SECURITIES LAW.  The stock of the Company is registered with the
Commission under the Exchange Act ("Exchange Act").  The Company is subject to
the information, proxy solicitation, insider trading restrictions and other
requirements of the Commission under the Exchange Act.

     Company stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of the Bank may not be resold without
registration or unless sold in accordance with certain resale restrictions.  If
the Company meets specified current public information requirements, each
affiliate of the Company is able to sell in the public market, without
registration, a limited number of shares in any three-month period.

     INSURANCE OF ACCOUNTS AND REGULATIONS BY THE FDIC.  The Bank is a member of
the SAIF, which is administered by the FDIC.  Deposits are insured up to
applicable limits by the FDIC and such insurance is backed by the full faith and
credit of the United States Government.  As insurer, the FDIC imposes deposit
insurance premiums and is authorized to conduct examinations of and to require
reporting by FDIC-insured institutions.  It also may prohibit any FDIC-insured
institution from engaging in any activity the FDIC determines by regulation or
order to pose a serious risk to the FDIC.  The FDIC also has the authority to
initiate enforcement actions against thrift associations, after giving the OTS
an opportunity to take such action, and may terminate the deposit insurance if
it determines that the institution has engaged or is engaging in unsafe or
unsound practices, or is in an unsafe or unsound condition.

     The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums based upon their level of
capital and supervisory evaluation.  Under the system, institutions classified
as well capitalized (i.e., a core capital ratio of at least 5%, a ratio of Tier
1 or core capital to risk-weighted assets of at least 6% and a risk-based
capital ratio of at least 10%) and considered healthy pay the lowest premium,
while institutions that are less than adequately capitalized (i.e., core or Tier
1 risk-based capital ratios of less than 4% or a risk-based capital ratio of
less than 8%) and considered of substantial supervisory concern pay the highest
premium.  Risk classification of all insured institutions will be made by the
FDIC for each semi-annual assessment period.

     Legislation to recapitalize the SAIF was enacted in September 1996.  The
legislation provided for a one-time assessment imposed on all deposits assessed
at the SAIF rates, as of March 31, 1995, in order to recapitalize the SAIF.  It
also provided for the merger of the BIF and the SAIF on January 1, 1999 if no
savings associations then exist.  The special assessment rate was established at
 .657% of deposits by the FDIC and the resulting assessment on the Bank of
$762,000 was paid in November 1996.  This special assessment significantly
increased noninterest expense and adversely affected the Bank's results of
operations for the year ended December 31, 1996.  As a result of the special
assessment, the Bank's deposit insurance premiums were reduced in 1997 and again
in 1998 based upon its current risk classification and the new assessment
schedule for SAIF insured institutions.

     Prior to the enactment of the legislation, a portion of the SAIF assessment
imposed on savings associations was used to repay obligations issued by a
federally chartered corporation to provide financing (FICO) for resolving the
thrift crisis in the 1980's.  Although the FDIC has proposed that the SAIF
assessment be equalized with the BIF assessment schedule, effective October 1,
1996, SAIF-insured institutions will continue to be subject to a FICO assessment
as a result of this continuing obligation.  Although the legislation also now
requires assessments to be made on BIF-assessable deposits for this purpose,
effective January 1, 1997, that assessment will be limited to 20% of the rate
imposed on SAIF assessable deposits until the earlier of December 31, 1999 or
when no savings association continues to exist, thereby imposing a greater
burden on SAIF member institutions such as the Bank.  Thereafter, however,
assessments on BIF-member institutions will be made on the same basis as
SAIF-member institutions.  The rates to be established by the FDIC to implement
this requirement


                                          24
<PAGE>

for all FDIC-insured institutions are uncertain at this time, but are
anticipated to be about a 6.3 basis points assessment on SAIF deposits and 1.26
basis points on BIF deposits until BIF insured institutions participate fully in
the assessment.

     REGULATORY CAPITAL REQUIREMENTS.  Federally insured thrift associations,
such as the Bank, are required to maintain a minimum level of regulatory
capital.  The OTS has established capital standards, including a tangible
capital requirement, a leverage ratio (or core capital) requirement and a
risk-based capital requirement applicable to such thrift associations.  These
capital requirements must be generally as stringent as the comparable capital
requirements for national banks.  The OTS is also authorized to impose capital
requirements in excess of these standards on individual associations on a
case-by-case basis.

     The capital regulations require tangible capital of at least 1.5% of
adjusted total assets (as defined by regulation).  Tangible capital generally
includes common stockholders' equity and retained income, and certain
noncumulative perpetual preferred stock and related income.  Intangible assets
including disallowed servicing assets and disallowed deferred tax assets are
deducted from capital to calculate adjusted tangible capital.

     The OTS regulations establish special capitalization requirements for
thrift associations that own subsidiaries.  Under these regulations certain
subsidiaries are consolidated for capital purposes and others are excluded from
assets and capital.  In determining compliance with the capital requirements,
all subsidiaries engaged solely in activities permissible for national banks or
engaged in certain other activities solely as agent for its customers are
"includable" subsidiaries that are consolidated for capital purposes in
proportion to the association's level of ownership, including the assets of
includable subsidiaries in which the association has a minority interest that is
not consolidated for generally accepted accounting principles ("GAAP") purposes.
For excludable subsidiaries, the debt and equity investments in such
subsidiaries are deducted from assets and capital, with a five-year transition
period beginning on July 1, 1990, for investments made before April 12, 1989. At
December 31, 1998, the Bank had tangible capital of $9,377,840 or 7.73% of
adjusted total assets, which was $7,558,758 above the minimum requirement of
1.5% of adjusted total assets in effect on that date.

     The capital standards also require core capital equal to at least 3% of
adjusted total assets (as defined by regulation).  Core capital generally
consists of tangible capital plus certain intangible assets, including a limited
amount of purchased credit card relationships.  A thrift association must
maintain a core capital ratio of at least 4% to be considered adequately
capitalized unless its supervisory condition is such to allow it to maintain a
3% ratio.  At December 31, 1998, the Bank had core capital equal to $9,377,840
or 7.73% of adjusted total assets, which was $4,526,955 above the minimum
leverage ratio requirement of 4% as in effect on that date.

     The OTS risk-based requirement requires thrift associations to have total
capital of at least 8% of risk-weighted assets.  Total capital consists of core
capital, as defined above, and supplementary capital. Supplementary capital
consists of certain permanent and maturing capital instruments that do not
qualify as core capital and general valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based requirement only to the extent of core capital.  The
OTS is also authorized to require a thrift association to maintain an additional
amount of total capital to account for concentration of credit risk and the risk
of non-traditional activities.  At December 31, 1998, the Bank had no capital
instruments that qualify as supplementary capital.  In addition, general loss
reserves at that date were less than 1.25% of risk-weighted assets.

     Certain exclusions from capital and assets are required to be made for the
purpose of calculating total capital.  Such exclusions consist of equity
investment (as defined by regulation) and that portion of land loans and
nonresidential construction loans in excess of an 80% loan-to-value ratio and
reciprocal holdings of qualifying capital instruments.  The Bank had no such
exclusions from capital and assets at December 31, 1998.

     In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, will be multiplied by a risk weight, ranging
from 0% to 100%, based on the risk inherent in the type of asset.  For example,
the OTS has assigned a risk weight of 50% for prudently underwritten permanent
one-to-four family


                                          25
<PAGE>

first lien mortgage loans not more than 90 days delinquent and having a loan to
value ratio of not more than 80% at origination unless insured to such ratio by
an insurer approved by the FNMA or FHLMC.

     At December 31, 1998, the Bank had risk-based capital of $9,978,824 or
14.70% of risk-weighted assets. This amount was $4,548,184 above the 8%
requirement in effect on that date.

     The OTS has adopted a rule that requires every thrift association with more
than normal interest rate risk to deduct from its total capital, for purposes of
determining compliance with such requirement, an amount equal to 50% of its
interest rate risk exposure multiplied by the present value of its assets.  This
exposure is a measure of the potential decline in the net portfolio value of a
thrift association, greater than 2% of the present value of its assets, based
upon a hypothetical 200 basis point increase or decrease in interest rates
(whichever results in a greater decline).  Net portfolio value is the present
value of expected cash flows from assets, liabilities and off-balance sheet
contracts.  The rule provides for a two quarter lag between calculating interest
rate risk and recognizing any deduction from capital.  Any thrift association
with less than $300 million in assets and a total capital ratio in excess of 12%
is exempt from this requirement unless the OTS determines otherwise.  Currently,
the Bank is exempt from this rule.

     The OTS and the FDIC are authorized and, under certain circumstances
required, to take certain actions against thrift associations that fail to meet
their capital requirements.  The OTS is generally required to take action to
restrict the activities of an "undercapitalized association" (generally defined
to be one with less than either a 4% core capital ratio, a 4% Tier 1
risked-based capital ratio or an 8% risk-based capital ratio).  Any such
association must submit a capital restoration plan and until such plan is
approved by the OTS may not increase its assets, acquire another institution,
establish a branch or engage in any new activities, and generally may not make
capital distributions.  The OTS is authorized to impose the additional
restrictions, discussed below, that are applicable to significantly
undercapitalized associations.

     As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized association must agree that is will enter into a
limited capital maintenance guarantee with respect to the institution's
achievement of its capital requirements.

     Any thrift association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less than 3% or a risk-based capital ratio of less than 6%) must be made
subject to one or more of additional specified actions and operating
restrictions.  These actions and restrictions include requiring the issuance of
additional voting securities; limitations on asset growth; mandated asset
reduction; changes in senior management; divestiture, merger or acquisition of
the association; restrictions on executive compensation; and any other action
the OTS deems appropriate.  An association that becomes "critically
undercapitalized" (i.e., a tangible capital ratio of 2% or less) is subject to
further mandatory restrictions on its activities in addition to those applicable
to significantly undercapitalized associations.  In addition, the OTS must
appoint a receiver (or conservator with the concurrence of the FDIC) for a
thrift association, with certain limited exceptions, within 90 days after it
becomes critically undercapitalized.

     Any undercapitalized association is also subject to other possible
enforcement actions by the OTS or the FDIC.  Such actions could include a
capital directive, a cease-and-desist order, civil money penalties, the
establishment of restrictions on all aspects of the Bank's operations or the
appointment of a receiver or conservator or a forced merger into another
institution.

     If the OTS determines that an association is in an unsafe or unsound
condition or is engaged in an unsafe or unsound practice, it is authorized to
reclassify a well-capitalized association as an adequately capitalized
association and if the association is adequately capitalized, to impose the
restrictions applicable to an undercapitalized association.  If the association
is undercapitalized, the OTS is authorized to impose the restrictions applicable
to a significantly undercapitalized association.

     The imposition by the OTS or the FDIC of any of these measures on the Bank
may have a substantial adverse effect on the Company's operations and
profitability.  The Company's shareholders do not have


                                          26
<PAGE>

preemptive rights, and therefore, if the Bank is directed by the OTS or the FDIC
to issue additional shares of Common Stock, such issuance may result in the
dilution in the percentage of ownership of the Company.

     LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS.  OTS regulations
impose various restrictions on thrift associations with respect to their ability
to make distributions of capital, which include dividends, stock redemptions or
repurchases, cash-out mergers and other transactions charged to the capital
account.  OTS regulations also prohibit a thrift association from declaring or
paying any dividends or from repurchasing any of its stock if, as a result, the
regulatory capital of the association would be reduced below the amount required
to be maintained for the liquidation account established in connection with its
mutual to stock conversion.

     Generally, thrift associations, such as the Bank, that before and after the
proposed distribution meet their capital requirements, may make capital
distributions during any calendar year equal to the greater of 100% of net
income for the year-to-date plus 50% of the amount by which the lesser of the
association's tangible, core or risk-based capital exceeds its capital
requirement for such capital component, as measured at the beginning of the
calendar year, or requirement for such capital component, as measured at the
beginning of the calendar year, or 75% of its net income for the most recent
four quarter period.  However, an association deemed to be in need of more than
normal supervision by the OTS may have its dividend authority restricted by the
OTS.  The Bank may pay dividends in accordance with this general authority.

     Thrift associations proposing to make any capital distributions need only
submit written notice to the OTS 30 days prior to such distribution.  Thrift
associations that do not, or would not meet their current minimum capital
requirements following a proposed capital distribution, however, must obtain OTS
approval prior to making such distribution.  The OTS may object to the
distribution during that 30-day period notice based on safety and soundness
concerns.

     LIQUIDITY.  All thrift associations, including the Bank, are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less.  This liquid asset ratio requirement may
vary from time to time (between 4% and 10%) depending upon economic conditions
and savings flows of all thrift associations.  At the present time, the minimum
liquid asset ratio is 4%.

     In addition, short-term liquid assets (i.e., cash, certain time deposits,
etc.) currently must constitute 1% of the Bank's average daily balance of net
withdrawable deposit accounts and current borrowings.  Penalties may be imposed
upon associations for violations of either liquid asset ratio requirement.  At
December 31, 1998, the Bank was in compliance with both requirements, with an
overall liquid asset ratio of 6.13%.

     ACCOUNTING.  An OTS policy statement applicable to all savings associations
clarifies and re-emphasizes that the investment activities of a thrift
association must be in compliance with approved and documented investment
policies and strategies, and must be accounted for in accordance with GAAP.
Under the policy statement, management must support its classification of and
accounting for loans and securities (i.e., whether held for investment, sale or
trading) with appropriate documentation.  The Bank is in compliance with this
policy statement.

     The OTS had adopted an amendment to its accounting regulations to require
that transactions be reported in a manner that best reflects their underlying
economic substance and inherent risk and that financial reports must incorporate
any other accounting regulations or orders prescribed by the OTS.  Such
regulations may result in reporting transactions in a manner that is more
stringent than may be required by GAAP.

     QUALIFIED THRIFT LENDER TEST.  All thrift associations, including the Bank,
are required to meet a QTL test to avoid certain restrictions on their
operations.  This test requires a savings association to have at least 65% of
its portfolio assets (as defined by regulation) in qualified thrift investments
on a monthly average for nine out of every 12 months on a rolling basis.  As an
alternative, the thrift association may maintain 60% of its assets in those
assets specified in Section 7701(a)(19) of the Internal Revenue Code.  Under
either test, such assets


                                          27
<PAGE>

primarily consist of residential housing related loans and investments.  At
December 31, 1998, the Bank met the QTL test and has always met the test since
its inception.

     Any thrift association that fails to meet the QTL test must convert to a
national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL.  Requalification as a QTL is restricted to one time only.  If an
association does not requalify and converts to a national bank charter, it must
remain SAIF-insured until the FDIC permits it to transfer to the BIF.  If an
association that fails the test has not yet requalified and has not converted to
a national bank, its new investments and activities are limited to those
permissible for both a thrift association and a national bank, and it is limited
to national bank branching rights in its home state.  In addition, the
association is immediately ineligible to receive any new FHLB borrowings and is
subject to national bank limits for payment of dividends.  If such association
has not requalified or converted to a national bank within three years after the
failure, it must divest of all investments and cease all activities not
permissible for a national bank.  In addition, it must repay promptly any
outstanding FHLB borrowings, which may result in prepayment penalties.  If any
association that fails the QTL test is controlled by a holding company, then
within one year after the failure, the holding company must register as a bank
holding company and become subject to all restrictions on bank holding
companies.

     COMMUNITY REINVESTMENT ACT.  Under the CRA, every FDIC insured institution
has a continuing and affirmative obligation consistent with safe and sound
banking practices to help meet the credit needs of its entire community,
including low and moderate-income neighborhoods.  The CRA does not establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and services
that it believes are best suited to its particular community, consistent with
the CRA.  The CRA requires the OTS, in connection with the examination of the
Bank, to assess the institution's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications, such as a merger or the establishment of a branch, by the Bank.
An unsatisfactory rating may be used as the basis for the denial of an
application by the OTS.  The most recent CRA examination as of September 30,
1996 classified the Bank as satisfactory.

     The federal banking agencies, including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's compliance
with the CRA.  Due to the heightened attention being given to the CRA in the
past few years, the Bank may be required to devote additional funds for
investment and lending in its local community.

     TRANSACTIONS WITH AFFILIATES.  Generally, transactions between a thrift
association or its subsidiaries and its affiliates are required to be on terms
as favorable to the association as transactions with non-affiliates.  In
addition, certain of these transactions, such as loans to an affiliate, are
restricted to a percentage of the association's capital.  Affiliates of the Bank
include the Company and any company which is under common control with the Bank.
In addition, a thrift association may not lend to any affiliate engaged in
activities not permissible for a bank holding company or acquire the securities
of most affiliates.  The OTS has the discretion to treat subsidiaries of thrift
associations as affiliates on a case-by-case basis.

     Certain transactions with directors, officers of controlling persons are
also subject to conflict of interest regulations enforced by the OTS.  These
conflict of interest regulations and other statutes also impose restrictions on
loans to such persons and their related interests.  Among other things, such
loans must be made on terms substantially the same as for loans to unaffiliated
individuals.  At December 31, 1998, loans to directors, executive officers, and
major stockholders were $2,272,616.

     FEDERAL HOME LOAN BANK SYSTEM.  The Bank is a member of the FHLB of Dallas,
which is one of 12 regional FHLBs that administer the home financing credit
function of thrift associations.  Each FHLB serves as a reserve or central bank
for its members within its assigned region.  It is funded primarily from
proceeds derived from the sale of consolidated obligations of the FHLB System.
It makes loans to members (i.e., advances) in accordance with policies and
procedures established by the board of directors of the FHLB.  These policies
and procedures are subject to the regulation and oversight of the Federal
Housing Finance Board.  All advances from


                                          28
<PAGE>

the FHLB are required to be fully secured by sufficient collateral as determined
by the FHLB.  In addition, all long-term advances are required to provide funds
for residential home financing.

     Under federal law, the FHLBs are required to provide funds for the
resolution of troubled thrift associations and to contribute to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future.  These contributions
could also have an adverse effect on the value of FHLB stock in the future.  A
reduction in value of the Bank's FHLB stock may result in a corresponding
reduction in the Bank's capital.

     As a member, the Bank is required to purchase and maintain stock in the
FHLB of Dallas.  At December 31, 1998, the Bank had $790,233 in FHLB stock,
which was deficient by approximately $44,000.  The Bank has received dividends
on its FHLB stock, which have averaged 5.85% over the past five calendar years
and were 5.96% for calendar year 1998.

     For the year ended December 31, 1998, stock and cash dividends paid by the
FHLB of Dallas to the Bank totaled $58,777 which constitutes a $36,513 decrease
from the amount of dividends received in fiscal year 1997. The $11,192 dividend
received for the quarter ended December 1998 reflects an annualized rate of
5.75%.

     REGULATORY ENVIRONMENT FOR 1999.  It is anticipated that in 1999 the
regulator agendas will continue to focus on three major areas:  regulatory
compliance, financial management, and cost control.

     The major issues to be reviewed in each of these areas are as follows:

     -    REGULATORY COMPLIANCE.  Regulatory compliance should focus on four
          main areas:

          --   Risk management in all areas of banking with specific attention
               to compliance and fair lending.

          --   Nondeposit investment products sold only by broker-dealers or
               properly licensed registered representatives and proper
               disclosures or no FDIC insurance of these products.

          --   Enhancement of individual financial privacy as it relates to new
               home banking, interest banking and smart card usage products.

          --   Expansion of goals geared to establish know-your-customer policy
               to prevent fraud, protect safety and soundness of the
               institution, and protect name and reputation of the Bank.

     -    FINANCIAL MANAGEMENT.  Regulations governing investment securities are
          scheduled for review by the regulatory agencies.  Regulators also may
          finalize proposals for measuring interest rate risk for risk-based
          capital purposes.  The Financial Accounting Standards Board ("FASB")
          is likely to take further action in the area of market valuation, as
          well as in the areas of financial statement disclosures, and
          accounting for derivatives and hedging activities.  Banks' use of
          simple gap models for asset/liability management may be reviewed again
          by regulators.  Falling rates may adversely affect any concentrated
          investment by banks in mortgage-backed securities.

     -    COST CONTROL.  Reengineering of retail delivery systems, focus on the
          customer, customer and product profitability models, and a new
          emphasis on the internal audit function all should get attention
          during 1999.

     In addition, the Federal Reserve and the Office of Comptroller of the
Currency issued risk management guidelines, which they began using in 1996 as
part of a new rating system for the banks they examine.  The FDIC informally has
been following a similar approach of managing bank risk for some time now.


                                          29
<PAGE>

     The federal banking agencies' management guidelines measure a bank's
control of six different types of risks:


     -    Credit risk                   -    Operational risk
     -    Market risk                   -    Legal risk
     -    Liquidity risk                -    Reputation risk


According to the guidelines, effective control of each of these must include:

-    Active board and senior management oversight
-    Adequate policies, procedures, and limits
-    Adequate risk measurement, monitoring, and management information systems
-    Comprehensive internal controls

     This approach for examiners incorporates all-inclusive measurement
guidelines of the risks associated with managing a bank, and they represent a
major shift in regulatory risk assessment:  from activities (i.e., commercial
loans, investing in mortgage-backed securities, etc.) to risk exposures.  This
shift might result in many changes in examination procedures and bank evaluation
standards.

     It is also anticipated that much legislative time will be devoted to the
issues of changing the Glass-Stegall Act and Bank Holding Company Act to permit
common ownership of commercial banks, securities firms and insurance companies.
These broad financial affiliations among financial service providers are
currently being debated under HR10 in the House Banking Committee.

     The following items of interest have recently appeared on the regulatory
agenda or have recently been adopted:

<TABLE>
<CAPTION>
       Agency                                       Action                                              Status
    --------------  -----------------------------------------------------------------------   ----------------------------
<S>                 <C>                                                                       <C>
    Recent Actions

    FRB             Lowered to 3.0 minimum leverage ratio Tier 1 capital                      Effective June 30, 1998
                    requirement for top-rated holding companies

    FDIC            Approved a six-month grace period for restructuring accounts following    Effective July 1, 1998
                    death of a depositor.

    FFIEC           Guidelines for bank compliance with consumer disclosure requirements for  Issued July 16, 1998
                    on-line services and advertising.

    FDIC            Expedited processing of applications (establishing branches, relocating   Effective Oct. 1, 1998
                    offices, etc.) for well-managed, well-capitalized banks.

    DOT             New money laundering rules to simplify exempting bank customers,          Effective Oct. 20 with
                    reducing CTR filings, and emphasizing use of Suspicious Activity          transition rules.
                    Reports (SARs).

    FASB            Adopted long-considered reporting rules for reporting market value of     Effective for fiscal years
                    derivatives on financial statements.                                      beginning after June 15, 1999
</TABLE>

FEDERAL AND STATE TAXATION

     FEDERAL TAXATION.  Prior to the enactment of recent legislation (discussed
below), thrift associations such as the Bank that met certain definitional tests
relating to the composition of assets and other conditions prescribed by the
Internal Revenue Code of 1986, as amended (the "Code"), had been permitted to
establish reserves for bad debts and to made annual additions thereto which
could, within specified formula limits, be


                                          30
<PAGE>

taken as a deduction in computing taxable income for federal income tax
purposes.  The amount of the bad debt reserve deduction for "non-qualifying
loans" was computed under the experience method.  The amount of the bad debt
reserve deduction for "qualifying real property loans" (generally loans secured
by improved real estate) is computed under the experience method.

     In August 1996, legislation was enacted that repeals the percentage of
taxable income method of accounting used by many thrifts to calculate their bad
debt reserve for federal income tax purposes.  As a result, small thrifts must
recapture that portion of the reserve that exceeds the amount that could have
been taken under the experience method for post-1987 tax years.  The legislation
also requires thrifts to account for bad debts for federal income tax purposes
on the same basis as commercial banks for tax years beginning after December 31,
1995.  The recapture will occur over a six-year period, the commencement of
which will be delayed until the first taxable year beginning after December 31,
1998, provided the institution meets certain residential lending requirements.
The legislation did not have a material impact on the Bank.

     In addition, to regular income tax, corporations, including thrift
institutions such as the Bank, generally are subject to a minimum tax.  An
alternative minimum tax is imposed at a minimum tax rate of 20% on alternative
minimum taxable income, which is the sum of a corporation's regular taxable
income (with certain adjustments) and tax preference items, less any available
exemption.  The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income.  For taxable years beginning
after 1986 and before 1996, corporations, including thrift associations such as
the Bank, are also subject to an environmental tax equal to 0.12% of the excess
of alternative minimum taxable income for the taxable year (determined without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.

     To the extent earnings appropriated to a thrift institution's bad debt
reserves for "qualifying real property loans" and deducted for federal income
tax purposes exceed the allowable amount of such reserves computed under the
experience method and to the extent of the thrift's supplemental reserves for
losses on loans ("Excess"), such Excess may not, without adverse tax
consequences, be utilized for the payment of cash dividends or other
distributions to a stockholder (including distributions on redemption,
dissolution or liquidation) or for any other purpose (except to absorb bad debt
losses).  As of December 31, 1997, the Bank had no Excess.  Under present law
should the Bank cease to be a thrift institution, the Company would be required
to recapture the Bank's bad debt reserves in its Excess.

     At December 31, 1998, the Company had remaining net operating loss ("NOL")
carryforwards of approximately $5,074,000 for federal income tax purposes which
expire in varying amounts through 2010.  The Company also has a capital loss
carryforward of $497,000 for tax purposes which will expire in 2002.  In
addition, the alternative minimum tax ("AMT") NOL carryforward and AMT credit
carryforward were approximately $5,906,000 and $101,000, respectively, which
expire in varying amounts through 2010.  Investment tax credit carryforwards of
approximately $38,000 expire in varying amounts through 2005.

     Section 382 of the Internal Revenue Code ("Code") provides that the
aforementioned tax NOL carryforwards would be subjected to an annual limitation
should there be a change of over 50% in the stock ownership of the Company
during any three year testing period.  Due to the fact that the Company has a
tax NOL carryforward, it is required to report changes in ownership of 5% or
greater of stockholders annually to the Internal Revenue Service.  The statute
and applicable Treasury regulations are extremely complex.  The Company believes
that no change of ownership as defined in applicable Section 382 regulations
occurred through the three-year testing period ended December 31, 1997.
However, if such a change in ownership occurs, the annual use of the tax NOL
carryforwards would be subject to an annual limitation.


                                          31
<PAGE>

     The Company files consolidated federal income tax returns with the Bank and
its subsidiary on a fiscal year basis using the accrual method of accounting.
The Bank's federal income tax returns have not been examined by the Internal
Revenue Service since 1990.  With respect to years examined by the IRS, either
all deficiencies have been satisfied or sufficient reserves have been
established to satisfy asserted deficiencies.  In the opinion of management, any
examination of still open returns (including returns of subsidiaries and
predecessors of, or entities merged into, the Bank) would not result in a
deficiency which could have a material adverse effect on the financial condition
or results of operations of the Company and its consolidated subsidiary.

     STATE TAXATION.  As a Delaware holding company, the Company is exempted
from Delaware corporate income tax but is required to file an annual report with
and pay an annual fee to the State of Delaware.  The Bank is also subject to an
annual franchise tax imposed by the State of Delaware.

     The State of New Mexico has a corporate tax which subjects the Bank's New
Mexico taxable income to tax rates ranging from 4.8% to 7.65%.  New Mexico
taxable income is computed by applying certain modifications to federal taxable
income.  The principal difference between state and federal taxable income is
that interest earned on U.S. government obligations is not taxable for state
purposes.

     The Bank's income tax returns have not been audited by state authorities
during the past five years.


NEW ACCOUNTING STANDARDS

     The Financial Accounting Standards Board has issued SFAS No. 130, Reporting
Comprehensive Income, which is effective for the fiscal years beginning after
December 15, 1997.  This statement establishes standards for reporting and
display of comprehensive income and its components, revenue, expenses, gains and
losses, in a full set of general purpose financial statements.  This statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.  The adoption of this statement during 1998 did not have a
significant impact on the Company's financial statements during that year or in
years prior to 1998.

     The Financial Accounting Standards Board recently adopted Statement No.
131, Disclosures about Segments of an Enterprise and Related Information.
Statement No. 131, which became effective for periods beginning after
December 15, 1997, requires that business enterprises report information about
operating segments in annual financial statements.  It also establishes
standards for related disclosures about products and services, geographic areas
and major customers.  The adoption of the statement in management's opinion did
not result in any significant disclosures in addition to those already contained
in the Company's financial statements.



COMPETITION

     The Bank's primary service area, which presently represents the principal
operating activities of the Company, includes the New Mexico counties of
Bernalillo, Cibola, Curry, De Baca, Los Alamos, Roosevelt, Sandoval, Santa Fe,
Torrance, Valencia, and the Texas counties of Parmer and Bailey.  The Bank
attracts all of its deposits and loans through its branch offices and loan
production office, primarily from the communities in which those branch offices
are located; therefore, competition for those deposits is principally from other
thrift institutions and commercial banks located in the same communities as well
as brokerage firms and insurance companies.


                                          32
<PAGE>

EMPLOYEES

     As of December 31, 1998, the Bank had 46 full-time and 14 peak-time
employees.  The Bank's employees are not represented by any collective
bargaining group.  Management considers its employee relations to be good.



ITEM 2.   DESCRIPTION OF PROPERTY

     The Company's principal asset is the common stock of the Bank.

     The following table sets forth information relating to each of the Bank's
current offices.  Net book value and total investment figures are for land,
building, furniture and fixtures.

<TABLE>
<CAPTION>
                                                                        Net book value at              Branch deposits at
                 Location                      Date acquired          December 31, 1998 (1)            December 31, 1998
--------------------------------------------  -----------------   -------------------------------  ---------------------------

<S>                                           <C>                 <C>                              <C>
MAIN OFFICE:
801 Pile Street                                     1966                   $  1,359,601                  $  55,196,162
Clovis, New Mexico

BRANCH OFFICES:
Prince and Parkland Streets                         1978                        346,911                     15,420,829
Clovis, New Mexico

400 West First Street                               1982                        617,987                     34,427,709
Portales, New Mexico

LOAN PRODUCTION OFFICE:
4061 Ridgerock Road, Suite C                        1996                         50,706 (2)              Not applicable
Rio Rancho, New Mexico
</TABLE>

(1)  The book value of the Bank's investment in land, premises and equipment,
less accumulated depreciation, totaled $2,375,205 at December 31, 1998.

(2)  The book value of the Bank's investment is for equipment and furniture.  
The office building is under an operating lease.


ITEM 3.        LEGAL PROCEEDINGS

     The Company and its subsidiary are from time to time parties to various
legal actions arising in the normal course of business.  Management believes
that there is no proceeding threatened or pending against the Company or its
subsidiary which, if determined adversely, would have a material adverse effect
on the financial condition or results of operations of the Company.


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

     Not applicable


                                          33
<PAGE>

                                       PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Common Stock of the Bank was traded in the over-the-counter market on
the NASDAQ Small Cap Market under the symbol "FSBC" prior to October 21, 1996,
and the Common Stock of the Company has been traded in the over-the-counter
market on the NASDAQ Small Cap Market under the symbol "AABC" since October 21,
1996.  As of March 9, 1999, the Company had 1,235,579 shares of common stock
outstanding and 434 holders of record.

     The following table sets forth the high and low sales prices of the Common
Stock of the Company and the Common Stock of the Bank prior to the formation of
the Company as a unitary thrift holding company as quoted on the NASDAQ Small
Cap Market.

<TABLE>
<CAPTION>
                                                                                                    Price range
                                                                                    ------------------------------------------
                                                                                                                      Cash
                                                                                                                 Dividends per
                                                                                         High           Low          share*
                                                                                    -------------  ------------  -------------
<S>                                                                                 <C>            <C>           <C>
1997
    First Quarter                                                                   $    6.25      $    5.25           --
    Second Quarter                                                                  $    5.94      $    5.25           --
    Third Quarter                                                                   $    8.25      $    6.00           --
    Fourth Quarter                                                                  $   11.38      $    7.75           --

1998
    First Quarter                                                                   $   12.50      $   10.00           --
    Second Quarter                                                                  $   13.00      $   11.00           --
    Third Quarter                                                                   $   12.00      $    7.00           --
    Fourth Quarter                                                                  $    8.63      $    6.38     $     .05
</TABLE>

*   Does not reflect 2% stock dividend declared on October 31, 1997 and issued 
    on December 1, 1997.

     For a foreseeable period of time, the principal source of cash revenues to
the Company will be dividends paid by the Bank with respect to the Bank's common
stock.  There are certain statutory and regulatory limitations on the payment of
such dividends (and other capital distributions) including OTS regulatory
capital requirements. In some cases, the OTS may prohibit a dividend payment
that meets these requirements on the basis that such a distribution would be an
unsafe or unsound practice.  Furthermore, the Bank may not pay a dividend if it
will cause the institution to become "undercapitalized."

     The Bank is required to give the OTS thirty days prior notice of the
proposed declaration by its directors of any dividend.  Any such dividend
declared within the thirty-day period or without giving such notice shall be
invalid and shall confer no rights or benefits on the Company as the sole
stockholder of the Bank.

     Under the Federal Deposit Insurance Act, an insured bank is prohibited from
paying dividends on its capital stock while in default in the payment of any
assessment due to the FDIC except in those cases where the amount of the
assessment is in dispute and the insured bank has deposited satisfactory
security.  The Bank is not in default in the payment of any such assessment.

     The Company paid a 2% stock dividend on December 1, 1997 and a cash
dividend of $.05 per share to shareholders of record as of December 31, 1998.
Payment was made to shareholders on January 15, 1999.


                                          34
<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS

     The Company became the unitary thrift holding company for the Bank as a
result of the consummation of an Agreement and Plan of Reorganization and
related Plan of Merger on October 21, 1996 (the "Merger"). The Company did not
have any material assets prior to the Merger.  Following the Merger, the
Company's consolidated statement of financial condition and statement of
operations are not materially different from the Bank's statement of financial
condition and statement of operations.  The Company is the successor registrant
to the Bank under the Securities Act of 1933 and the Securities and Exchange Act
of 1934.  The following table sets forth selected consolidated historical
financial and operating data for the Company as of and for each of the five
fiscal years ended December 31, 1998 and has been derived from and should be
read in conjunction with the audited consolidated financial statements of the
Company.  The following summary financial information is qualified in its
entirety by and should be read in conjunction with the detailed information and
financial statements of the Company, including the notes thereto, which
information as of December 31, 1998 and 1997 and for each of the three years in
the period ended December 31, 1998, are included in this Form 10-KSB.

<TABLE>
<CAPTION>
                                                                     For the years ended December 31
                                              -------------------------------------------------------------------------------
SELECTED CONSOLIDATED OPERATING DATA:             1998            1997            1996             1995            1994
                                              --------------  --------------  --------------   --------------  --------------

                                                                   (In Thousands Except Per Share Data)
<S>                                           <C>             <C>             <C>              <C>             <C>
Income statement data:
    Interest income                           $      8,010    $      7,250    $      7,473     $      8,417    $      7,888
    Interest expense                                 4,523           4,149           4,717            5,423           4,563
                                              --------------  --------------  --------------   --------------  --------------
    Net interest income before provision
      for loan losses                                3,487           3,101           2,756            2,994           3,325
    Provision for loan losses charged
    (credited)                                         238             118              14              (15)              4
                                              --------------  --------------  --------------   --------------  --------------
Net interest income after provision for
  loan losses                                        3,249           2,983           2,742            3,009           3,321
    Net gain (loss) on mortgage loans
      held-for-sale                                    223             149             141              118             (19)
    Net gain on sale of securities                      --              21              --               --               5
    Real estate operations, net                         10              (3)            (43)             (58)           (273)
    Other income, net                                1,545             697             664              716             752
    Other expenses                                  (3,921)         (3,463)         (4,238)          (3,371)         (3,635)
                                              --------------  --------------  --------------   --------------  --------------
Income (loss) before income taxes                    1,106             384            (734)             414             151
    Income tax expense (benefit)                       346          (1,212)             --               --            (189)
                                              --------------  --------------  --------------   --------------  --------------

Net income (loss)                             $        760    $      1,596    $       (734)    $        414    $        340
                                              --------------  --------------  --------------   --------------  --------------
                                              --------------  --------------  --------------   --------------  --------------

Per share data:
    Earnings  (loss) per common share         $       0.62    $       1.40    $      (1.01)    $       0.58    $      0.48
                                              --------------  --------------  --------------   --------------  --------------
                                              --------------  --------------  --------------   --------------  --------------

    Earnings (loss) per common
      share-assuming  dilution                $       0.59    $       1.37    $      (1.01)    $       0.58    $      0.48
                                              --------------  --------------  --------------   --------------  --------------
                                              --------------  --------------  --------------   --------------  --------------
</TABLE>


                                        35
<PAGE>

<TABLE>
<CAPTION>
                                                                               December 31
                                              -------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL CONDITION
  DATA:                                           1998            1997            1996             1995            1994
                                              --------------  --------------  --------------   --------------  --------------

                                                                              (In Thousands)
<S>                                           <C>             <C>             <C>              <C>             <C>
Loans receivable, net                         $     88,809    $     58,172    $     45,596     $     34,332    $     35,670
Loans held-for-sale                                    855             298             564              862             671
Securities held-to-maturity                          7,528          18,947          29,113           36,404          77,505
Securities available-for-sale                       11,426          15,032          23,640           33,090           2,980
Real estate owned, net                                 166              76              86              114             421
Total assets                                       121,768         107,213         106,853          116,966         125,709
Deposits                                           105,045          97,412          98,164          110,633         112,773
Borrowings                                           5,750              --           3,000               --           7,400
Net unrealized depreciation on
   available-for-sale securities, net                  (41)             (3)           (199)            (204)           (363)
Stockholders' equity                                 9,925           9,145           5,086            5,620           5,048

<CAPTION>
SELECTED FINANCIAL RATIOS AND OTHER DATA:
                                                  1998            1997            1996             1995            1994
                                              --------------  --------------  --------------   --------------  --------------
<S>                                           <C>             <C>             <C>              <C>             <C>
PERFORMANCE RATIOS:
    Return on assets (ratio of net
      income/(loss)to average total assets)         0.66%           1.49%          (0.66)%           0.34%           0.26%
                                           
    Interest rate spread information:
      Average during period                         3.02            2.91            2.43             2.45            2.62
      End of period                                 3.04            3.01            2.68             2.13            2.42
    Net interest margin (1)                         3.20            3.08            2.54             2.54            2.64
    Ratio of operating expense to average
      total assets                                  3.42            3.24            3.83             2.83            2.98
    Return on equity (ratio of net
      income/(loss) to average equity)              7.97           22.43          (13.70)            7.75            6.73

QUALITY RATIOS:
    Non-performing assets to total assets
      at end of year                                0.42%           0.08%           1.60%            1.44%           2.98%
    Allowance for loan losses to
      non-performing loans                        116.62          634.94           25.06            25.37           12.29
    Allowance for loan losses to total
      loans                                         0.68            0.91            0.94             1.25            1.29

CAPITAL RATIOS:
    Equity to total assets at the end of
      year                                          8.15%           8.53%           4.76%            4.81%           4.02%
    Average equity to average assets                8.33            6.65            4.78             4.40            3.85
    Ratio of average interest-earning
      assets to average interest-bearing
      liabilities                                 112.47          103.86          102.55           101.99          100.66
</TABLE>


(1)  Net interest income divided by average interest earning assets


                                          36
<PAGE>

GENERAL

     The Company is a Delaware corporation which was organized in 1996 for the
purpose of becoming the thrift holding company of the Bank.  The Bank is a
federally chartered stock savings bank conducting business from three banking
locations in Clovis and Portales, New Mexico and a loan production office in Rio
Rancho, New Mexico.  The Bank has a wholly-owned subsidiary, FEDCO, which is
currently inactive.

     The Bank is principally engaged in the business of attracting retail
deposits from the general public and investing those funds in first mortgage
loans in owner occupied, single-family residential loans and mortgage-backed
securities.  To a lesser extent, the Bank originates residential construction
loans and commercial real estate loans. The Bank also originates consumer loans,
including loans for the purchase of automobiles and home improvement loans, and
commercial loans including SBA loans.

     The most significant outside factors influencing the operations of the Bank
and other financial institutions include general economic conditions,
competition in the local market place and the related monetary and fiscal
policies of agencies that regulate financial institutions.  More specifically,
the cost of funds, primarily consisting of deposits, is influenced by interest
rates on competing investments and general market rates of interest.  Lending
activities are influenced by the demand for real estate financing and other
types of loans, which in turn is affected by the interest rates at which such
loans may be offered and other factors affecting loan demand and funds
availability.

     In order to continue to meet the financial services needs of the
communities it serves, the Bank intends to continue to grow in a reasonable,
prudent manner which may include expansion of the existing branch network.  As a
part of this intended growth, the Bank has increased the portfolio allocation of
single-family lending, consumer lending and commercial lending.  Certain
improvements have been completed and should assist in the expansion of the
Bank's core deposit base.

     Growth of the Bank may be financed by either increasing the deposit
portfolio or from borrowed funds.  The use of borrowed funds to purchase short
duration, mortgage-backed securities or single family mortgage loans may be
considered to add to the Bank's portfolio.

     Loan servicing has been sold and servicing will be sold in the future.

     The Company's strategic plan will continue to be reviewed quarterly for
progress by the Board of Directors.  The Board will modify the plan as deemed
appropriate to reflect the operational environment of the Bank.

     Interest rates decreased moderately during the fiscal year December 31,
1998, and had some apparent impact on lending.  The Bank had a higher volume of
permanent single family lending activity, resulting in a net gain on sale of
loans and an increase to loans receivable.  In a declining rate environment,
prices for loans sold in the secondary market normally increase and generally
create a gain when the loans are sold.  Since rates decreased moderately, the
Bank was able to generate gains on loans sold in the secondary market.  In
addition, the Bank has been able to generate new sources of consumer lending and
commercial real estate lending to compliment the volume of permanent single
family lending.

     Prepayment tendencies on loans and mortgage-backed securities may vary from
historical experience and depositors' preference for various deposit products
and maturities may also vary.  The Bank's favorable liquidity position of 6.13%
allows some flexibility in adjusting to cash flow requirements brought on by
interest rate changes.  The Bank's one-year interest-rate sensitivity gap was a
negative 6.13% of total assets as December 31, 1998.  A negative gap indicates
there are more interest-bearing liabilities repricing during a stated period
than interest-earnings assets.

     At December 31, 1998, the Bank had unrealized gains and losses in its
mortgage-backed securities portfolio which are being held to maturity.  The Bank
has both the intent and ability to hold these securities until maturity.  In
addition, management believes the Bank will be able to collect all amounts due
according to the


                                          37
<PAGE>

contractual terms of the debt securities and is not aware of any information
that would indicate the inability of any issuer of such securities to make
contractual payments in a timely manner.  As such the Bank believes that these
unrealized losses will not ultimately be realized.

     All of the Bank's mortgage-backed securities are agency securities and are
either guaranteed by the full faith and credit of the United States Government
(GNMA) or are insured by a Government Sponsored Enterprise (FNMA & FHLMC).  None
of these securities are considered "high risk" as defined by the OTS and none
have failed to pass the Federal Financial Institution Examination Council
(FFIEC) mandatory test for "high risk" securities.  The Bank does not invest in
such "high risk" securities.

     Management of the investment portfolio is not designed to be the primary
source of funds for the Bank's operations.  Rather, it is viewed as a use of
funds generated by the Bank to be invested in interest-earning assets to be
held-to-maturity or available-for-sale.  Cash flow mismatches between sources
and uses of funds should not require any of the securities to be liquidated.
While cash flows from the securities vary depending on the prepayment speeds
associated with each particular security, the variance in the prepayment speeds
does not impact the over-all cash flow needs of the Bank since the Bank has the
ability to borrow funds from the FHLB of Dallas.  See LIQUIDITY AND CAPITAL
RESOURCES in this Form 10K-SB.


REGULATORY MATTERS

     The Bank was subject to an Amended Prompt Corrective Action Directive dated
August 1994 and a Supervisory Agreement dated June 1996 mainly directed to the
improvement of capital ratios, plan and asset/liability management issues.
These agreements were terminated by the OTS in November 1997.


                                          38
<PAGE>

RESULTS OF OPERATIONS

     Operating results are impacted by many factors, the most important factor
being the interest spread between the yield on loans and investments and the
cost of funds.  The following table presents for the periods indicated the total
dollar amount of interest income from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates.  No tax equivalent adjustments
were made and all average balances are monthly average balances.  Non-accruing
loans have been included in the table as loans carrying a zero yield.

<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                                                      (In Thousands)
                               ----------------------------------------------------------------------------------------------
                                           1998                            1997                            1996
                               ------------------------------  ------------------------------ -------------------------------
                               Average     Interest            Average    Interest            Average     Interest
                               outstanding earned/   Yield/    outstanding earned/   Yield/   outstanding earned/    Yield/
                                balance     paid      rate      balance     paid      rate     balance      paid      rate
                               ----------  --------  --------  ---------- --------- --------- ----------- --------- ---------
<S>                            <C>         <C>       <C>       <C>        <C>       <C>       <C>         <C>       <C>
Interest-earning assets:
  Loans receivable (1)         $   76,674  $  6,144    8.01%   $   52,909 $  4,490    8.49%   $   40,095  $  3,477    8.67%
  Mortgage-backed securities       26,029     1,452    5.58        42,019    2,379    5.66        59,161     3,434    5.80
Investment securities               1,006        70    6.98         1,607      104    6.46         5,028       293    5.83
Other interest-earning assets       5,417       344    6.36         4,238      277    6.54         4,193       269    6.42
                               ----------  --------  --------  ---------- --------- --------- ----------- --------- ---------

    Total interest-earning
      assets (1)               $  109,126  $  8,010    7.34%   $  100,773 $  7,250    7.19%   $  108,477  $  7,473    6.89%
                               ----------  --------  --------  ---------- --------- --------- ----------- --------- ---------
                               ----------  --------  --------  ---------- --------- --------- ----------- --------- ---------

Interest-bearing liabilities:
  Savings deposits             $   99,823  $  4,260    4.27%   $   96,798 $  4,136    4.27%   $  105,319  $  4,692    4.46%
  Federal Home Loan Bank
    advances                        4,786       263    5.49           231       13    5.64           459        25    5.47
                               ----------  --------  --------  ---------- --------- --------- ----------- --------- ---------

    Total interest-bearing
      liabilities              $  104,609  $  4,523    4.32%   $   97,029 $  4,149    4.28%   $  105,778  $  4,717    4.46%
                               ----------  --------  --------  ---------- --------- --------- ----------- --------- ---------
                               ----------  --------  --------  ---------- --------- --------- ----------- --------- ---------

Net interest income                        $  3,487                       $  3,101                        $  2,756
                                           --------                       ---------                       ---------
                                           --------                       ---------                       ---------

Net interest rate spread                               3.02%                          2.91%                           2.43%
                                                     --------                       ---------                       ---------
                                                     --------                       ---------                       ---------

Net interest-earning assets    $    4,517                      $    3,744                     $    2,699
                               ----------                      ----------                     -----------
                               ----------                      ----------                     -----------

Net
   yield
   on average             
   interest-earning assets                             3.20%                          3.08%                           2.54%
                                                     --------                       ---------                       ---------
                                                     --------                       ---------                       ---------

Average interest-earning
   assets to average
   interest-bearing
   liabilities                               104.32%                        103.86%                         102.55%
                                           ----------                     ----------                      ----------
                                           ----------                     ----------                      ----------
</TABLE>


(1)  Calculated net of loans in process


                                          39
<PAGE>

     The following table presents the weighted average yields earned on loans,
investments, and other interest-earning assets, and the weighted average rates
paid on deposits and borrowings and the resultant interest rate spreads at the
dates indicated.  Weighted average rates are based on the balances at the end of
the period.

<TABLE>
<CAPTION>
                                                                                                At December 31,
                                                                                    -----------------------------------------
                                                                                        1998          1997          1996
                                                                                    -------------  ------------  ------------
<S>                                                                                 <C>            <C>           <C>
WEIGHTED AVERAGE YIELD ON:
  Loans receivable                                                                       7.81%          8.31%         8.59%
  Mortgage-backed securities                                                             5.44           5.56          5.84
  Investment securities and other interest-earning assets                                6.34           6.94          6.24
                                                                                    -------------  ------------  ------------
COMBINED WEIGHTED AVERAGE YIELD ON INTEREST-EARNING ASSETS                               7.31%          7.26%         7.11%
                                                                                    -------------  ------------  ------------
WEIGHTED AVERAGE RATE PAID ON:
  Savings deposits                                                                       2.25%          2.50%         2.50%
  Transaction accounts                                                                   2.60           2.64          2.39
  CDs                                                                                    5.11           5.04          5.02
  Borrowings                                                                             5.44            --           5.50
                                                                                    -------------  ------------  ------------
COMBINED WEIGHTED AVERAGE RATE PAID ON INTEREST-BEARING LIABILITIES                      4.27%          4.25%         4.34%
                                                                                    -------------  ------------  ------------

SPREAD                                                                                   3.04%          3.01%         2.77%
                                                                                    -------------  ------------  ------------
                                                                                    -------------  ------------  ------------
</TABLE>

     The following table presents the dollar amount of changes in interest
income and interest expense for major components of interest-earning assets and
interest-bearing liabilities and distinguishes between the increase related to
higher or lower outstanding balances and the volatility of interest rates.  For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume (i.e.,
changes in volume multiplied by old rate) and (ii) changes in rate (i.e.,
changes in rate multiplied by old volume).  For purposes of this table, changes
attributable to both rate and volume, which cannot be segregated, have been
presented separately.

<TABLE>
<CAPTION>
                                                                  Year ended December 31
                              ------------------------------------------------------------------------------------------------
                                               1998 vs 1997                                     1997 vs 1996
                              -----------------------------------------------  -----------------------------------------------
                                        Increase (decrease) due to                       Increase (decrease) due to
                              -----------------------------------------------  -----------------------------------------------
                                                        Rate/                                            Rate/
                               Volume       Rate        volume      Total       Volume       Rate        volume       Total
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------
<S>                           <C>         <C>         <C>         <C>          <C>         <C>         <C>          <C>
                                                                      (In Thousands)
Interest-earning assets:
  Loan portfolio              $    2,018  $     (254) $     (110) $    1,654   $    1,111  $      (73) $      (25)  $    1,013
  Investments                        (39)          8          (3)        (34)        (199)         32         (22)        (189)
  Mortgage-backed
    securities                      (905)        (34)         12        (927)        (995)        (85)         25       (1,055)
  Other interest earning
  assets                              77          (8)         (2)         67            3           5          --            8
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------

Total interest-earning
  assets                      $    1,151  $     (288) $     (103) $      760   $      (80) $     (121) $      (22)  $     (223)
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------

Interest-bearing
  liabilities:
  Savings deposits            $      129  $       --  $       (5) $      124   $     (380) $     (195) $       19   $     (556)
  Federal Home Loan Bank
   advances                          257          --          (7)        250          (12)          1          (1)         (12)
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------

Total interest-bearing
  liabilities                 $      386  $       --  $      (12) $      374   $     (392) $     (194) $       18   $     (568)
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------

Change in  net interest
  income                      $      765  $     (288) $      (91) $      386   $      312  $       73  $      (40)  $      345
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------
                              ----------  ----------  ----------- -----------  ----------  ----------  -----------  ----------
</TABLE>


                                          40
<PAGE>

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997.

     Net income for the year ended December 31, 1998 was $760,000 or $.62 per
share compared to net income of $1,596,000 or $1.40 per share for 1997.  The
1998 $836,000 decrease in income compared to 1997 resulted from a reduction in
the valuation allowance of the deferred tax asset of the Company of $1,373,000
in September 1997 reduced by a net gain of $838,000 on the sale of mortgage loan
servicing rights in 1998.

     NET INTEREST INCOME.  Net interest income before provision for loan losses
is the difference between interest earned on interest-earning assets and
interest paid on interest-bearing liabilities.  Net interest income before
provision for loan losses increased $386,000 to $3,487,000 for 1998 compared to
$3,101,000 in 1997.  The increase in 1998 was due to an effort by management of
the Bank to reduce the level of mortgage-backed securities and increase loans in
order to enhance interest income.

     PROVISION FOR LOAN LOSSES.  Management determines the amount of the
allowance for loan loss which covers specific loans as well as estimated losses
inherent in the loan portfolio.  The level of the allowance is based on such
factors as the amount of non-performing assets, historical loss experience,
regulatory policies, general economic conditions, the estimated fair value of
the underlying collateral and other factors which may affect the collectibility
of the loans.  During 1998, the provision for loan losses increased to $238,000
from $118,000 for 1997.  The increase in provision was reflective of the
increase in loans in 1998.

     NONINTEREST INCOME.  Noninterest income was $1,778,000 in 1998 compared to
$866,000 in 1997.  The increase of $912,000 or 105% was primarily due to a net
gain of $838,000 on the sale of approximately $100,000,000 of mortgage loan
servicing rights in the last quarter of 1998 and, to a lesser extent, the
increase was partially due to a $74,000 increase in the net realized gains on
sales of loans.

     NONINTEREST EXPENSE.  Noninterest expense increased by $455,000 or 13.13%
to $3,921,000 compared to $3,466,000 in 1997.  Salaries and employee benefits
increased by $284,000 in 1998.  Deposit insurance premiums declined by $135,000
in 1998 due to a reduction in the rate paid for SAIF insurance premiums for the
Bank.  Professional fees increased $155,000, due to a recovery in 1997 exceeding
$100,000, which reduced expenses for that year.

     PROVISION FOR INCOME TAXES.  The net income tax benefit of $1,212,000 in
1997 as compared to an expense of $346,000 in 1998 results primarily from the
1997 deferred tax asset valuation adjustment of $1,373,000.  Prior to 1997, the
deferred tax asset valuation allowance was due primarily to NOL carryforwards
which were not expected to be utilized before their respective expiration dates
which, prior to 1997, the Company was unable to predict whether they would more
likely than not be realized.  During 1997, the Company changed its estimate with
respect to the future benefits of the NOL carryforwards and, accordingly,
reduced the related valuation allowance.  To the extent the valuation allowance
was reduced, the related tax benefit was credited to income.


COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996

     Net income for the year ended December 31, 1997 was $1,596,000 or $1.40 per
share compared to net loss of $734,000 or $1.01 per share for 1996.  The 1997
income compared to the loss in 1996 resulted from a reduction in the valuation
allowance of the deferred tax asset of the Company of $1,373,000 in September
1997 (see Note 10 - Income Taxes in Notes to Consolidated Financial Statements)
and the one time SAIF insurance charge in 1996 of $762,000.

     NET INTEREST INCOME.  Net interest income before provision for loan losses
increased $345,000 to $3,101,000 for 1997 compared to $2,756,000 in 1996.  The
increase in 1997 was due to an effort by management of the Bank to reduce
interest expense for deposits while reducing the level of mortgage-backed
securities and increasing loans in order to enhance interest income.


                                          41
<PAGE>

     PROVISION FOR LOAN LOSSES.  Management determines the amount of the
allowance for loan loss which covers specific loans as well as estimated losses
inherent in the loan portfolio.  The level of the allowance is based on such
factors as the amount of non-performing assets, historical loss experience,
regulatory policies, general economic conditions, the estimated fair value of
the underlying collateral and other factors which may affect the collectibility
of the loans.  During 1997, the provision for loan losses increased to $118,000
from $14,000 for 1996.  The increase in provision was reflective of the increase
in loans in 1997.

     NONINTEREST INCOME.  Noninterest income was $866,000 in 1997 compared to
$806,000 in 1996.  The increase is due to an increase in fees on deposit
accounts and a $21,000 gain on the sale of available-for-sale mortgage-backed
securities.

     NONINTEREST EXPENSE.  Noninterest expense decreased by $815,000 or 19.04%
to $3,466,000 compared to $4,281,000 in 1996.  Salaries and employee benefits
increased by $171,000 in 1997 due to the opening of a new loan production office
and the formation of the holding company in the last half of 1996.  Deposit
insurance premiums declined by $886,000 in 1997 due to one-time charge of the
SAIF assessment of $762,000 in 1996.  Professional fees declined $234,000 due to
a settlement with a former officer of the Bank and a general reduction in fees.

     PROVISION FOR INCOME TAXES.  The net income tax benefit of $1,212,000 in
1997 as compared to no net provision for income taxes in 1996 results primarily
from the 1997 deferred tax asset valuation adjustment of $1,373,000.  Prior to
1997, the deferred tax asset valuation allowance was due primarily to NOL
carryforwards which were not expected to be utilized before their respective
expiration dates or which benefits the Company was unable to predict whether
they would more likely than not be realized.  During 1997, the Company changed
its estimate with respect to the future benefits of the NOL carryforwards and,
accordingly, reduced the related valuation allowance.  To the extent the
valuation allowance was reduced, the related tax benefit was credited to income.


ASSET/LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY

     The Bank attempts to maximize net interest income by achieving a positive
interest rate spread that can be sustained during fluctuations in prevailing
interest rates.   Management monitors the mix of earning assets on a continuous
basis in order to react to fluctuating interest rate environments.

Risk-based capital guidelines and the corresponding asset risk weighting have
resulted in an incentive to invest in mortgage-backed and U.S. Agency
Securities, particularly those issued by government sponsored entities such as
FNMA, GNMA, and FHLMC.  In addition, the favorable risk weighting assigned to
residential loans provided the incentive to invest in these assets.  This asset
mix has always been the basis on which the Bank has focused.

     The Bank assumes a high level of interest rate risk as a result of its
policy to originate fixed-rate single family home loans.  These risks are
minimized by selling mostly thirty-year mortgage loans into the secondary
market.  These loans generally have longer terms than the short term
characteristics and liabilities of customer accounts and borrowed money.  Rates
were stable in 1997 with a slight reduction in rates in 1998.  As the prepayment
on loans and mortgage-backed securities have occurred, the proceeds have been
channeled to new loans with a resulting increase in interest income.

     Interest rate sensitivity is the rate at which the Bank's assets and
liabilities are subject to repricing at future time periods.  Management seeks
to effectively manage interest rate sensitivity to insure that net interest
income is maximized while the impact of change on market interest rates is
minimized.  It is the objective of the Bank to reduce the sensitivity of its
earnings to fluctuating interest rates by diversifying the sources of funds,


                                          42
<PAGE>

improving its interest rate spread, and improving the ratio of earning assets to
interest bearing liabilities.  Also, the Bank needs to maintain a match of
maturities and interest rate sensitivity of its assets and liabilities.

     The differences between the volume of assets and liabilities in the Bank's
current portfolio, which are subject to repricing in future time periods, are
known as interest rate sensitivity gaps.  Certain estimates and assumptions are
included in the data in the table below which sets forth the interest rate
sensitivity analysis at December 31, 1998.

     The following table sets forth the assumed repricing and maturity periods
of the Bank's interest-earning assets and interest-bearing liabilities at
December 31, 1998 and the interest rate sensitivity gap percentages at the dates
indicated.  The interest rate sensitivity gap is defined as the amount by which
assets repricing within the respective periods exceed liabilities repricing
within such periods.  The effect of these assumptions is to quantify the dollar
amount of items that are interest-rate sensitive and can be repriced within each
of the periods specified. Such repricing can occur in one of three ways:  (1)
the rate of interest to be paid on an asset or liability may adjust periodically
on the basis of an index; (2) an asset or liability such as a mortgage loan may
amortize, permitting reinvestment of cash flows at the then-prevailing interest
rates; or (3) an asset or liability may mature, at which time the proceeds can
be reinvested at current market rates.

<TABLE>
<CAPTION>
                                                                    Maturing or Repricing Amount
                                       -------------------------------------------------------------------------------------
                                          Within    Over 1 to     Over 3     Over 5 to    Over 10      Over 20
                                         one year    3 years       to 5       10 years     to 20        years       Total
                                                                   years                   years
                                       ----------- -----------  ----------  ----------- -----------  ----------  -----------
                                                                           (In Thousands)
<S>                                     <C>         <C>          <C>         <C>         <C>          <C>         <C>
Total Rate Sensitive Assets:
  Mortgages:
   Adjustable-rate (1)                  $   8,763   $   1,465    $      --   $      --   $      --    $      --   $  10,228
   Fixed-rate (2)                          10,641      18,389       10,933      10,981       2,510           53      53,507
   Construction(6)                            383          --           --          --          --           --         383
   Non-residential adjustable (2)           3,796          --           --          --          --           --       3,796
   Non-residential fixed                    5,541       2,310          586         362         292           67       9,158
  Non-Mortgages:
   Consumer and Commercial (2)(6)           5,633       5,297        2,325         295          --           --      13,550
  Investments:
   Investment securities (3)                4,831         350            1           1           2            2       5,187
   Mortgage-backed (1)(2)                  15,149       3,805           --          --          --           --      18,954
   Funds sold (3)                           1,037          --           --          --          --           --       1,037
                                        ----------- -----------  ----------  ----------- -----------  ----------  -----------

TOTAL                                   $  55,774   $  31,616    $  13,845   $  11,639   $   2,804    $     122   $ 115,800
                                        ----------- -----------  ----------  ----------- -----------  ----------  -----------
                                        ----------- -----------  ----------  ----------- -----------  ----------  -----------

Total Rate Sensitive Liabilities:
  Deposits:
   Certificates of deposit (3)          $  48,238   $   7,760    $   2,509   $      --   $      --    $      --   $  58,507
   IRAs                                     6,662       1,665        1,214          --          --           --       9,541
   Money market (4)                         5,625       6,877        2,501       3,751          --           --      18,754
   NOW accounts (4)                         1,115       1,362        1,238       3,716          --           --       7,431
   Savings accounts (4)                     1,585       1,690          845       2,218          --           --       6,338
 Advances                                      --       5,000          750          --                                5,750
                                        ----------- -----------  ----------  ----------- -----------  ----------  -----------

TOTAL                                   $  63,225   $  24,354    $   9,057   $   9,685   $      --    $      --   $ 106,321
                                        ----------- -----------  ----------  ----------- -----------  ----------  -----------
                                        ----------- -----------  ----------  ----------- -----------  ----------  -----------

December 31, 1998
Cumulative interest rate sensitivity
gap (5)                                 $  (7,451)  $    (189)   $   4,599   $   6,553   $   9,357    $   9,479
Cumulative interest rate sensitivity
  gap (5) as a percent of total     
  assets                                    (6.13)%     (0.16)%       3.78 %      5.39 %      7.70 %       7.80 %
December 31, 1997
Cumulative interest rate sensitivity
  gap (5) as a percent of  total    
  assets                                    (4.03)%     (5.75)%      (2.35)%      2.70 %      6.46 %       6.52 %
December 31, 1996
Cumulative interest rate sensitivity
  gap (5) as a percent of total     
  assets                                    (9.30)%     (8.28)%      (4.11)%     (2.99)%      1.40 %       3.05 %
</TABLE>


                                          43
<PAGE>


(1)  MOST ADJUSTABLE RATE ASSETS ARE INCLUDED IN THE "UNDER 1 YEAR" CATEGORY, AS
     THEY ARE SUBJECT TO AN INTEREST RATE ADJUSTMENT EVERY SIX OR TWELVE MONTHS,
     DEPENDING UPON LOAN PLAN.
(2)  MATURITY/RATE SENSITIVITY IS BASED UPON CONTRACTUAL MATURITY WITH PROJECTED
     REPAYMENT OF PRINCIPAL.
(3)  BASED ON CONTRACTUAL MATURITY OF THE INVESTMENTS.
(4)  SAVINGS ACCOUNT DECAY RATES USED ASSUME THAT THE ACCOUNTS HAVE A MARKET
     VALUE SENSITIVITY APPROXIMATING THAT OF A 2 1/2 YEAR TREASURY BOND.
(5)  THE DIFFERENCE BETWEEN RATE SENSITIVE ASSETS AND RATE SENSITIVE
     LIABILITIES.
(6)  GENERALLY FIXED RATE.

     As prepayment activity changes however, the resulting gap is expected to be
affected.  An increase in prepayment speeds would be expected to move the gap
towards a matched or positive position.  The opposite would be expected to occur
if prepayment speeds decrease.  Prepayment speeds are influenced by fluctuation
in interest rates and may not produce the same results as reflected in the
previous table.  Also, certain assets and liabilities may have similar
maturities or repricing periods but could react differently to changes in
interest rates.  Assets which have adjustable-rate features may have a
limitation on the periodic interest rate adjustments and could result in a rate
that is still below existing market rates.  This same feature may also limit the
downward adjustment in a declining rate environment.

     During 1997 and 1996 the Bank sold fixed-rate whole loans "held-for-sale"
while retaining adjustable-rate mortgages.  During 1997, the Bank began to
retain certain fixed-rate loans rather than placing them in the secondary
markets.  Beginning in the third quarter of 1997, FHLB advances were used to
supplement cash flow from operations as the Bank's lending activities began to
increase.  The Bank increased deposits and used FHLB advances to fund the
increased loan origination volume in 1998.

     Presented below, as of December 31, 1998, is an analysis of the Bank's
interest rate risk as measured by changes in net present value for instantaneous
and sustained parallel shifts in the yield curve, in 50 basis point increments,
up and down 200 basis points.  As illustrated in the table, the Bank's NPV is
more sensitive to rising rates than declining rates.  This occurs principally
because, as rates rise, the market value of fixed-rate loans declines due to
both the rate increase and slowing prepayments (and the NPV focuses on the
Bank's entire portfolio, not just assets that are subject to adjustment or
maturity within one year).  When rates decline, the Bank does not experience a
significant rise in market value for these loans because borrowers repay at
relatively high rates.

<TABLE>
<CAPTION>
                                          Net Present Value
                Change in               At December 31, 1998
              interest rate     --------------------------------------
             (basis points)         $ Change            % Change
            ------------------  ------------------  ------------------
                                     (000's)
            <S>                 <C>                 <C>
                    +200        $         (2,440)           (16)%
                    +150                  (1,685)           (11)
                    +100                    (997)            (7)
                     +50                    (476)            (3)
                       0                      --             --
                     -50                     360              2
                    -100                     678              4
                    -150                   1,023              7
                    -200                   1,225              8
</TABLE>


                                          44
<PAGE>

     Management reviews these measurements periodically.  In addition to
monitoring selected measures on NPV, management also monitors effects on net
interest income resulting from increases or decreases in rates. This measure is
used in conjunction with NPV measures to identify excessive 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.  Also, the interest rates on
certain types of assets and liabilities may fluctuate in advance of changes in
market rates.  Additionally, certain assets, such as adjustable rate mortgage
loans, have features which restrict changes in interest rates on a short-term
basis and over the life of the asset.  Further, in the event of a change in
interest rates, prepayment and early withdrawal levels would 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 an interest
rate increase.

     In addition, the previous table does not necessarily indicate the impact of
general interest rate movements on the Bank's net interest income because the
repricing of certain categories of assets and liabilities is subject to
competitive and other pressures beyond the Bank's control.  As a result, certain
assets and liabilities indicated as maturing or otherwise repricing within a
stated period may in fact mature or reprice at different times and at different
volumes.


LIQUIDITY AND CAPITAL RESOURCES

     The Company's current liquidity and capital resources are dependent on its
ability to borrow funds from the Bank and other sources as well as receive
dividends from the Bank.  The Bank's primary sources of funds are deposits,
sales of mortgage loans, principal and interest payments on loans and
mortgage-backed securities, borrowings, and funds provided by operations.  While
scheduled loan and mortgage-backed securities principal repayments are a
relatively predictable source of funds, deposits flows, prepayments of principal
on loans and mortgage-backed securities, and sales of mortgage loans are greatly
influenced by general interest rates, economic conditions, and competition.
Current OTS regulations require the Bank to maintain cash and eligible
investments in an amount equal to at least 4% of customer accounts and
short-term borrowings to assure its ability to meet demands for withdrawals and
repayment of short-term borrowings.  As of December 31, 1998, the Bank's
liquidity ratio was 6.13% which was in excess of the minimum regulatory
requirements.

     During the year ended December 31, 1998, total deposits increased
approximately $7.6 million or 7.84%, and FHLB advances increased by $5,750,000.
Stock options in the amount of $108,793 were exercised in 1998.

     Securities available-for-sale decreased by $3.6 million and securities
held-to-maturity decreased by $11.4 million in 1998.  The decrease in securities
was due to principal payments and an increase in the level of principal
prepayments on the loans underlying the mortgage-backed securities.  The
decrease in securities was used to fund loans which increased by $30.6 million
in 1998.

     The Bank's capital for regulatory purposes at December 31, 1998 was
$9,377,840 or 7.73% of total regulatory assets.  Regulations require savings
institutions to have a minimum regulatory tangible capital ratio equal to 1.5%
of adjustable tangible assets, a minimum 3% core capital ratio, and a minimum 8%
risk-based capital ratio.  At December 31, 1998 and 1997, the Bank was in
compliance with all applicable capital standards.

     Beginning in December 1996, the Company offered to the then existing
stockholders of the Company subscription rights for the issuance of 732,198
shares of the Company's common stock.  The subscription price was $5.25 per
share.  Holders of the subscription rights were able to exercise their
subscription rights until the expiration date on February 14, 1997.  An
aggregate of 286,054 shares of the 732,198 shares of common stock were
subscribed which amounted to $1,501,783.  In addition, the Company issued
174,824 additional shares of stock to other investors at the same subscription
price of $5.25 per share.  When the supplemental offering expired April 8, 1997,
the Company received $917,826 for 174,824 shares.  The 271,320 remaining shares
were withdrawn from registration in December 1997.


                                          45
<PAGE>

     The OTS has adopted a rule that requires every thrift association with more
than normal interest rate risk to deduct from its total capital, for purposes of
determining compliance with such requirement, an amount equal to 50% of its
interest rate risk exposure multiplied by the present value of its assets.  This
exposure is a measure of the potential decline in the net portfolio value of a
thrift association, greater than 2% of the present value of its assets, based
upon a hypothetical 200 basis point increase or decrease in interest rates
(whichever results in a greater decline).  Net portfolio value is the present
value of expected cash flows from assets, liabilities and off-balance sheet
contracts.  The rule provides for a two quarter lag between calculating interest
rate risk and recognizing any deduction from capital.  Any thrift association
with less than $300 million in assets and a total capital ratio in excess of 12%
is exempt from this requirement unless the OTS determines otherwise.  Currently,
the Bank is exempt from this rule.

     The table below presents the Bank's capital position at December 31, 1998
relative to the existing regulatory requirements:


<TABLE>
<CAPTION>
                                                                                                                Percent of
                                                                                               Amount           assets (1)
                                                                                          ------------------  ---------------
                                                                                           (In Thousands)
<S>                                                                                       <C>                 <C>
Tangible capital                                                                          $        9,378             7.73%
Tangible capital requirement                                                                       1,819             1.50
                                                                                          ------------------  ---------------
       Excess tangible capital                                                            $        7,559             6.23%
                                                                                          ------------------  ---------------
                                                                                          ------------------  ---------------
Core capital                                                                              $        9,378             7.73%
Core capital requirement                                                                           4,851             4.00
                                                                                          ------------------  ---------------
       Excess core capital                                                                $        4,527             3.73%
                                                                                          ------------------  ---------------
                                                                                          ------------------  ---------------
Total capital (i.e., core and supplemental capital)                                       $        9,979            14.70%
Risk-based capital requirement                                                                     5,431             8.00
                                                                                          ------------------  ---------------
       Excess total capital                                                               $        4,548             6.70%
                                                                                          ------------------  ---------------
                                                                                          ------------------  ---------------
</TABLE>


(1)  Based upon adjusted assets for purposes of the tangible capital and core
     capital requirements, and risk-weighted assets for purposes of the
     risk-based capital requirement.


     The OTS Capital Distribution Regulation differentiates thrift institutions
primarily by their capital levels and prescribes the amount of capital
distributions that can be made without prior OTS approval.

     The Bank has met its liquidity requirements with funds generated from
operations, proceeds from repayment or sale of loans and investment securities,
and short-term borrowings.  The Bank believes its requirements for 1999 will be
met from similar sources.  If alternative funding is needed, the Bank can
generate additional funds from several other sources.  Currently, the FHLB
system functions as a source of credit for the Bank.


ASSET QUALITY

     ALLOWANCE FOR LOAN LOSSES.  The allowance for loan losses is established
through a provision for loan losses based on management's quarterly asset
classification review and evaluation of the risk inherent in its loan portfolio
and changes in the nature and volume of its loan activity.  Such evaluation,
which includes a review of all loans of which full collectibility may not be
reasonably assured, considers among other matters, the estimated fair value of
the underlying collateral, economic conditions, cash flow analysis, historical
loan loss experience, discussions held with delinquent borrowers and other
factors that warrant recognition in providing for allowance for loan losses.


                                          46
<PAGE>

     During 1998, net loans increased approximately $30,637,000 or 52.67% from
December 31, 1997 and the allowance for loan losses increased $74,000.
Management feels that the December 31, 1998 allowances are adequate for future
needs.

     The following presents an analysis of the allowance for loan losses for
years ended December 31, 1998, 1997, and 1996.


<TABLE>
<CAPTION>
                                                                                             Year ended December 31
                                                                                    -----------------------------------------
                                                                                        1998          1997          1996
                                                                                    -------------  ------------  ------------
<S>                                                                                 <C>            <C>           <C>
MORTGAGE LOANS AND CONTRACTS:
Balance at beginning of year                                                        $   300,638    $   232,665   $   230,865

Loans charged-off                                                                            --         (1,862)           --
Recoveries                                                                                   --         20,710         1,800
                                                                                    -------------  ------------  ------------

       Net loans recovered                                                                   --         18,848         1,800
Provision for loan losses charged to operations                                          61,134         49,125            --
                                                                                    -------------  ------------  ------------

BALANCE AT END OF YEAR                                                              $   361,772    $   300,638   $   232,665
                                                                                    -------------  ------------  ------------
                                                                                    -------------  ------------  ------------

CONSUMER AND OTHER:
Balance at beginning of year                                                        $   226,709    $   196,576   $   197,024

Loans charged-off                                                                      (190,056)       (59,735)      (17,882)
Recoveries                                                                               25,413         21,076         3,795
                                                                                    -------------  ------------  ------------

       Net loans charged-off                                                           (164,643)       (38,659)      (14,087)
Provision for loan losses charged to operations                                         177,146         68,792        13,639
                                                                                    -------------  ------------  ------------

BALANCE AT END OF YEAR                                                              $   239,212    $   226,709   $   196,576
                                                                                    -------------  ------------  ------------
                                                                                    -------------  ------------  ------------

TOTAL ALLOWANCE FOR LOAN LOSSES:
Balance at beginning of year                                                        $   527,347    $   429,241   $   427,889

Loans charged-off                                                                      (190,056)       (61,597)      (17,882)
Recoveries                                                                               25,413         41,786         5,595
                                                                                    -------------  ------------  ------------

       Net loans charged-off                                                           (164,643)       (19,811)      (12,287)
Provision for loan losses charged to operations                                         238,280        117,917        13,639
                                                                                    -------------  ------------  ------------

BALANCE AT END OF YEAR                                                              $   600,984    $   527,347   $   429,241
                                                                                    -------------  ------------  ------------
                                                                                    -------------  ------------  ------------

Allowance for loan losses as a percentage of total loans outstanding                       0.66%          0.90%         0.93%
                                                                                    -------------  ------------  ------------
                                                                                    -------------  ------------  ------------
</TABLE>


                                          47
<PAGE>

     NON-PERFORMING ASSETS.  Total non-performing assets increased by
approximately $432,000 during 1998.  The non-performing assets to total assets
ratio is one indicator of the exposure to credit risk.  Non-performing assets of
the Bank consist of non-accruing loans, troubled debt restructurings, and real
estate which was acquired as a result of foreclosure. The composition of the
Bank's portfolio of non-performing assets is shown in the following table:

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

                                                                                                  (In Thousands)
<S>                                                                                 <C>            <C>           <C>
Non-accruing loans*                                                                 $      349     $        7    $        53
Past due 90 days or more and still accruing                                                 --             --             --
Renegotiated loans**                                                                        --             --          1,573
Other real estate                                                                          166             76             86
                                                                                    -------------  ------------  ------------

Total non-performing assets                                                         $      515     $       83    $     1,712
                                                                                    -------------  ------------  ------------
                                                                                    -------------  ------------  ------------

Ratio of non-performing assets to total assets                                          0.42%          0.08%          1.60%
                                                                                    -------------  ------------  ------------
                                                                                    -------------  ------------  ------------
</TABLE>

 *   Primarily loans which are past due for 90 days or more
**   Renegotiated loans are those for which the interest rate was reduced
     because of the inability of the borrower to service the obligation under
     the original terms of the agreement.


     Interest lost on non-performing assets amounted to $28,589 in 1998 compared
to $7,337 in 1997.

     INVESTMENT SECURITIES - The Bank's available-for-sale securities portfolio
has a $62,102 unrealized loss, which is recorded net of tax at December 31,
1998, while an unrealized loss of $4,065 was recorded at December 31, 1997.  The
Bank's held-to-maturity securities portfolio has an unrealized loss of $20,396
and $144,318 at December 31, 1998 and 1997, respectively.  The Bank's
available-for-sale and held-to-maturity portfolios did not experience
significant fair market value fluctuations during the year ended December 31,
1998.


OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

     The Bank may be a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuation in interest rates.
These financial instruments include commitments to extend credit (including
credit cards), standby letters of credit, and financial guarantees.  These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated statements of
financial position.  The contract or notional amounts of these instruments
reflect the extent of involvement the Bank has in particular classes of
financial instruments.  The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.

     At December 31, 1998, unfunded credit commitments are as follows:

<TABLE>
     <S>                                               <C>
     Commitments to extend residential loans           $  2,057,237
     Lines of credit                                   $  3,916,882
     Credit cards                                      $  1,149,560
</TABLE>

     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.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee.  Some of the commitments are expected to
expire without


                                          48
<PAGE>

being drawn upon.  The total commitment amounts do not necessarily represent
future cash requirements.  The Bank evaluates each customer's creditworthiness
on a case-by-case basis.  The amount of collateral obtained, if deemed necessary
by the Bank upon extension of credit, is based on management's credit evaluation
of the customers.

     Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party.  Currently, letters of credit are not extended beyond one year.
The credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers.  The Bank holds
collateral and personal guarantees as deemed necessary.  At December 31, 1998,
the Bank had no standby letters of credit outstanding.

     At December 31, 1998, the Bank had no open interest rate swaps, futures,
options, or forward contracts.

     At December 31, 1998 and 1997, the Bank had $2,057,237 and $1,355,106,
respectively, of commitments to sell newly-originated single family residential
loans.


INCOME TAXES

     At December 31, 1998, the Company had remaining net operating loss ("NOL")
carryforwards of approximately $5,074,000 for federal income tax purposes which
expire in varying amounts through 2010.  The Company also has a capital loss
carryforward of $497,000 for tax purposes which will expire in 2001.  In
addition, the alternative minimum tax ("AMT") NOL carryforward and AMT credit
carryforward were approximately $5,906,000 and $29,000, respectively, which
expire in varying amounts through 2010.  Investment tax credit carryforwards of
approximately $40,000 expire in varying amounts through 2005.


     Section 382 of the Internal Revenue Code ("Code") provides that the
aforementioned tax NOL carryforwards would be subjected to an annual limitation
should there be a change of over 50% in the stock ownership of the Company
during any three year testing period.  Due to the fact that the Company has a
tax NOL carryforward, it is required to report changes in ownership of 5% or
greater of stockholders annually to the Internal Revenue Service.  The statute
and applicable Treasury regulations are extremely complex.  The Company believes
that no change of ownership as defined in applicable Section 382 regulations
occurred through the three-year testing period ended December 31, 1998.
However, if such a change in ownership occurs, the annual use of the tax NOL
carryforwards would be subject to an annual limitation.


IMPACT OF INFLATION AND CHANGING PRICES

     The consolidated financial statements and related data have been prepared
in accordance with generally accepted accounting principles which require
measurement of financial position and operating results in terms of historical
dollars, without considering changes in relative purchasing power over time due
to inflation.

     Virtually all of the assets and liabilities of a financial institution are
monetary in nature.  As a result, interest rates generally have a more
significant impact on the Company's and the Bank's performance than does the
effect of inflation.


IMPACT OF NEW ACCOUNTING STANDARDS

     In June 1996, the FASB issued SFAS No. 125, ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, which was
amended in December 1996. The Statement provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities.  The Company was required to adopt certain provisions of SFAS No.
125 for the year beginning January 1, 1997 and certain other provisions of the
Statement for the year beginning January 1, 1998.  The adoption of the
applicable provision in 1997 did not have a material impact on the Company's
financial position


                                          49
<PAGE>

or results of operations.  The adoption of the applicable provisions of this new
standard, as amended, in 1998, is not expected to have a material impact on the
Company's and the Bank's financial position or results of operations.

     In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME.
This Statement establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.  Comprehensive
income is the total of reported net income and all other revenues, expenses,
gains and losses that under generally accepted accounting principles bypass
reported net income.  SFAS No. 130 requires that comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements with the aggregate amount of comprehensive income
reported in that same financial statement.  SFAS No. 130 permits the statement
of changes in stockholders' equity to be used to meet this requirement.
Companies are encouraged, but not required, to display the components of other
comprehensive income below the total for net income in the statement of
operations or in a separate statement of comprehensive income.  Companies are
also required to display the cumulative total of other comprehensive income for
the period as a separate component of equity in the statement of financial
position.  This Statement is effective for fiscal years beginning after
December 15, 1997.  The Company adopted the provisions of this statement
effective January 1, 1998.

     In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION.  This Statement supersedes SFAS No. 14,
FINANCIAL REPORTING SEGMENTS OF A BUSINESS ENTERPRISE, and utilizes the
"management approach" for segment reporting.  The management approach is based
on the way that the chief operating decision maker organizes segments within a
company for making operating decisions and assessing performance.  Reportable
segments are based on any manner in which management disaggregates its company
such as by products and services, geography, legal structure and management
structure.  SFAS No. 131 requires disclosures for each segment that are similar
to those required under current standards with the addition of quarterly
disclosure requirements and more specific and detailed geographic disclosures
especially by countries as opposed to broad geographic regions.  This Statement
also requires descriptive information about the way the operating segments were
determined, the products/services provided by the operating segments, the
differences between the measurements used in reporting segment information and
those used in general purpose financial statements, and the changes in the
measurement of segment amounts from period to period.  The provisions of SFAS
No. 131 are effective for fiscal years beginning after December 15, 1997.  The
adoption of this statement did not have a material impact on the Company.

     In February 1998, the FASB released SFAS 132, EMPLOYERS' DISCLOSURES ABOUT
PENSIONS AND OTHER POSTRETIREMENT BENEFITS, AN AMENDMENT OF FASB STATEMENTS NO.
87, 88, AND 106 ("SFAS 132").  SFAS 132 standardizes disclosure requirements for
pensions and postretirement benefits where applicable and suggests a combined
format for presentation purposes, requires additional information on changes in
the benefit obligations and fair values of plan assets, and eliminates certain
disclosures that are no longer useful.  This statement, however, does not change
the measurement or recognition requirements of pension or postretirement benefit
plans.  SFAS 132 is effective for fiscal years beginning after December 15, 1997
and requires restatement of earlier periods if the information is readily
available.  The impact of this statement is not expected to have a material
effect on the Company's financial statements.

     In June 1998, the FASB released SFAS 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133").  SFAS 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities.  It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value.  The accounting for changes in the fair value of a
derivative (that is, gains and losses) depends on the intended use of the
derivative and the resulting designation.  This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999.  Earlier
application is encouraged, however, this statement should not be applied
retroactively to financial statements of prior periods.  The Company does not
currently participate in any activity that qualifies as


                                          50
<PAGE>

derivative or hedging and, therefore, does not expect this statement to have a
material effect on the financial statements.

     In October 1998, the FASB released SFAS 134, ACCOUNTING FOR MORTGAGE-BACKED
SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS HELD-FOR-SALE BY
A MORTGAGE BANKING ENTERPRISE ("SFAS 134").  SFAS 134 requires that after the
securitization of a mortgage loan held-for-sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold those
investments.  This Statement conforms the subsequent accounting for securities
retained after the securitization of mortgage loans by a mortgage banking
enterprise with the subsequent accounting for securities retained after the
securitization of other types of assets by a nonmortgage banking enterprise.
SFAS 134 is effective for the first fiscal quarter beginning after December 15,
1998 and is not expected to have a material effect on the Company's financial
statements.

     In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accounts issued Statement of Position ("SOP") No.
98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES.  This SOP provides guidance
on the financial reporting of start-up activities and organization costs to be
expensed as incurred.  This SOP is effective for financial statements for fiscal
years beginning December 15, 1998 and at the time of adoption, any such costs
that have previously been capitalized should be expensed and reported as a
cumulative effect of change in accounting principle.  The adoption of this SOP
is not expected to have a material effect on the Company's financial statements.


IMPACT OF YEAR 2000

     The Company recognizes and is addressing the potential implications of the
"Year 2000 Issue."  The "Year 2000 Issue" is a general term used to describe the
various situations that may result from the improper processing of dates and
date-sensitive calculations as the year 2000 approaches.  This issue is caused
by the fact that many of the world's existing computer programs use only two
digits to identify the year in the date field of a program.  These programs were
designed and developed without considering the impact of the upcoming change in
the century. Malfunctions may occur when the last two digits of the year change
to "00" as a result of identifying a year designated "00" as the year 1900
rather than the year 2000. Because of the potential ramifications of the Year
2000 Issue, the Company is taking the Year 2000 Issue very seriously.

     The Bank's Year 2000 Compliance Committee ("Committee"), which is comprised
of management of the Bank, is leading the Company's Year 2000 efforts and
involving all employees in ensuring that the Company is properly prepared for
the Year 2000.  The Bank's Board of Directors has approved and is monitoring a
plan submitted by the Committee that was developed in accordance with guidelines
set forth by the Federal Financial Institutions Examination Council.  This plan
has five primary phases related to internal Year 2000 compliance.

     The following phases describe the discovery, planning, and implementation
in managing the Company's Year 2000 program and the readiness of the Company to
meet its schedule:

     -    AWARNESS PHASE - Define the Year 2000 problem and gather the resources
          necessary to perform compliance work.  Establish a Year 2000 program
          committee and develop an overall strategy that encompasses in-house
          systems, service bureaus for systems outsourced, vendors, auditors,
          customers, and suppliers (including correspondents).  The awareness
          phase was complete at September 30, 1998.

     -    ASSESSMENT PHASE - Assess the size and complexity of the problem and
          detail the magnitude of the effort necessary to address Year 2000
          issues.  This phase identifies all hardware, software, networks,
          automated teller machines, other various processing platforms,
          customer and vendor interdependencies affected by the Year 2000 date
          change.  The assessment phase was complete at September 30, 1998.


                                          51
<PAGE>

     -    RENOVATION PHASE - This phase includes code enhancements, hardware and
          software upgrades, system placements, vendor certification, and other
          associated changes.  Work should be prioritized based on information
          gathered during the assessment phase.  Since the Company relies on
          outside servicers or third-party software providers, ongoing
          discussion and monitoring of vendor progress have been necessary.  The
          renovation phase was substantially complete at December 31, 1998.

     -    VALIDATION PHASE - Testing is a multifaceted process that is critical
          to the Year 2000 project and inherent in each phase of the plan.  This
          process includes the testing of incremental changes to hardware and
          software components. In addition to testing upgraded components,
          connections with other systems must be verified, and all changes
          should be accepted by internal and external users.  The validation
          phase of mission-critical systems is well underway and should be
          substantially complete by March 31, 1999.

     -    IMPLEMENTATION PHASE - In this phase, systems should be certified as
          Year 2000 compliant and be accepted by the users.  For any system
          failing certification, the business effect must be assessed clearly
          and the Company's Year 2000 contingency plans should be implemented.
          Testing of mission critical systems should be completed and
          implementation should be substantially complete by June 30, 1999.

     The identified areas of Year 2000 concern for the Bank are: 1) core 
applications, 2) teller and platform applications, 3) automatic teller 
machines, electronic funds transfer, and electronic data interchange, 4) 
marketing, 5) loan administration, operations, and processing, 6) other 
applications, 7) office automation, 8) item processing, 9) communications and 
network, 10) primary hardware, 11) wide area network and local area network, 
and 12) infrastructure.  At December 31, 1998, automated teller machines 
("ATMs") were the only system identified as an area to be updated.

     The Bank purchased new Local Area Networks ("LAN") for the 3 branches 
and a Wide Area Network ("WAN") connecting these branches for the April 1998 
conversion to FiServ (a third party bank application software provider.)  
This equipment, FiServ system, and the Novell software were tested by the 
Bank for Year 2000 compliance in November 1998, and, as an additional 
precaution, will be tested again in March 1999. The reports from FiServ 
indicate that FiServ has completed its portion of the Year 2000 project.

     The Company has taken the additional precaution of developing a Year 
2000 Contingency Plan in consideration of the "most reasonably likely worst 
case scenario."  The purpose of this plan is to assure, to the best of the 
Company's ability, the Company's continued operation should an unforeseen 
problem arise after January 1, 2000.  The Company's contingency plan 
addresses its method of continuing operation if an unforeseen problem 
temporarily affects one of the Company's mission-critical or non 
mission-critical systems.  All financial institutions are already required to 
keep back-up records for all accounts in case of an emergency, if necessary 
these records can be accessed any time they are needed.

     While the management of the Bank does not believe the financial impact to
the Company to ensure 2000 compliance is material to the financial position or
results of operations of the Company, it estimates that the Company will spend
less than $100,000 on the project.  As of December 31, 1998 the Company has
spent approximately $13,000 in direct costs associated with the Year 2000
project, which were expensed as incurred.

     The Company expects that when the century changes, reliance on third 
parties is where disruption of services may occur in a "most reasonably 
likely worst case scenario."  Some of these third parties provide 
mission-critical systems, such as electricity and telephone utilities, which 
are beyond the control of the Company.  Other third parties provide 
mission-critical and non mission-critical systems such as hardware and 
software solutions. Contingency plans for each individual mission-critical 
system have alternative solutions such as

                                          52
<PAGE>

spreadsheet software and manual systems on a temporary basis, until problems can
be corrected.  However, contingency plans for non mission-critical systems are
not considered necessary for the day to day operation of the Bank.

     In addition, financial institutions may experience increases in problem 
loans and credit losses in the event that borrowers fail to prepare properly 
for Year 2000, and higher funding costs could result if consumers react to 
publicity about the issue by withdrawing deposits.  The Bank has attempted to 
assess these risk and will take action to minimize their effects.

     The Year 2000 statements in the "Impact of Year 2000" section of this 
Form 10-KSB are Year 2000 Readiness Disclosures pursuant to the Year 2000 
Information and Readiness Disclosure Act, Pub. L. No. 105-271, 112 Stat. 2386 
(1998).

FORWARD-LOOKING INFORMATION

     When used in this report, the words "believes," "anticipates," "expect" and
similar expressions are intended to identify forward-looking statements.  Such
statements are subject to certain risks and uncertainties which could cause
actual results to differ materially, including, but not limited to, those set
forth in "Management's Discussion and Analysis or Plan of Operation."  The costs
of the Company's Year 2000 compliance project and the dates on which the Company
believes it will complete the phases of the project are based upon management's
best estimates, which were derived using numerous assumptions regarding future
events, including the continued availability of certain resources, third-party
remediation plans, and other factors.  There can be no assurance that these
estimates will prove to be accurate and actual results could differ materially
from those currently anticipated.  Specific factors that could cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in Year 2000 issues, the ability to identify, assess,
remediate and test all relevant computer codes and embedded technology, and
similar uncertainties.  READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.  THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.


                                          53
<PAGE>

ITEM 7.   FINANCIAL STATEMENTS

     Financial statements are filed as a part of this report at the end of Part
III hereof beginning at page F-1, Index to Consolidated Financial Statements,
and are incorporated herein by reference.


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

     None


                                       PART III

     The information required by Part III is omitted from this report because
the Company will file a definitive Proxy Statement for the Company's 1999 Annual
Meeting of Stockholders (the "Proxy Statement") pursuant to Regulation 14A of
the Securities Exchange Act of 1934 not later than 120 days after the end of the
fiscal year covered by this Form 10-KSB and certain information included therein
is incorporated herein by reference.

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

     The information required by this Item is incorporated by reference to the
Proxy Statement.


ITEM 10.  EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to the
Proxy Statement.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to the
Proxy Statement.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to the
Proxy Statement.


                                          54
<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

<TABLE>
<CAPTION>
  EXHIBIT NO.                             DESCRIPTION
-------------- -----------------------------------------------------------------
<S>            <C>
      **3.1    Certificate of Amendment of Certificate of Incorporation and
               Certificate of Incorporation of the Company (incorporated by
               reference from the Company's Quarterly Report on Form 10-QSB for
               the quarter ended June 30, 1997, SEC File No. 0-28894)

      **3.2    Amended Bylaws of the Company (incorporated by reference from
               the Company's Registration Statement on Form S-8, filed June
               2,1997, SEC File No. 333-28215)

     **10.1    Agreement and Plan of Reorganization and Plan of Merger
               (incorporated by reference from the Company's Registration
               Statement on Form 8-A, filed October 11, 1996, SEC File No. 001-
               12309)

     **10.3    Profit Sharing and Employee Stock Ownership Plan of First
               Savings Bank, F.S.B. (incorporated by reference from the
               Company's Registration Statement on Form 8-A, filed October 11,
               1996, SEC File No. 001-12309)

     **10.3.1  Amendment Number One to Profit Sharing and Employee Stock
               Ownership Plan of First Savings Bank, F.S.B. (refiled) 
               (incorporated by reference from the Company's Registration 
               Statement on Form 8-A, filed October 11, 1996, SEC File No. 
               001-12309)

     **10.4    Agreement for Standby Letter of Credit Advances/Confirmation,
               Collateral Pledge and Security Agreement with FHLB of Dallas
               (incorporated by reference from the Company's Registration
               Statement on Form 8-A, filed October 11, 1996, SEC File No. 001-
               12309)

 **/***10.6    Employment Agreement with Kenneth J. Huey, Jr. (incorporated by
               reference from the Company's Registration Statement on Form 8-A,
               filed October 11, 1996, SEC File No. 001-12309)

 **/***10.6.1  Extension of Employment Agreement with Kenneth J. Huey, Jr.
               dated November 20, 1997

 **/***10.7    Employment Agreement with Norman R. Corzine (incorporated by
               reference from the Company's 1996 10-KSB)

 **/***10.7.1  Extension of Employment Agreement with Norman R. Corzine dated
               November 20, 1997

 **/***10.10   Non-Employee Director Retainer Plan (incorporated by reference
               from the Company's Registration Statement on Form S-8, filed
               June 2, 1997, SEC File No. 333-28217)

 **/***10.11   1997 Stock Option and Incentive Plan (incorporated by reference
               from the Company's Registration Statement on Form S-8, filed
               June 2, 1997, SEC File No. 333-28215)
 
  */***10.12   Nonqualified 401(K) Rabbi Trust for an Executive Savings Plan
               dated June 1, 1998

      *21      Subsidiaries of the Small Business Issuer

      *23      Consent of Independent Accountants

      *27      Financial Data Schedule
</TABLE>


  *  Filed herewith
 **  Previously filed
***  Designates each management contract or compensatory plan or arrangement
     required to be identified pursuant to Item 13(a) of Form 10-KSB.


                                          55
<PAGE>

(b)  REPORTS ON FORM 8-K

     The following subparagraph sets forth information concerning two Forms 8-K
filed during the fourth quarter ended December 31, 1998:

     1.   On December 1, 1998 the Company filed a Form 8-K reporting that the
          Company's wholly-owned subsidiary FirstBank had concluded as of this
          date a sale of its mortgage servicing portfolio (owned and serviced
          for others) to Suburban Mortgage Company of New Mexico of Albuquerque,
          New Mexico for an undisclosed purchase price.  Suburban Mortgage
          assumes the responsibility for administering and servicing
          approximately $99 million in loans outstanding for itself and various
          other investors.

     2.   On December 19, 1998 the Company filed a Form 8-K reporting that the
          Company for FirstBank, had declared a five cent ($.05) cash dividend
          payable on January 15, 1999 to shareholders of record as of
          December 31, 1998.


                                          56
<PAGE>

                                      SIGNATURES


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


                                   ACCESS ANYTIME BANCORP, INC.


     Date:  March 11, 1999         /s/ Norman R. Corzine
                                   ----------------------------------------
                                   Norman R. Corzine, Chairman of the Board,
                                   Chief Executive Officer
                                   (DULY AUTHORIZED REPRESENTATIVE)



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

By:  /s/ Norman R. Corzine                   By:  /s/ R. Chad Lydick
     -----------------------------------          ------------------------------
     Norman R. Corzine                            R. Chad Lydick
     Chairman of the Board                        Director
     Chief Executive Officer
     Director

     Date:  March 11, 1999                   Date:  March 11, 1999

By:  /s/ Ken Huey, Jr.                       By:  /s/ Charles Guthals
     -----------------------------------          ------------------------------
     Ken Huey, Jr.                                Charles Guthals
     President, Chief Financial Officer           Director
     Director

     Date:  March 11, 1999                   Date:  March 11, 1999

By:  /s/ Carl Deaton                         By:  /s/ Allan M. Moorhead
     -----------------------------------          ------------------------------
     Carl Deaton                                  Allan M. Moorhead
     Director                                     Director

     Date:  March 11, 1999                   Date:  March 11 1999

By:  /s/ James A. Clark                      By:  /s/ Thomas W. Martin, III
     -----------------------------------          ------------------------------
     James A. Clark                               Thomas W. Martin, III
     Director                                     Director

     Date:  March 11, 1999                   Date:  March 11, 1999


                                     (Continued)


                                          57
<PAGE>

                                      SIGNATURES
                                     (CONTINUED)


By:  /s/ Cornelius Higgins, Ph.D.            By:  /s/ David Ottensmeyer, M.D.
     -----------------------------------          ------------------------------
     Cornelius Higgins                            David Ottensmeyer
     Director                                     Director

     Date:  March 11, 1999                   Date:  March 11, 1999


                                          58

<PAGE>

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                       

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Report of Independent Accountants......................................   F-2
                                                                             
Financial Statements:                                                        
  Consolidated Statements of Financial Condition.......................   F-3
  Consolidated Statements of Operations................................   F-4
  Consolidated Statements of Stockholders' Equity......................   F-5
  Consolidated Statements of Cash Flows................................   F-6
  Notes to Consolidated Financial Statements...........................   F-8
</TABLE>


                                      F-1

<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS
                                       


Board of Directors and Stockholders
Access Anytime Bancorp, Inc.
Clovis, New Mexico


We have audited the accompanying consolidated statements of financial 
condition of Access Anytime Bancorp, Inc. and subsidiary as of December 31, 
1998 and 1997, and the related consolidated statements of operations, 
stockholders' equity and cash flows for each of the three years in the period 
ended December 31, 1998. These financial statements are the responsibility of 
the Company's management. Our responsibility is to express an opinion on 
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the consolidated financial position of Access Anytime 
Bancorp, Inc. and subsidiary as of December 31, 1998 and 1997, and the 
consolidated results of their operations and their cash flows for each of the 
three years in the period ended December 31, 1998, in conformity with 
generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company 
changed its method of accounting for earnings per share in 1997.



Robinson Burdette Martin & Cowan, L.L.P.

Lubbock, Texas
February 12, 1999, except as to the first 
  paragraph of Note 18 for which the 
  date is February 17, 1999.


                                      F-2
<PAGE>

                    ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY
                                          
                   CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                                                  December 31
                                                                                    -----------------------------------------
ASSETS                                                                                       1998                  1997
------                                                                              --------------------  -------------------
<S>                                                                                 <C>                   <C>
Cash and cash equivalents                                                           $         5,232,708   $         6,814,126
Certificates of deposit                                                                       2,590,000             1,530,000
Securities available-for-sale (amortized cost of $11,487,694 and $15,036,150)                11,425,592            15,032,085
Securities held-to-maturity (aggregate fair value of $7,507,941                                                              
   and  $18,803,081)                                                                          7,528,337            18,947,399
Loans held-for-sale (aggregate fair value of $869,777 and $304,150)                             855,258               297,873
Loans receivable                                                                             88,809,104            58,172,494
Interest receivable                                                                             634,546               585,730
Real estate owned                                                                               166,195                76,091
FHLB stock                                                                                      790,233             1,667,434
Premises and equipment                                                                        2,375,205             2,054,247
Servicing rights                                                                                     --               331,296
Organizational cost, net of accumulated amortization of $89,932 and $48,055                     115,162               157,039
Deferred tax asset                                                                            1,075,586             1,402,032
Other assets                                                                                    170,441               145,372
                                                                                    --------------------  -------------------
       Total assets                                                                 $       121,768,367   $       107,213,218
                                                                                    ====================  ===================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Deposits                                                                         $       105,045,150   $        97,412,005
   Federal Home Loan Bank advances                                                            5,750,000                    --
   Accrued interest and other liabilities                                                       686,447               358,154
   Advanced payments by borrowers for taxes and insurance                                       362,009               297,837
                                                                                    --------------------  -------------------
       Total liabilities                                                                    111,843,606            98,067,996
                                                                                    --------------------  -------------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $.01 par value; 4,000,000 shares authorized; none
     issued                                                                                          --                    --
   Common stock, $.01 par value; 6,000,000 shares authorized;                        
     1,236,955 and 1,217,336 shares issued;  1,235,579 and 1,217,336                             
     outstanding in 1998 and 1997, respectively                                                  12,370                12,173
   Capital in excess of par value                                                             9,604,001             9,477,405
   Retained earnings (accumulated deficit)                                                      356,601              (341,673)
   Accumulated other comprehensive income (loss), net of tax of
     $21,115  and $1,382                                                                        (40,987)               (2,683)
                                                                                    --------------------  -------------------
                                                                                              9,931,985             9,145,222
   Treasury stock, at cost                                                                       (7,224)                   --
                                                                                    --------------------  -------------------
       Total stockholders' equity                                                             9,924,761             9,145,222
                                                                                    --------------------  -------------------

       Total liabilities and stockholders' equity                                   $       121,768,367   $       107,213,218
                                                                                    ====================  ===================
</TABLE>


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


                                      F-3
<PAGE>

                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY
                                       
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                    Years ended December 31
                                                                   ---------------------------------------------------------
                                                                         1998               1997                 1996
                                                                   -----------------  ------------------  ------------------
<S>                                                                <C>                <C>                 <C>               
Interest income:
   Loans receivable                                                $       6,143,506  $       4,490,079   $       3,476,520
   U.S. government agency securities                                          70,241            103,888             292,926
   Mortgage-backed securities                                              1,452,059          2,379,293           3,434,232
   Other interest income                                                     344,241            277,041             268,950
                                                                   -----------------  ------------------  ------------------
       Total interest income                                               8,010,047          7,250,301           7,472,628
                                                                   -----------------  ------------------  ------------------

Interest expense:                                                                      
   Deposits                                                                4,260,384          4,136,200           4,692,438
   FHLB advances                                                             262,640             13,007              24,663
                                                                   -----------------  ------------------  ------------------

       Total interest expense                                              4,523,024          4,149,207           4,717,101
                                                                   -----------------  ------------------  ------------------

Net interest income before provision for loan losses                       3,487,023          3,101,094           2,755,527
Provision for loan losses                                                    238,280            117,917              13,639
                                                                   -----------------  ------------------  ------------------

       Net interest income after provision for loan
         losses                                                            3,248,743          2,983,177           2,741,888
                                                                   -----------------  ------------------  ------------------

Noninterest income:
   Loan servicing and other fees                                             314,316            329,420             339,058
   Net realized gains on sales of available-for-sale
     securities                                                                   --             20,637                  --
   Net realized gains on sales of loans                                      222,830            148,915             141,175
   Real estate operations, net                                                10,466                 --                  --
   Other income                                                            1,230,666            367,338             325,378
                                                                   -----------------  ------------------  ------------------

       Total other income                                                  1,778,278            866,310             805,611
                                                                   -----------------  ------------------  ------------------

Noninterest expenses:
   Salaries and employee benefits                                          2,061,294          1,777,190           1,606,397
   Occupancy expense                                                         522,832            401,755             371,413
   Deposit insurance premium                                                 122,928            258,375           1,144,417
   Advertising                                                                54,058             53,465              28,347
   Real estate operations, net                                                    --              3,013              42,826
   Professional fees                                                         171,377             16,611             250,673
   Other expense                                                             988,235            955,369             836,996
                                                                   -----------------  ------------------  ------------------

       Total other expenses                                                3,920,724          3,465,778           4,281,069
                                                                   -----------------  ------------------  ------------------

Income (loss) before income taxes                                          1,106,297            383,709            (733,570)

Income tax expense (benefit)                                                 346,179         (1,212,000)                 --
                                                                   -----------------  ------------------  ------------------

Net income (loss)                                                  $         760,118  $       1,595,709   $        (733,570)
                                                                   =================  ==================  ==================

Earnings (loss) per common share                                   $            .62   $           1.40    $          (1.01)
                                                                   =================  ==================  ==================

Earnings (loss) per common share-assuming dilution                 $            .59   $           1.37    $          (1.01)
                                                                   =================  ==================  ==================
</TABLE>

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


                                      F-4
<PAGE>

                   ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY
                                       
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                            
                                             Common Stock       Treasury Stock                              Accumulated  
                                          ------------------- --------------------                              Other    
                                                                                    Capital      Retained   Comprehensive
                                                                                   in Excess    Earnings/      Income    
                            Comprehensive   Number             Number                Of Par    (Accumulated    (Loss),   
                               Income     of shares   Amount  of Shares    Amount     Value      Deficit)       Net         Total  
                            ------------- --------- --------- ---------- --------- ----------- ------------ ------------- ----------
<S>                         <C>           <C>       <C>       <C>        <C>       <C>         <C>          <C>           <C>       
Balance  at  December  31,                                                                                                          
  1995                                      695,698 $   6,957 $     --         --  $6,826,442  $(1,008,612) $   (204,410) $5,620,377
                                                                                                                                    
Net loss                    $   (733,570)        --        --       --         --          --     (733,570)           --   (733,570)
                                                                                                                                    
Net changes in  unrealized                                                                                                          
   depreciation on                                                                                                                  
   available-for-sale                                                                                                               
   securities, net                 5,815         --        --       --         --          --           --         5,815       5,815
                            -------------                                                                                           
Total comprehensive income  $   (727,755)                                                                                           
                            =============                                                                                           
                                                                                                                                    
Common stock issued                          36,500       365       --         --     193,135           --            --     193,500
                                          --------- --------- ---------- --------- ----------- ------------ ------------- ----------
                                                                                                                                    
Balance  at  December  31,                                                                                                          
   1996                                     732,198     7,322       --         --   7,019,577   (1,742,182)     (198,595)  5,086,122
                                                                                                                                    
Net income                  $  1,595,709         --        --       --         --          --    1,595,709            --   1,595,709
                                                                                                                                    
Net changes in  unrealized                                                                                                          
   depreciation on                                                                                                                  
   available-for-sale                                                                                                               
   securities, net               195,912         --        --       --        --           --           --       195,912     195,912
                            -------------                                                                                           
Total comprehensive income  $  1,791,621                                                                                            
                            =============                                                                                           
                                                                                                                                    
Common stock issued                         461,422     4,614       --         --   2,253,569           --            --   2,258,183
                                                                                                                                    
Common stock rights                                                                                                                 
   issued in lieu of                                                                                                                
   directors cash                                                                                                                   
   compensation                                  --        --       --         --      10,500           --            --      10,500
                                                                                                                                    
2% common stock dividend                                                                                                            
   issued on December 1,                                                                                                            
   1997                                      23,716       237       --         --     193,759     (193,996)           --          --
                                                                                                                                    
Cash dividends-fractional                                                                                                           
  shares in cash                                 --        --        --        --          --       (1,204)           --     (1,204)
                                          --------- --------- ---------- --------- ----------- ------------ ------------ -----------
                                                                                                                                    
Balance at December  31,                                                                                                            
   1997                                   1,217,336    12,173       --        --    9,477,405     (341,673)       (2,683)  9,145,222
                                                                                                                                    
Net income                  $    760,118         --        --       --        --           --      760,118            --     760,118
                                                                                                                                    
Net changes in unrealized                                                                                                           
   depreciation on                                                                                                                  
   available-for-sale                                                                                                               
   securities, net               (38,304)        --        --       --        --           --           --       (38,304)   (38,304)
                            -------------                                                                                           
Total comprehensive income  $    721,814                                                                                            
                            =============                                                                                           
                                                                                                                                    
Common stock issued                          19,619       197       --        --      108,596           --            --     108,793
                                                                                                                                    
Common stock rights                                                                                                                 
   issued in lieu of                                                                                                                
   directors cash                                                                                                                   
   compensation                                  --        --       --        --       18,000           --            --      18,000
                                                                                                                                    
Purchase treasury stock                          --        --    1,376    (7,224)          --           --            --     (7,224)
                                                                                                                                    
Cash dividends                                   --        --       --        --           --      (61,844)           --    (61,844)
                                          --------- --------- ---------- --------- ----------- ------------ ------------ -----------
Balance  at  December  31,                                                                                                          
   1998                                   1,236,955 $  12,370    1,376   $ (7,224) $9,604,001  $   356,601  $    (40,987)$ 9,924,761
                                          ========= ========= ========== ========= =========== ============ ============ ===========
</TABLE>

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


                                      F-5
<PAGE>
                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                    Years ended December 31
                                                                   ---------------------------------------------------------
                                                                         1998               1997                 1996
                                                                   -----------------  ------------------  ------------------
<S>                                                                <C>                <C>                 <C>
Cash flows from operating activities:
   Net income (loss)                                               $        760,118   $      1,595,709    $       (733,570)
   Adjustments to reconcile net income (loss) to cash
    provided (used) by operating activities:
     Depreciation                                                           269,072            144,419             133,970
     Deferred income taxes                                                  346,179         (1,212,000)                 --
     Provision for loan losses charged                                      238,280            117,917              13,639
     Amortization of premiums on investment securities                      178,164            308,294             300,594
     Amortization of loan premiums, discounts and
       deferred fees, net                                                   244,007            134,689              (6,148)
     Amortization of organizational costs                                    41,877             38,241               9,814
     Gain on sale of mortgage servicing rights                             (838,143)                --                  --
     Gain on sale of available-for-sale securities                               --            (20,637)                 --
     Gain on sale of loans held-for-sale                                   (222,830)          (148,915)           (176,011)
     Proceeds from sales of loans held-for-sale                          13,210,392          8,769,996           9,058,465
     Originations of loans held-for-sale                                (13,674,579)        (8,347,287)         (8,620,197)
     Common stock rights issued in lieu of directors
       compensation                                                          18,000             10,500                  --
     (Gain) loss on foreclosed real estate                                  (14,575)              (813)                512
     (Gain) loss on disposition of assets                                   (14,418)               727              16,112
     Net (increase) decrease in accrued interest
       receivable and other assets                                          (74,079)           162,186            (105,052)
     Increase (decrease) in accrued expense and other                       266,449              7,019             (50,506)
       liabilities
                                                                   -----------------  ------------------  ------------------
       Net cash provided by (used in) operating activities                  733,914          1,560,045            (158,378)
                                                                   -----------------  ------------------  ------------------

Cash flows from investing activities:
   Proceeds from maturities and principal repayments
     of available-for-sale securities                                     3,438,728          3,250,346           9,319,271
   Purchases of held-to-maturity securities                                      --                 --          (5,017,969)
   Proceeds from maturities and principal repayments
     of held-to-maturity securities                                      11,350,626         10,055,258          12,145,023
   Proceeds from sales of available-for-sale-securities                          --          5,376,284                  --
   Proceeds from the redemption of FHLB stock                               877,201                 --                  --
   Proceeds from sale of mortgage servicing rights                        1,203,905                 --                  --
   Net (increase) decrease in certificates of deposit                    (1,060,000)        (1,149,430)             95,855
   Net increase in loans                                                (31,165,066)       (12,836,195)        (11,302,134)
   Proceeds from sales of foreclosed real estate                             66,000             19,600              57,613
   Purchases of premises and equipment                                     (575,612)          (274,988)            (89,627)
                                                                   -----------------  ------------------  ------------------
       Net cash provided (used) by investing activities                 (15,864,218)         4,440,875           5,208,032
                                                                   -----------------  ------------------  ------------------

Cash flows from financing activities:
   Net increase (decrease) in deposits                                    7,633,145           (751,996)        (12,469,123)
   Net increase (decrease) in other borrowed funds                        5,750,000         (3,000,000)          3,000,000
   Net increase (decrease) in advance payments by
     borrowers for taxes and insurance                                       64,172             45,738             (59,058)
   Organizational costs incurred                                                 --            (31,907)           (173,187)
   Rights offering costs incurred                                                --            (69,253)            (95,165)
   Purchase of treasury stock                                                (7,224)                --                  --
   Proceeds from issuance of common stock                                   108,793          2,422,601             193,500
   Cash dividend (fractional share payments)                                     --             (1,204)                 --
                                                                   -----------------  ------------------  ------------------
       Net cash provided (used) in financing activities                  13,548,886         (1,386,021)         (9,603,033)
                                                                   -----------------  ------------------  ------------------
Increase (decrease) in cash and cash equivalents                         (1,581,418)         4,614,899          (4,553,379)
Cash and cash equivalents at January 1                                    6,814,126          2,199,227           6,752,606
                                                                   -----------------  ------------------  ------------------
Cash and cash equivalents at December 31                           $      5,232,708   $      6,814,126    $      2,199,227
                                                                   =================  ==================  ==================
                                                 (Continued)

                                      F-6
<PAGE>

                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (CONTINUED)

                                                                                    Years ended December 31
                                                                   ---------------------------------------------------------
                                                                         1998               1997                 1996
                                                                   -----------------  ------------------  ------------------

Supplemental  disclosures  of cash flow  information:  
 Cash paid during the year for:
     Interest                                                      $      4,437,249   $      4,147,090    $      4,827,856
     Income taxes                                                                --                 --                  --
   Supplemental disclosure of non-cash investing and
    financing activities
     Real estate acquired in settlement of loans                             46,169             20,862              53,419
     Common stock dividend                                                       --            193,996                  --
     Loans to facilitate the sale of real estate owned                           --                 --              23,000

</TABLE>


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


                                      F-7

<PAGE>

                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION, PRINCIPLES OF CONSOLIDATION AND USE OF ESTIMATES - 
Access Anytime Bancorp, Inc. (the "Company") is a thrift holding company for 
its wholly-owned subsidiary First Savings Bank, F.S.B. renamed FirstBank (the 
"Bank") and the Bank's wholly-owned subsidiary, First Equity Development 
Corporation ("FEDCO"). The consolidated financial statements include the 
accounts and transactions of the Company, the Bank and FEDCO. All significant 
intercompany accounts and transactions have been eliminated in consolidation.

The Company was formed in 1996 and, through an agreement and plan of 
reorganization by and between the Company and the Bank, became the holding 
company for the Bank under a stock-for-stock exchange.  As a result of this 
reorganization, the 1995 financial statements are presented to reflect the 
result of the reorganization. There was no effect on that year's net income 
or net income per share of common stock.

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 and disclosure of 
contingent assets and liabilities at the date of the financial statements and 
the reported amounts of revenues and expenses during the reporting period. 
Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash, due from 
banks and all certificates of deposit with original maturities of three months 
or less.  There are no amounts subject to withdrawal or usage restrictions.

SECURITIES AVAILABLE-FOR-SALE - Securities to be held for indefinite periods 
of time and not intended to be held-to-maturity are classified as 
available-for-sale.  Assets included in this category are those assets that 
management intends to use as part of its asset/liability management strategy 
and that may be sold in response to changes in liquidity needs, interest 
rates, resultant prepayment risk, and other factors related to interest rate 
and resultant prepayment risk changes.  Securities available-for-sale are 
recorded at fair value.  Both unrealized gains and losses on securities 
available-for-sale, net of taxes, are included as a separate component of 
accumulated other comprehensive income (loss) in the consolidated statements 
of financial condition until these gains or losses are realized.  Gain and 
losses are determined using the specific-identification method.  If a 
security has a decline in fair value that is other than temporary, the 
security is written down to its fair value by recording a loss in the 
consolidated statements of operations.


                                  (Continued)


                                      F-8

<PAGE>

                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SECURITIES HELD-TO-MATURITY - Securities for which the Bank has the positive 
intent and ability to hold to maturity are reported at cost, adjusted for 
premiums and discounts that are recognized in interest income using the 
interest method over period to maturity.  If a security has a decline in fair 
value below its amortized cost that is other than temporary, the security is 
written down to its new cost basis by recording a loss in the consolidated 
statements of operations.  The Bank has not experienced a permanent decline 
on securities that would result in a charge to operations.

LOANS HELD-FOR-SALE - Loans to be held for indefinite periods of time and not 
intended to be held-to-maturity are classified as held-for-sale.  Loans 
held-for-sale are recorded at the lower of amortized cost or fair value with 
only net unrealized losses included in the consolidated statements of 
operations.

FEDERAL HOME LOAN BANK (FHLB) STOCK - This asset is owned due to regulatory 
requirements and is carried at cost.  This stock is pledged as collateral to 
secure FHLB advances.

LOANS RECEIVABLE - Loans receivable that management has the intent and 
ability to hold for the foreseeable future or until maturity or pay-off are 
reported at their outstanding principal adjusted for any unearned discount, 
the allowance for loan losses and any deferred fees or costs on originated 
loans.

Unearned discount on installment loans is recognized as income over terms 
which approximate the interest method.  Interest on other loans is recognized 
using the simple-interest method on the daily balances of the principal 
amounts outstanding.

The accrual of interest on impaired loans is discontinued when, in 
management's opinion, the borrower may be unable to meet payments as they 
become due.  When interest accrual is discontinued, all unpaid accrued 
interest is reversed.  If the ultimate collectibility of principal, wholly or 
partially, is in doubt, any payment received on a loan on which the accrual 
of interest has been suspended is applied to reduce principal to the extent 
necessary to eliminate such doubt. Otherwise, interest income is recognized 
for such payments.

Loan origination fees and direct origination costs are deferred and 
recognized as an adjustment of the yield of the related loan.

The Bank defines a loan as impaired when, based on current information and 
events, it is probable that the Bank will be unable to collect all amounts 
due according to the contractual terms of the loan agreement.  The Bank uses 
the same criteria in placing a loan on nonaccrual status, exclusive of 
residential mortgage loans and consumer loans which are placed on nonaccrual 
status when they become 90 days past due.  When interest accrual is 
discontinued, all unpaid accrued interest is reversed.  Interest income is 
subsequently recognized only to the extent cash payments are received.


                                  (Continued)


                                      F-9

<PAGE>

                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The allowance for loan losses is increased by charges to income and decreased 
by revisions in the estimate of the necessary allowance and by charge-offs 
(net of recoveries).  Management's periodic evaluation of the adequacy of the 
allowance is based on the Bank'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.

LOAN SERVICING - The cost of mortgage servicing rights is amortized in 
proportion to, and over the period of, estimated net servicing revenues. 
Impairment of mortgage servicing rights is assessed based on the fair value 
of those rights.  Fair values are estimated using discounted cash flows based 
on a current market interest rate.  For purposes of measuring impairment, the 
rights are stratified based on the predominant risk characteristics of the 
underlying loans.  The amount of impairment recognized is the amount by which 
the capitalized mortgage servicing rights for a stratum exceed their fair 
value.

When participating interests in loans sold have an average contractual 
interest rate, adjusted for normal servicing fees, that differs from the 
agreed yield to the purchaser, gains or losses are recognized equal to the 
present value of such differential over the estimated remaining life of such 
loans.  The resulting "excess servicing receivable" or "deferred servicing 
revenue" is amortized over the estimated life using a method approximating 
the interest method.

Quoted market prices are not available for the excess servicing receivables. 
Thus, the excess servicing receivables and the amortization thereon are 
periodically evaluated in relation to estimated future servicing revenues, 
taking into consideration changes in interest rates, current prepayment 
rates, and expected future cash flows.  The Bank evaluates the carrying value 
of the excess servicing receivables by estimating the future servicing income 
of the excess servicing receivables based on management's best estimate of 
remaining loan lives and discounted at the original discount rate.

For originated mortgage servicing rights, the Bank allocates the total cost 
of the mortgage loans to the mortgage servicing rights and the loans (without 
the mortgage servicing rights) based on their relative fair values.  Fair 
values are based on quoted market prices in active markets for loans and loan 
servicing rights.  For purchased mortgage servicing rights, the cost of 
acquiring loan servicing contracts is capitalized to the extent such costs do 
not exceed the amount by which the present value of estimated future 
servicing revenue exceeds the present value of expected future servicing 
costs.


                                  (Continued)


                                      F-10

<PAGE>

                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PREMISES AND EQUIPMENT - Land is carried at cost.  Premises and equipment are 
carried at cost, less accumulated depreciation computed by the straight-line 
method over the estimated useful life of the assets.  Maintenance and repairs 
are charged to expense as incurred and improvements are capitalized.

The Company adopted SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED 
ASSETS TO BE DISPOSED OF during 1996.  The Statement establishes accounting 
standards for determining the impairment of the Company's long-lived assets. 
Implementation of the Statement did not result in any adjustments to the 
carrying values of the Company's assets.

FORECLOSED REAL ESTATE - Real estate properties acquired through foreclosure, 
or in lieu of foreclosure are to be sold and are initially recorded at fair 
value at the date of foreclosure establishing a new cost basis.  Any excess 
of the loan balance and foreclosure costs over the fair value at the date of 
foreclosure is charged to the allowance for loan losses.  After foreclosure, 
valuations are periodically performed by management and the real estate is 
carried at the lower of carrying amount or fair value less cost to sell. 
Revenue and expenses from operations and changes in the valuation allowance 
are included in real estate operations, net.

ORGANIZATIONAL COSTS - Organizational costs are being amortized using the 
straight-line method over five years.

STOCK-BASED COMPENSATION - The Company applies Accounting Principles Board 
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" ("APB 25") and 
related interpretations in accounting for its stock-based compensation plans.

In 1995, the Financial Accounting Standards Board ("FASB") issued Statement 
of Financial Accounting Standards (SFAS) No. 123, "ACCOUNTING FOR STOCK-BASED 
COMPENSATION" which was effective for fiscal years beginning after December 15, 
1995.  Under SFAS No. 123, the Company may elect to recognize stock-based 
compensation expense based on the fair value of the awards or continue to 
account for stock-based compensation under APB 25.  The Company has elected 
to continue to apply the measurement provisions of APB 25.

INCOME TAXES - The Company utilizes the liability method of accounting for 
income taxes, whereby deferred income taxes are recognized for the tax 
consequences in future years of differences in the tax bases of assets and 
liabilities and their financial reporting amounts based on enacted tax laws 
and statutory tax rates applicable to the periods in which the differences 
are expected to affect taxable income.  Valuation allowances are established, 
if necessary, to reduce deferred tax assets to the amount expected to be 
realized.

NET INCOME (LOSS) PER SHARE - Basic earnings per share has been computed on 
the basis of the weighted-average number of shares of common stock outstanding 
during the period.  Diluted earnings per share reflects the potential 
dilution that would have occurred if stock options and other contingently 
issuable shares of common stock had been issued during the period 


                                  (Continued)


                                      F-11

<PAGE>

                  ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PRESENTATION - Effective January 1, 1998, the Company adopted SFAS No. 130, 
REPORTING COMPREHENSIVE INCOME.  SFAS No. 130 establishes new rules for the 
reporting and display of comprehensive income and its components, but has no 
effect on the Company's net income or total stockholders' equity.  SFAS No. 130 
requires unrealized gains and losses on the Company's available-for-sale 
securities, which prior to adoption were reported separately in stockholders' 
equity, to be included in comprehensive income.  Prior year financial 
statements have been reclassified to conform to the requirements of 
SFAS No. 130.

IMPACT OF NEW ACCOUNTING STANDARDS - In June 1996, the FASB issued SFAS No. 125,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS 
OF LIABILITIES, which was amended in December 1996.  The Statement provides 
accounting and reporting standards for transfers and servicing of financial 
assets and extinguishment of liabilities.  The Company was required to adopt 
certain provisions of SFAS No. 125 for the year beginning January 1, 1997 and 
certain other provisions of the Statement for the year beginning January 1, 
1998.  The adoption of this statement did not have a material impact on the 
Company's financial position or results of operations.

In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN 
ENTERPRISE AND RELATED INFORMATION.  This Statement supersedes SFAS No. 14, 
FINANCIAL REPORTING SEGMENTS OF A BUSINESS ENTERPRISE, and utilizes the 
"management approach" for segment reporting.  The management approach is 
based on the way that the chief operating decision maker organizes segments 
within a company for making operating decisions and assessing performance.  
Reportable segments are based on any manner in which management disaggregates 
its company such as by products and services, geography, legal structure and 
management structure.  SFAS No. 131 requires disclosures for each segment 
that are similar to those required under current standards with the addition 
of quarterly disclosure requirements and more specific and detailed geographic 
disclosures especially by countries as opposed to broad geographic regions.  
This Statement also requires descriptive information about the way the 
operating segments were determined, the products/services provided by the 
operating segments, the differences between the measurements used in 
reporting segment information and those used in general purpose financial 
statements, and the changes in the measurement of segment amounts from period 
to period.  The provisions of SFAS No. 131 are effective for fiscal years 
beginning after December 15, 1997, or January 1, 1998, for the Company, with 
earlier application permitted.  The adoption of the statement in management's 
opinion did not result in any significant disclosures in addition to those 
already contained in the Company's financial statements.

RECLASSIFICATIONS - Certain amounts for prior years have been reclassified to 
conform with the current year presentation.  These reclassifications had no 
effect on net income (loss) or stockholders' equity.


                                  (Continued)


                                      F-12

<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 2    SECURITIES

Securities have been classified in the consolidated statements of financial
condition according to management's intent.  The carrying amounts of securities
and their approximate fair values at December 31 follow:


<TABLE>
<CAPTION>
                                                    Amortized                 Gross unrealized                   Fair
                                                       Cost               Gains              Losses             Value
                                                 -----------------  ------------------  -----------------  -----------------
<S>                                              <C>                <C>                 <C>                <C>
AVAILABLE-FOR-SALE SECURITIES:

   December 31, 1998:
     Mortgage-backed securities:
       GNMA adjustable rate                      $      11,487,694  $         17,726    $          79,828  $     11,425,592
                                                 -----------------  ----------------    -----------------  ----------------
                                                 -----------------  ----------------    -----------------  ----------------


   December 31, 1997:
     Mortgage-backed securities:
       GNMA adjustable rate                      $      15,036,150  $         69,199    $          73,264  $     15,032,085
                                                 -----------------  ----------------    -----------------  ----------------
                                                 -----------------  ----------------    -----------------  ----------------
</TABLE>


<TABLE>
<CAPTION>                                           Amortized                 Gross unrealized                  Fair
                                                       Cost               Gains              Losses             Value
                                                 -----------------  ------------------  -----------------  -----------------
<S>                                              <C>                <C>                 <C>                <C>

HELD-TO-MATURITY SECURITIES:

   December 31, 1998:
     Mortgage-backed securities:
       FNMA participation certificates           $       2,860,553  $           1,020   $          10,234  $       2,851,339
       FHLMC participation certificates                  3,356,571              4,019               1,207          3,359,383
       FHLMC adjustable rate                             1,311,213                 --              13,994          1,297,219
                                                 -----------------  ------------------  -----------------  -----------------

                                                 $       7,528,337  $           5,039   $          25,435  $       7,507,941
                                                 -----------------  ------------------  -----------------  -----------------
                                                 -----------------  ------------------  -----------------  -----------------

   December 31, 1997:
     Mortgage-backed securities:
       FNMA participation certificates           $       4,362,078  $              --   $          55,795  $       4,306,283
       FHLMC participation certificates                 12,942,259              6,127              66,551         12,881,835
       FHLMC adjustable rate                             1,643,062                 --              28,099          1,614,963
                                                 -----------------  ------------------  -----------------  -----------------

                                                 $      18,947,399  $           6,127   $         150,445  $      18,803,081
                                                 -----------------  ------------------  -----------------  -----------------
                                                 -----------------  ------------------  -----------------  -----------------
</TABLE>

                                  (Continued)


                                     F-13
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 2    SECURITIES  (CONTINUED)

The scheduled maturities of securities available-for-sale and held-to-maturity
at December 31, 1998 were as follows:

<TABLE>
<CAPTION>

                                                    Available-for-sale securities:         Held-to-maturity securities:
                                                 -------------------------------------  ------------------------------------
                                                    Amortized             Fair             Amortized             Fair
                                                       Cost               Value               Cost              Value
                                                 -----------------  ------------------  -----------------  -----------------
<S>                                              <C>                <C>                 <C>                <C>
Due in one year or less                          $              --  $              --   $         968,146  $         970,590
Due from one to five years                                      --                 --           5,248,978          5,240,132
Due from five to ten years                                      --                 --                  --                 --
Due after ten years                                     11,487,694         11,425,592           1,311,213          1,297,219
                                                 -----------------  ------------------  -----------------  -----------------

                                                 $      11,487,694  $      11,425,592   $       7,528,337  $       7,507,941
                                                 -----------------  ------------------  -----------------  -----------------
                                                 -----------------  ------------------  -----------------  -----------------
</TABLE>

For purposes of the maturity table, mortgage-backed securities, which are not
due at a single maturity date, have been allocated over maturity groupings based
on the weighted-average contractual maturities of underlying collateral.  The
underlying principal on mortgage-backed securities may be recovered earlier than
their scheduled contractual maturities because of principal prepayments.

Securities of $4,445,695 and $2,800,534 were pledged to secure public deposits
and for other purposes required or permitted by law at December 31, 1998 and
1997, respectively.  


NOTE 3    LOANS HELD-FOR-SALE

The carrying amount of loans held-for-sale and their estimated fair value, as
determined on an aggregate basis, at December 31, follows:


<TABLE>
<CAPTION>
                                                                     Gross unrealized
                                                        --------------------------------------------
      December 31               Amortized cost                Gains                    Losses                 Fair value
------------------------      -------------------       -------------------      -------------------      -------------------
<S>                           <C>                       <C>                      <C>

         1998                 $         855,258         $          14,519        $              --        $         869,777
         1997                           297,873                     6,277                       --                  304,150
</TABLE>

Proceeds from sale of loans held-for-sale were $13,127,660, $8,769,996, and
$9,058,465 for the years ended December 31, 1998, 1997 and 1996, respectively. 
Gains of $223,083 and losses of $253 were recognized in 1998, while gains of
$149,742 and losses of $827 were recognized in 1997, and gains of $176,411 and
losses of $400 were recognized in 1996.

                                  (Continued)


                                     F-14
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 4    LOANS RECEIVABLE

The components of loans in the consolidated statements of financial condition
were as follows:

<TABLE>
<CAPTION>
                                                                                                   December 31
                                                                                      --------------------------------------
                                                                                            1998                1997
                                                                                      -----------------  -------------------
<S>                                                                                   <C>                <C>
First mortgage loans:
   Conventional                                                                       $      67,703,131  $      41,730,469
   FHA insured and VA guaranteed                                                              6,520,261          4,531,977
Consumer and installment loans                                                               13,560,182         11,377,032
Construction loans                                                                            1,329,806            889,400
Other                                                                                         1,949,673          1,167,782
                                                                                      -----------------  -------------------

                                                                                             91,063,053         59,696,660

Less:
   Loans in process                                                                             947,193            535,054
   Unearned discounts, deferred loan fees, and other                                            705,772            461,765
   Allowance for loan losses                                                                    600,984            527,347
                                                                                      -----------------  -------------------

                                                                                      $      88,809,104  $      58,172,494
                                                                                      -----------------  -------------------
                                                                                      -----------------  -------------------
</TABLE>

An analysis of the changes in allowance for loan losses follows:

<TABLE>
<CAPTION>                                                                                    Years ended December 31
                                                                    --------------------------------------------------------
                                                                          1998                1997               1996
                                                                    ------------------  -----------------  -----------------
<S>                                                                 <C>                 <C>                <C>              
Balance at beginning of year                                        $        527,347    $        429,241   $        427,889

Loans charged-off                                                           (190,056)            (61,597)           (17,882)
Recoveries                                                                    25,413              41,786              5,595
                                                                    ------------------  -----------------  -----------------

       Net loans charged-off                                                (164,643)            (19,811)           (12,287)
Provision for loan losses charged to operations                              238,280             117,917             13,639
                                                                    ------------------  -----------------  -----------------

Balance at end of year                                              $        600,984    $        527,347   $        429,241

                                                                    ------------------  -----------------  -----------------
                                                                    ------------------  -----------------  -----------------
</TABLE>

An analysis of the changes of loans to directors,  executive officers, and major
stockholders were as follows:

<TABLE>
<CAPTION>
                                                                                    Years ended December 31
                                                                    --------------------------------------------------------
                                                                          1998                1997               1996
                                                                    ------------------  -----------------  -----------------
<S>                                                                 <C>                 <C>                <C>   
Balance at beginning of year                                        $        984,434    $        315,605   $        262,180
Loans originated                                                           1,743,100             904,375            110,623
Loan principal payments and other reductions                                (454,918)           (235,546)           (57,198)
                                                                    ------------------  -----------------  -----------------

Balance at end of year                                              $      2,272,616    $        984,434   $        315,605
                                                                    ------------------  -----------------  -----------------
                                                                    ------------------  -----------------  -----------------
</TABLE>

                                  (Continued)


                                     F-15
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 4    LOANS RECEIVABLE (CONTINUED)

The Bank had outstanding commitments to originate loans at December 31, 1998 
and 1997 of approximately $2,057,000 and $1,057,000, respectively.

The following table summarizes impaired loan information:

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                           1998                1997
                                                                     -----------------  -------------------
<S>                                                                  <C>                <C>
Recorded investment in impaired loans                                $         882,213  $            83,026
Average recorded investment in impaired loans                                  121,143            1,603,516
Interest income on impaired loans                                                   --              117,181
</TABLE>

The Bank is not committed to lend additional funds to borrowers with 
non-performing or renegotiated loans. 

NOTE 5    PREMISES AND EQUIPMENT

Components of premises and equipment included in the consolidated statements 
of financial condition at December 31, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                                      1998                1997
                                                                -----------------  -------------------
<S>                                                             <C>                <C>
Cost:
   Land                                                         $         407,593  $         407,593
   Bank premises                                                        2,176,599          2,172,022
   Furniture and equipment                                              1,441,315          1,576,079
   Automobiles                                                             95,385             77,646
                                                                -----------------  -------------------

       Total cost                                                       4,120,892          4,233,340
Less accumulated depreciation                                           1,745,687          2,179,093
                                                                -----------------  -------------------

       Net book value                                           $       2,375,205  $       2,054,247
                                                                =================  ===================
</TABLE>

Certain Bank facilities and equipment are leased under various operating 
leases. Rental expense was $18,942 in 1998, $17,818 in 1997 and $8,253 in 
1996.

Future minimum rental commitments under noncancelable leases are:

<TABLE>
<S>                                                              <C>
              1999                                               $          17,974
              2000                                                          16,854
              2001                                                           9,832
                                                                 -----------------

                                                                 $          44,660
                                                                 =================
</TABLE>

                                  (Continued)


                                     F-16
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 6    LOAN SERVICING

Mortgage loans serviced for others are not included in the accompanying 
consolidated statements of financial condition.  Mortgage servicing rights of 
approximately $100,000,000 were sold in the last quarter of 1998 and the Bank 
realized a gain of $838,143.  The unpaid balances of loans serviced for 
others at December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                                          1998                1997               1996
                                                                    ------------------  -----------------  -----------------
<S>                                                                 <C>                 <C>                <C>
Mortgage loans underlying pass through certificates:
  GNMA                                                              $              --   $       2,630,780  $       2,868,539
  FHLMC                                                                            --           5,115,155          6,574,245
Mortgage loan portfolios serviced for:
  FNMA                                                                             --          33,371,117         33,904,655
  Other investors                                                                  --           1,252,871          1,418,465
                                                                    ------------------  -----------------  -----------------

                                                                    $              --   $      42,369,923  $      44,765,904
                                                                    ==================  =================  =================
</TABLE>

Custodial escrow balances maintained in connection with loan servicing were 
$0 and $391,580 at December 31, 1998 and 1997, respectively.

Mortgage servicing rights retained on loans sold of $129,632 and $55,152 were 
capitalized in 1998 and 1997, respectively.  

Following is an analysis of the aggregate changes in servicing rights asset 
balances for the years 1998, 1997 and 1996.

<TABLE>
<S>                                                                               <C>
Balance, January 1, 1996                                                          $        359,854
Amortization*                                                                              (52,142)
Originated mortgage servicing rights                                                        37,842
                                                                                  -----------------

Balance, January 1, 1997                                                                   345,554
Amortization*                                                                              (69,380)
Originated mortgage servicing rights                                                        55,122
                                                                                  -----------------

Balance, January 1, 1998                                                                   331,296
Amortization*                                                                              (95,166)
Originated mortgage servicing rights                                                       129,632
Originated mortgage servicing rights sold                                                 (365,762)
                                                                                  -----------------

Balance, December 31, 1998                                                        $              0
                                                                                  =================
</TABLE>

*    Includes valuation adjustments, if any, due to changes in prepayment 
assumptions

NOTE 7    CONCENTRATION OF CREDIT RISK

The Bank invests available funds in mortgage-backed securities and 
interest-bearing deposits and maintains funds in other depository 
institutions, including the FHLB of Dallas.  Generally, the Bank's 
investments in U.S. Government securities and mortgage-backed securities are 
recorded in book entry form only, and the Bank does

                       (Continued)


                          F-17
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 7    CONCENTRATION OF CREDIT RISK (CONTINUED)

not take possession of the actual investment certificates.  The Bank's 
investment in interest-bearing deposits, excluding those with the FHLB of 
Dallas, is normally limited to amounts covered by applicable Federal Deposit 
Insurance Corporation (FDIC) limits.

The Bank has two full service bank locations in Clovis, New Mexico and 
another in Portales, New Mexico.  The Bank has also opened a loan production 
office in Rio Rancho, New Mexico, near Albuquerque.  The Bank's primary 
service area includes the New Mexico counties of Bernalillo, Cibola, Curry, 
De Baca, Los Alamos, Roosevelt, Sandoval, Santa Fe, Torrance, Valencia, and 
the Texas counties of Parmer and Bailey.

The Bank has historically been a major lender of mortgage loans in the 
Eastern New Mexico area and is dedicated to the promotion of thrift through 
the solicitation of savings accounts.  The Bank's four offices primarily 
service the Curry and Roosevelt counties of New Mexico and the adjoining West 
Texas counties.  The Bank offers a comprehensive range of credit and 
depository services, while conducting business in a manner based on financial 
stability, service, and community involvement.

The Bank grants consumer, commercial business, commercial real estate, and 
residential loans to customers in its trade area.  Generally, the loans are 
secured by real estate; however, the Bank does make consumer loans and 
commercial loans.  The loans are expected to be repaid from the cash flow of 
the borrowers.  Although the Bank has a diversified loan portfolio, a 
substantial portion of its debtors' ability to honor their contracts is 
dependent upon the general economic conditions of the region.

The Bank's collateral policy is to secure all real estate loans by mortgages, 
place first liens on available assets underlying commercial loans, and 
perfect purchase money liens on consumer loan products.  The Bank grants 
unsecured loans to its customers.

NOTE 8    DEPOSITS

The composition of deposits and the effective rates of interest at December 
31 were as follows:

<TABLE>
<CAPTION>
                                                                                              1998               1997
                                                                                        -----------------  -----------------
<S>                                                                                     <C>                <C>
Checking accounts - noninterest bearing                                                 $       4,474,107  $       3,226,028
Savings accounts (1998 - 2.25%; 1997 - 2.50%)                                                   6,338,225          6,927,394
Insured Money Market accounts (1998 - 2.55%-4.75%; 1997 - 2.80%-4.50%)                         18,754,049         15,711,088
Transaction accounts (1998 - .50%-2.70%; 1997 -.50%-2.70%)                                      7,430,775          6,758,786
Certificates of deposit:
   2.01% - 3.00%                                                                                   67,132             29,446
   3.01% - 4:00%                                                                                  779,096            535,148
   4.01% - 5.00%                                                                               39,958,157         38,898,386
   5.01% - 6.00%                                                                               23,463,691         21,402,537
   6.01% - 7.00%                                                                                3,332,233          3,465,336
   7.01% - 8.00%                                                                                  447,685            457,856
                                                                                        -----------------  -----------------

                                                                                        $     105,045,150  $      97,412,005
                                                                                        =================  =================
</TABLE>

                                  (Continued)


                                     F-18
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 8    DEPOSITS (CONTINUED)

At December 31, 1998, the scheduled maturities of certificates of deposits 
were as follows:

<TABLE>
<CAPTION>
                                                       Amount        Percent of total
                                                  -----------------  -----------------
<S>                                               <C>                <C>
1999                                              $      54,900,452            80.7%
2000                                                      6,809,272            10.0
2001                                                      2,615,471             3.9
2002                                                      2,334,104             3.4
2003                                                      1,388,695             2.0
                                                  -----------------  -----------------

                                                  $      68,047,994           100.0%
                                                  =================  =================
</TABLE>

At December 31, 1998 and 1997, individual deposit accounts in excess of 
$100,000 amounted to $6,034,088 and $3,582,510, respectively.

Interest expense on deposits for the years ended December 31 was as follows:

<TABLE>
<CAPTION>
                                                          1998                1997               1996
                                                    ------------------  -----------------  -----------------
<S>                                                 <C>                 <C>                <C>
Savings accounts                                    $        160,639    $        188,337   $        225,687
Money Market accounts                                        499,684             487,209            319,687
Transaction accounts                                         234,631              88,385            150,649
Certificates of Deposit                                    3,365,430           3,372,269          3,996,415
                                                    ------------------  -----------------  -----------------

                                                    $      4,260,384    $      4,136,200   $      4,692,438
                                                    ==================  =================  =================
</TABLE>

At December 31, 1998 and 1997, the Bank had accrued interest payable on 
certificates of deposit totaling $155,094 and $95,554, respectively.  The 
weighted average interest rate on deposits was 4.27%, 4.27%, and 4.46% for 
the years ended December 31, 1998, 1997 and 1996, respectively.

NOTE 9    OTHER BORROWED FUNDS 

Each FHLB is authorized to make advances to its members, subject to such 
regulations and limitations as the FHLB may prescribe.  At December 31, 1998, 
advances from FHLB of $5,750,000 were collateralized by investment securities 
totaling $7,137,000.  Interest on these advances accrues at rates ranging 
between 5.33% and 5.77% and the advances mature in 2003.  The Bank is also 
required to maintain stock ownership in the FHLB of at least a minimum 
percentage of its loans.  At December 31, 1998, the Bank's investment in 
stock of the FHLB was deficient by approximately $44,000.  There were no 
advances from FHLB outstanding at December 31, 1997.  

At December 31, 1998 and 1997, the Company had lines of credit totaling 
$200,000 and $100,000 respectively, from other banks. The lines of credit 
bear market rates of interest and borrowings thereunder, if any, are to be 
used for general Company purposes.  These borrowings mature between July 16, 
1999 and June 5, 2001.

                             (Continued)


                                 F-19
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 10   INCOME TAXES

At December 31, 1998, the Company had remaining net operating loss ("NOL") 
carryforwards of approximately $5,074,000 for federal income tax purposes 
which expire in varying amounts through 2010.  The Company also has a capital 
loss carryforward of $497,000 for tax purposes which will expire in 2002.  In 
addition, the alternative minimum tax ("AMT") NOL carryforward and AMT credit 
carryforward were approximately $5,906,000 and $101,000, respectively, which 
expire in varying amounts through 2010.  Investment tax credit carryforwards 
of approximately $38,000 expire in varying amounts through 2005. 

Section 382 of the Internal Revenue Code ("Code") provides that the 
aforementioned tax NOL carryforwards would be subjected to an annual 
limitation should there be a change of over 50% in the stock ownership of the 
Company during any three year testing period.  Due to the fact that the 
Company has a tax NOL carryforward, it is required to report changes in 
ownership of 5% or greater of stockholders annually to the Internal Revenue 
Service.  The statute and applicable Treasury regulations are extremely 
complex.  The Company believes that no change of ownership as defined in 
applicable Section 382 regulations occurred through the three-year testing 
period ended December 31, 1998. However, if such a change in ownership 
occurs, the annual use of the tax NOL carryforwards would be subject to an 
annual limitation.

Stockholders' equity at December 31, 1998 includes approximately $2,100,000 
for which no provision for Federal income tax has been accrued.  These 
amounts represent allocation of income to bad debt reserves for tax purposes 
only. Reduction of amounts so allocated for purposes other than losses on 
loans will create income for tax purposes only, which will be subject to the 
then current corporate tax rate.

The Company, the Bank and FEDCO are parties to a tax sharing agreement.  The 
general provisions of the agreement require the Bank and FEDCO to pay the 
Company on the tax due date the taxes due calculated for each entity.  The 
Company in turn calculates the taxes due on a consolidated basis and forwards 
the required payments to the taxing authorities.

The reasons for the differences between the statutory federal income tax 
rates and the effective tax rates for the years ended December 31 are 
summarized as follows:

<TABLE>
<CAPTION>
                                                                          1998                1997               1996
                                                                    ------------------  -----------------  -----------------
<S>                                                                 <C>                 <C>                <C>
Statutory rates                                                            34.00 %             34.00 %            34.00 %
Effect of net operating loss                                                 --               (34.00)            (34.00)
Deferred tax asset valuation allowance adjustment                            --              (315.86)               --
Other                                                                      (2.71)                --                 --
                                                                    ------------------  -----------------  -----------------

                                                                           31.29%            (315.86)%             --   %
                                                                    ==================  =================  =================
</TABLE>

                               (Continued)


                                  F-20
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 10   INCOME TAXES (CONTINUED)

The tax effect of significant temporary differences representing deferred tax 
assets and liabilities and changes thereon were as follows:

<TABLE>
<CAPTION>
                                  December 31,           Net            December 31,           Net             December 31,
                                     1996              change              1997               change               1998
                                ---------------    ---------------    ----------------    ---------------    ---------------
<S>                             <C>                <C>                <C>                 <C>                <C>
OPERATIONAL ITEMS:        
  Deferred taxes assets:       
   Net operating loss        
    carryforward                $    2,206,000     $      (115,000)   $     2,091,000     $      (381,000)   $     1,710,000
   Capital loss         
    carryforward                       319,000                  --            319,000            (150,000)           169,000
   Bad debt deduction and      
    deferred loan fees                 143,000              22,000            165,000              13,000            178,000
   Other                                 7,000               2,000              9,000               8,000             17,000
                                ---------------                       ----------------                       ---------------
                                     2,675,000                              2,584,000                              2,074,000
   Valuation allowance              (2,008,000)          1,373,000           (635,000)                 --           (635,000)
                                ---------------    ---------------    ----------------    ---------------    ---------------
    Deferred tax assets                667,000           1,282,000          1,949,000            (510,000)         1,439,000
                                ---------------    ---------------    ----------------    ---------------    ---------------
  Deferred tax liabilities:    
   Depreciation                       (241,000)             12,000           (229,000)             (8,000)          (237,000)
   FHLB stock                         (221,000)            (32,000)          (253,000)            126,000           (127,000)
   Originated mortgage        
    servicing rights                   (16,000)            (50,000)           (66,000)             66,000                 --
                                ---------------    ---------------    ----------------    ---------------    ---------------
    Deferred tax        
     liabilities                      (478,000)            (70,000)          (548,000)            184,000           (364,000)
                                ---------------    ---------------    ----------------    ---------------    ---------------
    Net deferred tax asset      $      189,000     $     1,212,000    $     1,401,000     $      (326,000)   $     1,075,000
                                ===============    ===============    ================    ===============    ===============
EQUITY ITEMS:         
  Deferred tax assets:        
   Investments                  $       68,000     $       (67,000)   $         1,000     $        20,000    $        21,000
                                ---------------                       ----------------                       ---------------
                                        68,000                                  1,000                                 21,000
   Valuation allowance                 (68,000)             68,000                 --                  --                 --
                                ---------------    ---------------    ----------------    ---------------    ---------------
    Deferred tax assets                     --               1,000              1,000              20,000             21,000
  Deferred tax liabilities                  --                  --                 --                  --                 --
                                ---------------    ---------------    ----------------    ---------------    ---------------
    Net deferred tax asset      $           --     $         1,000    $         1,000     $        20,000    $        21,000
                                ===============    ===============    ================    ===============    ===============
</TABLE>

During 1997, the Company changed its estimate with respect to the future 
benefits of their NOL carryforwards and, accordingly, reduced the related 
valuation allowance.  To the extent the valuation allowance was reduced, the 
related tax benefit was credited to income.

                            (Continued)


                                F-21
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 11   REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered 
by the federal banking agencies. 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 the Bank's financial statements.  Under capital adequacy guidelines 
and the regulatory framework for prompt corrective action, the Bank must meet 
specific capital guidelines that involve quantitative measures of the Bank's 
assets, liabilities, and certain off-balance-sheet items as calculated under 
regulatory accounting practices.  The Bank's capital amounts and 
classification are also subject to qualitative judgments by the regulators 
about components, risk weightings, and other factors.

In accordance with Office of Thrift Supervision ("OTS") regulations, the Bank 
must have: (1) core capital equal to 4% of adjusted total assets; (2) 
tangible capital equal to 1.5% of adjusted total assets; and (3) total 
capital equal to 8.0% of risk-weighted assets, which includes off-balance 
sheet items.

The following table is a reconciliation of the Bank's capital for regulatory 
purposes at December 31, 1998 as reported to the OTS.

<TABLE>
<CAPTION>
                                                                         Tier 1-            Tier 1-             Total
                                                                          Core             Risk-based         Risk-based
                                                                         Capital            Capital            Capital
                                                                    ------------------  -----------------  -----------------
<S>                                                                 <C>                 <C>                <C>
Total regulatory assets                                             $    121,536,382   
Net unrealized depreciation on
   available-for-sale securities, net                                         40,987
Less intangible assets disallowed for
   regulatory purposes                                                      (305,232)
                                                                    ------------------

Adjusted regulatory total assets                                    $    121,272,137
                                                                    ==================

Risk-based assets                                                                       $    67,883,000    $    67,883,000
                                                                                        =================  =================

Stockholders' equity                                                $      9,642,085    $     9,642,085    $     9,642,085
Net unrealized depreciation on
   available-for-sale securities, net                                         40,987             40,987             40,987
General valuation allowance                                                       --                 --            600,984
Less intangible assets disallowed for
   regulatory purposes                                                      (305,232)          (305,232)          (305,232)
                                                                    ------------------  -----------------  -----------------

Regulatory capital                                                         9,377,840          9,377,840          9,978,824
Regulatory capital required to be "well capitalized"                       6,063,607          4,072,980          6,788,300
                                                                    ------------------  -----------------  -----------------

Excess regulatory capital                                           $      3,314,233    $     5,304,860    $     3,190,524
                                                                    ==================  =================  =================

Bank's capital to adjusted regulatory assets                                    7.73%     
                                                                    ==================

Bank's capital to risk-based assets                                                               13.81%             14.70%
                                                                                        =================  =================
</TABLE>

                               (Continued)


                                  F-22
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 11   REGULATORY MATTERS (CONTINUED)

The Bank was subject to an Amended Prompt Corrective Action Directive dated 
August 1994 and a Supervisory Agreement dated June 1996 mainly directed to 
the improvement of capital ratios, plan and asset/liability management 
issues. These agreements were terminated by the OTS in November 1997.  

NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN

On October 30, 1997, the Company declared a 2% stock dividend on the 
Company's common stock for stockholders of record on October 31, 1997.  The 
dividend was paid in December 1997.  The dividend was charged to accumulated 
deficit in the amount of $195,201, including a $1,204 cash payment for 
dividends on fractional shares.  Average shares outstanding and all per share 
amounts included in the consolidated financial statements and notes are based 
on the increased number of shares giving effect to the stock dividend.  A 
cash dividend of $.05 per share was paid on January 5, 1999 to shareholders 
of record as of December 31, 1998.  

Under the 1986 Stock Option and Incentive Plan ("1986 Plan"), as amended, the 
Bank could grant Incentive and Non-Incentive Stock Options, as well as Stock 
Appreciation Rights ("SARs") to officers, directors, key employees and other 
persons up to a maximum of 68,250 shares of the Bank's common stock.  The 
1986 Plan was administered by a committee of the Board of Directors.  The 
1986 Plan terminated in August 1996.  Under the provisions of the 1986 Plan, 
stock options had terms that were determined by the committee, but not to 
exceed ten years from the date of grant.  However, in the case of optionees 
who owned in excess of 10% of the outstanding common stock of the Bank, the 
term of the stock option could not exceed five years.  The aggregate fair 
market value of the options for which any persons could be granted in any 
calendar year could not exceed $100,000.  During 1996, 36,500 shares of 
common stock were issued in connection with exercises of stock options.  The 
aggregate proceeds received by the Company in connection with the exercises 
was $193,500.  During 1997, 544 shares of common stock were issued in 
connection with exercises of stock options, with proceeds to the Company of 
$2,992.  During 1998, 12,519 shares of common stock were issued in connection 
with exercise of options under this plan with proceeds to the Company of 
$68,855.  At December 31, 1998 there were no remaining options outstanding 
under the 1986 plan.  

In 1997, the stockholders approved the 1997 Stock Option and Incentive Plan 
("1997 Plan") to provide a means for the Company to attract and retain 
officers, directors and employees.  Under the terms of the 1997 Plan, the 
aggregate number of shares of stock to be issued pursuant to the exercise of 
all options granted under the 1997 Plan may not exceed 183,600.  No options 
may be granted under the 1997 Plan after ten years from the date of the 
adoption of the 1997 Plan.  In addition, the 1997 Plan also provides for the 
granting of Stock Appreciation Rights ("SARs").  During 1997, options to 
purchase 165,240 shares were granted all of which were immediately 
exercisable.  No options were awarded under the 1997 Plan during 1998.  No 
SARs were granted during 1998 or 1997.  During 1998, 7100 shares of common 
stock were issued in connection with exercise of options under the 1997 Plan 
with proceeds to the Company of $39,938.  At December 31, 1998 and 1997, 
options to purchase 18,360 shares of the Company's common stock were 
available for issuance under the 1997 Plan. 

                        (Continued)


                           F-23
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN 
          (CONTINUED)

The Company accounts for compensation costs incurred in connection with the 
granting of stock options using the intrinsic value method prescribed in APB 
No. 25.  As such, no compensation expense was recorded in connection with the 
granting of stock options during 1996 or 1997 as the exercise price was not 
below the market price of the Company's common stock at the respective dates 
of grant.  In 1995, the FASB issued SFAS No. 123, ACCOUNTING FOR STOCK BASED 
COMPENSATION, which, if fully adopted by the Company, would change the method 
the Company applies in recognizing costs associated with the granting of 
stock options.  Adoption of the cost recognition provisions of SFAS No. 123 
is optional and the Company has determined not to elect these provisions.  
However, pro-forma disclosure of net income and earnings per share as if the 
Company adopted the cost recognition provisions of SFAS No. 123 are required 
and are presented below.

A summary of the status of the Company's stock options as of December 31, 
1998 and 1997 and the changes for the years then ended is presented below:

<TABLE>
<CAPTION>
                                                                           For the years ended December 31
                                                          -------------------------------------------------------------------
                                                                        1998                               1997
                                                          ----------------------------------  -------------------------------
                                                                               Weighted                          Weighted
                                                                                Average                           Average
                                                               Shares        Exercise Price       Shares       Exercise Price
<S>                                                       <C>              <C>                <C>            <C>
Options outstanding, beginning of year                           177,759   $          6.752        13,063    $        5.500
Granted                                                               --                 --       165,240             6.847
Exercised                                                        (19,619)             5.545          (544)            5.500
Expired                                                               --                --             --                --
                                                          ----------------                    -------------
Options outstanding, end of year                                 158,140   $          6.902       177,759    $        6.752
                                                          ---------------- -----------------  -------------  ----------------
                                                          ---------------- -----------------  -------------  ----------------
Weighted average fair market value of options
   granted during the year                                                 $         N/A                     $        2.54
                                                                           -----------------                 ----------------
                                                                           -----------------                 ----------------
</TABLE>

                             (Continued)


                                F-24
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN 
          (CONTINUED)

The following table summarizes information about options outstanding as of 
December 31, 1998:

<TABLE>
<CAPTION>
                                                             Options Outstanding and Exercisable
                                  ------------------------------------------------------------------------------------------

                                           Number                   Weighted Average                     Weighted
                                       Outstanding and            Remaining Contractual              Average Exercise
   Range of Exercise Price               Exercisable                  Life (In Years)                      Price
-------------------------------   -------------------------   ------------------------------   -----------------------------
<S>                               <C>                         <C>                               <C>
$5.625 to $8.375                                158,140                      8.61                         $   6.902
</TABLE>

The fair value of each option  granted during 1997 and 1996 was estimated on 
the date of grant using the Black-Scholes option-pricing model with the 
following weighted average assumptions:

<TABLE>
<CAPTION>
                                                               1997               1996
                                                         -----------------  -----------------
<S>                                                      <C>                <C>
Dividend yield                                                   --  %              --  %
Expected volatility                                             30.73%             36.46%
Risk-fee interest rate                                           6.16%              6.19%
Expected lives (in years)                                         5                  2
</TABLE>

Had compensation cost for all grants of stock options during 1997 and 1996 
been determined based on the fair value at the date of grant, reported net 
income (loss) and earnings (loss) per share would have been adjusted to the 
pro-forma amounts shown below:

<TABLE>
<CAPTION>
                                                                                   1997               1996
                                                                             -----------------  -----------------
<S>                                                                          <C>                <C>
Net income (loss)
  As reported                                                                $       1,595,709  $       (733,570)
  Pro-forma                                                                          1,319,376          (750,884)

Earnings (loss) per share
  As reported                                                                $            1.40  $          (1.01)
  Pro-forma                                                                               1.16             (1.04)

Earnings (loss) per share-assuming dilution
  As reported                                                                $            1.37  $          (1.01)
  Pro-forma                                                                               1.13             (1.04)
</TABLE>

During 1997, the Company adopted the Non-Employee Director Retainer Plan 
("Retainer Plan") which provides for the payment of all or a portion of the 
directors fees in shares of common stock of the Company.  The number of 
shares is determined based on the fair market value of the Bank's stock 
during the month the fee is payable.

                              (Continued)


                                 F-25
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 12   COMMON STOCK, STOCK OPTION PLANS AND DIRECTOR RETAINER PLAN 
          (CONTINUED)

The Retainer Plan defers the recognition of compensation by the directors by 
deferring the issuance of common stock to the director until the director 
leaves the board.  A total of 50,000 shares of common stock have been 
reserved for issuance under the Retainer Plan.  During 1997, $10,500 of 
directors fees, representing 1,579 shares of common stock to be issued, were 
reserved under the terms of the Retainer Plan.  During 1998, $18,000 of 
directors fees, representing 1,736 shares of common stock to be issued, were 
reserved under the terms of the Retainer Plan.  As of December 31, 1998, none 
of these shares have been issued.  

NOTE 13   EMPLOYEE BENEFIT PLANS

The Company and the Bank have a profit sharing/employee stock ownership plan 
for which substantially all employees are eligible.  Contributions, when 
made, may be made in the form of cash or in common stock of the Company.  
Contribution amounts are based upon employee's compensation, but may not 
exceed maximum deductible limits for federal income tax purposes.  Employer 
contributions to the employee stock ownership plan of $15,754, $11,637, and 
$0, were made in 1998, 1997, and 1996, respectively.  

Effective January 1, 1989, this plan was amended to include a 401(k) 
before-tax salary deferral feature. Employees may elect to contribute to the 
plan and such contributions may be matched by the Bank as a percentage of 
each employee's contribution.  Employer contributions made to the 401(k) plan 
for the years ended December 31, 1998, 1997, and 1996 totaled $20,161, 
$15,849, and $3,431, respectively.  

In June 1998, the Bank established an executive savings plan to provide 
additional benefits for select highly compensated management employees of the 
Bank as a means for participants to defer a portion of their compensation for 
the future.  Participants may contribute to the plan a percentage of their 
basic compensation varying from 1% to 12%.  The Bank may make discretionary 
matching contributions to the plan.  Salary deferrals and matching 
contributions, if any, are funded into a Rabbi Trust which are available to 
the general creditors of the Bank and, as a result, are recorded on the books 
and records of the Company. There were no contributions made by the Company 
during 1998.  All salary deferral contributions during 1998 were invested in 
the Company's common stock. 

NOTE 14   NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share has been computed by dividing net income 
(loss) available to common stockholders for the period by the weighted 
average number of common shares outstanding during the period.  Diluted net 
income (loss) per share has been computed by dividing net income (loss) 
available to common stockholders for the period by the weighted average 
number of common shares outstanding during the period adjusted for the 
assumed exercise of outstanding stock options and other contingently issuable 
shares of common stock.  Net income (loss) for basic and diluted earnings per 
share are the same, as there are no contingently issuable shares of stock 
whose issuance would have impacted net income.  

                            (Continued)


                               F-26
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 14   NET INCOME (LOSS) PER SHARE (CONTINUED)

A reconciliation between basic and diluted weighted average common shares 
outstanding follows:

<TABLE>
<CAPTION>
                                                                          1998                1997               1996
                                                                    ------------------  -----------------  -----------------
<S>                                                                 <C>                 <C>                <C>
Weighted average common
     shares - Basic                                                       1,221,533            1,141,316            724,409

Plus effect of dilutive securities:
  Stock Options                                                              63,418               24,066               --
  Common Stock Rights                                                         2,473                  646               --
                                                                    ------------------  -----------------  -----------------

Weighted average common
     shares - Assuming Dilution                                           1,287,424            1,166,028            724,409
                                                                    ------------------  -----------------  -----------------
                                                                    ------------------  -----------------  -----------------
</TABLE>

For the year ended December 31, 1996, the dilutive effect of outstanding 
stock options has not been considered due to the fact that their effects 
would be anti-dilutive. 

NOTE 15   FINANCIAL INSTRUMENTS

The Bank is a party to financial instruments with off-balance sheet risk in 
the normal course of business to meet the financing needs of its customers 
and to reduce its own exposure to fluctuation in interest rates.  These 
financial instruments include commitments to extend credit, standby letters 
of credit, and financial guarantees. These instruments involve, to varying 
degrees, elements of credit and interest rate risk in excess of the amount 
recognized in the consolidated statements of financial position.  The 
contract or notional amounts of these instruments reflect the extent of 
involvement the Bank has in particular classes of financial instruments.  The 
Bank uses the same credit policies in making commitments and conditional 
obligations as it does for on-balance sheet instruments.

At December 31, 1998, unfunded credit commitments are as follows:

<TABLE>
<S>                                                       <C>
        Commitments to extend residential loans           $   2,057,237
        Lines of credit                                   $   3,916,882
        Credit cards                                      $   1,149,560
</TABLE>

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.  
Commitments generally have fixed expiration dates or other termination 
clauses and may require payment of a fee.  Some of the commitments are 
expected to expire without being drawn upon.  The total commitment amounts do 
not necessarily represent future cash requirements.  The Bank evaluates each 
customer's creditworthiness on a case-by-case basis.  The amount of 
collateral obtained, if deemed necessary by the Bank upon extension of 
credit, is based on management's credit evaluation of the customers.

                       (Continued)


                          F-27
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 15   FINANCIAL INSTRUMENTS (CONTINUED)

Standby letters of credit and financial guarantees written are conditional 
commitments issued by the Bank to guarantee the performance of a customer to 
a third party.  Currently, letters of credit are not extended beyond one 
year. The credit risk involved in issuing letters of credit is essentially 
the same as that involved in extending loan facilities to customers.  The 
Bank holds collateral and personal guarantees as deemed necessary.  At 
December 31, 1998, the Bank had no standby letters of credit outstanding.

At December 31, 1998, the Bank had no open interest rate swaps, futures, 
options, or forward contracts.

At December 31, 1998 and 1997, the Bank had $2,912,495 and $1,355,106, 
respectively, of commitments to sell newly-originated single family 
residential loans.

SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires 
disclosure of fair value information about financial instruments, whether or 
not recognized on the balance sheet, for which it is practicable to estimate 
that value.  Quoted market prices, if available, are utilized as an estimate 
of the fair value of financial instruments.  Because no quoted market prices 
exist for a part of the Bank's financial instruments, the fair value of such 
instruments has been derived based on management's assumptions with respect 
to future economic conditions, the amount and timing of future cash flows and 
estimated discount rates.  Different assumptions could significantly affect 
these estimates.  Accordingly, the estimates provided herein do not 
necessarily indicate amounts which could be realized in a current exchange.  
Further, as it is management's intent to hold a portion of its financial 
instruments to maturity, it is not probable that the fair values shown below 
will be realized in a current transaction.  In addition, fair value estimates 
are based solely on existing on- and off balance sheet financial instruments 
without attempting to estimate the value of anticipated future business and 
the value of assets and liabilities that are not considered financial 
instruments.  Examples would include portfolios of loans serviced for others, 
investments in real estate, premises and equipment, and deferred tax assets.

Because of the wide range of permissible valuation techniques and the 
numerous estimates which must be made, it may be difficult to make reasonable 
comparisons of the fair value information to that of other financial 
institutions.  The aggregate fair value amount should in no way be construed 
as representative of the underlying value of the Company and/or the Bank.

The following methods and assumptions were used to estimate the fair value of 
each class of financial instruments for which it is practical to estimate 
that value:

CASH AND CASH EQUIVALENTS - The carrying amount for cash and cash equivalents 
approximates the assets' fair value because of the short maturity of those 
instruments.

SECURITIES - The fair value of long-term investments such as U.S. Government 
and agency obligations and mortgage-backed securities is estimated based on 
bid quotations received from securities dealers and the FHLB.

                           (Continued)


                              F-28
<PAGE>

                ACCESS ANYTIME BANCORP, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (CONTINUED)

NOTE 15   FINANCIAL INSTRUMENTS (CONTINUED)

LOANS RECEIVABLE - Fair values are estimated for portfolios of loans with 
similar financial characteristics. Mortgage loans are segregated by type, 
including but not limited to residential, commercial and construction. 
Consumer loans are segregated by type, including but not limited to home 
improvement loans, automobile loans, loans secured by deposits and secured 
and unsecured personal loans.  Each loan category may be segmented, as 
appropriate, into fixed and adjustable interest rate terms, ranges of 
interest rates, performing and non-performing, and repricing frequency.

For certain homogeneous categories of loans, such as some residential 
mortgages, fair value is estimated using the quoted market prices for 
securities backed by similar loans, adjusted for differences in loan 
characteristics.  The fair values of other types of loans are estimated by 
discounting the future scheduled and unscheduled cash flows using the current 
rates at which similar loans would be made to borrowers with similar credit 
ratings and for the same remaining maturities.  Unscheduled cash flows take 
the form of estimated prepayments and may be based upon historical experience 
as well as anticipated experience derived from current and prospective 
economic and interest rate environments. For certain types of loans, 
anticipated prepayment experience exists in published tables from securities 
dealers.

The fair value of significant non-performing mortgage loans is based on 
estimated value of the collateral.  Where appraisals are not available, 
estimated cash flows are discounted using a rate commensurate with the credit 
risk associated with those cash flows.  Assumptions regarding credit risk, 
cash flows and discount rates are judgementally determined using available 
market information and specific borrower information.  The fair value of 
non-performing consumer loans is based on historical experience with such 
loans.

The fair value of loans held-for-sale is estimated based on outstanding 
commitments from investors or current market prices for similar loans.

FEDERAL HOME LOAN BANK STOCK - The fair value of stock in the FHLB is 
estimated to be equal to its carrying amount given it is not a publicly 
traded equity security, it has an adjustable dividend rate, and all 
transactions in the stock are executed at the stated par value.

DEPOSITS AND ADVANCES FROM BORROWERS FOR TAXES AND INSURANCE - The fair value 
of deposits with no stated maturity, such as interest-bearing or 
non-interest-bearing checking accounts, savings accounts, money market 
accounts and advances from borrowers for taxes and insurance is equal to the 
amount payable upon demand.  The fair value of certificates of deposit is 
based on the lower of redemption or discounted value of contractual cash 
flows.  Discount rates for certificates of deposit are estimated using 
current market rates.

FEDERAL HOME LOAN BANK ADVANCES - The estimated fair value of the FHLB 
advances is normally based upon the discounted value of the differences 
between contractual interest rates and current market rates for similar 
agreements. However, the estimated fair value is the same as the carrying 
value due to the short-term nature of the advances.

                        (Continued)


                           F-29
<PAGE>

NOTE 15   FINANCIAL INSTRUMENTS (CONTINUED)

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - The fair value of commitments to 
extend credit is estimated using the fees currently charged to enter into 
similar agreements, taking into account the remaining terms of the agreements 
and the present creditworthiness of the counterparties.  For fixed-rate loan 
commitments, fair value also considers the difference between current levels 
of interest rates and the committed rates.  The fair value of guarantees and 
letters of credit is based on fees currently charged for similar agreements 
or on the estimated cost to terminate them or otherwise settle the 
obligations with the counterparties at the reporting date.

The fair value of off-balance sheet financial instruments is estimated to 
equal the carrying amount at December 31, 1998 and 1997.

NON-FINANCIAL INSTRUMENTS - SFAS No. 107 does not permit financial 
institutions to take into account the value of long-term relationships with 
depositors, commonly known as core deposit intangibles, when estimating the 
fair value of deposit liabilities.  These intangibles are considered to be 
separate intangible assets that are not financial instruments.  Nonetheless, 
financial institutions' core deposits have typically traded at premiums to 
their book values under both historical and current market conditions.

Likewise, SFAS No. 107 does not permit financial institutions to take into 
account the value of the cash flows and income stream derived from its 
portfolio of loans serviced for others.  

The estimated fair values of the Bank's financial instruments are shown below:


<TABLE>
<CAPTION>
                                                               December 31, 1998                  December 31, 1997         
                                                        ---------------------------------  ---------------------------------
                                                        Carrying amount  Estimated fair    Carrying amount    Estimated fair
                                                                              value                                value
                                                        ---------------- ----------------  ----------------  ---------------
                                                                                   (In Thousands)                           
<S>                                                  <C>              <C>               <C>               <C>            
Financial assets:                                                                                                           
   Cash and cash equivalents                            $         5,233  $         5,233   $         6,814   $         6,814
   Certificates of deposit                                        2,590            2,602             1,530             1,532
   Securities available-for-sale                                 11,426           11,426            15,032            15,032
   Securities held-to-maturity                                    7,528            7,508            18,947            18,803
   Loans held-for-sale                                              855              870               298               304
                                                                                                                            
   Loans receivable                                              88,809           91,045            58,172            58,440
   Accrued interest receivable                                      635              635               586               586
   FHLB stock                                                       790              790             1,667             1,667
                                                                                                                            
Financial liabilities:                                                                                                      
   Deposits                                                     105,045          101,535            97,412            94,577
   Accrued interest payable                                         686              686               358               358
   Advance payments by borrowers for taxes and                                                                               
     insurance                                                      362              362               298               298
   FHLB advances                                                  5,750            5,778                --                --
</TABLE>


The deferred income amounts arising from unrecognized financial instruments 
are not significant.  Also, these financial instruments have contractual 
interest rates at or above current market rates.  Therefore, no market value 
disclosure is provided for these items.


                                   (Continued)

                                      F-30
<PAGE>

NOTE 16   COMMITMENTS AND CONTINGENCIES

The Company and its subsidiary are from time to time parties to various legal 
actions arising in the normal course of business.  Management believes that 
there is no proceeding threatened or pending against the Company or its 
subsidiary which, if determined adversely, would have a material adverse 
effect on the financial condition or results of operations of the Company.  

As the year 2000 approaches, a significant business issue has emerged 
regarding how existing software programs and operating systems can 
accommodate the date value for the year 2000.  Many existing software 
products, including products used by the Bank and its suppliers and 
customers, were designed to accommodate only a two-digit date value, which 
represents the year.  For example, information relating to the year 1996 is 
stored in the system as 96.  As a result, the year 1999 could be the maximum 
date value that these systems will be able to process accurately.  In 
response to concerns about this issue, regulatory agencies have begun to 
monitor bank holding companies' and banks' readiness for the year 2000 as 
part of their regular examination process.  

The Company presently believes that with modifications to existing software 
and the conversion to new software, the year 2000 issue will not pose 
significant operational problems for the Bank's business operations.  
Substantially all data processing services for the Bank are provided by 
FiServ in Brookfield, Wisconsin.  FiServ has been engaged by the Bank to 
ensure the system is fully 2000 compliant by the second quarter of 1999.  An 
agreement has been entered into and augmented by FiServ with written status 
reports on a monthly basis. Reports to date indicate that FiServ has met all 
target dates and is prepared to meet all future target dates for completion 
of the project.  Management believes that, to date, FiServ is completely 
converted, tested and compliant.  Management of the Bank is not aware of 
limitations on any legal remedies of the Bank as a result of year 2000 
damages it may suffer should damages be incurred.  

Additionally, implementation of the Bank's plan to test in-house and 
out-sourced software has been underway since the first quarter of 1998.  
Testing of applications considered to be mission critical are scheduled for 
completion by the first quarter of 1999.  Total compliance for all systems, 
including the Bank's out-sourced computer systems, is expected by management 
to be completed by the second quarter of 1999.  Compliance audits performed 
to date on the Bank have been positive and no specific items of improvement 
were noted.  

Management currently estimates that year 2000 compliance for the Bank will 
cost less than $100,000.  The Year 2000 Committee is responsible for progress 
and will continue to provide a status report to the board of directors on a 
quarterly basis through December 31, 2000.  However, if the modifications and 
conversions are not made, or are not completed timely, the year 2000 issue 
could have a material adverse impact on the operations of the Bank.  Because 
of the factors discussed below, management cannot estimate with any 
reasonable degree of certainty the magnitude of lost revenues should 
management's reasonable worst case scenario develop in which the Bank would 
need to use an alternate vendor to become year 2000 compliant and 
noncompliant customers were unable to repay their loans.  


                                   (Continued)

                                      F-31
<PAGE>

NOTE 16   COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Bank has sent direct mail to their customers regarding the year 2000 
issue and the need for readiness, pursuant to guidelines of the banking 
industry regulators.  However, response to these inquiries has been low.  
Management intends to continue to solicit customer response on this matter.  
Failure of the Bank's customers to prepare for the year 2000 compatibility 
could have a significant adverse effect on customers' operations and 
profitability, thus inhibiting their ability to repay loans and adversely 
affect the Bank's operations.  The Bank does not have sufficient information 
accumulated from customers to enable the Bank to assess the degree to which 
customers' operations are susceptible to potential problems relating to the 
year 2000 issue or, further, to quantify the potential lost revenue to the 
Bank in this case. 
 
NOTE 17   PARENT COMPANY CONDENSED FINANCIAL STATEMENTS

The following condensed statements of financial condition as of December 31, 
1998 and 1997, and the related statements of operations and cash flows for 
the years then ended for the Company should be read in conjunction with the 
consolidated financial statements and notes thereto.

                        STATEMENTS OF FINANCIAL CONDITION
                                       

<TABLE>
<CAPTION>
                                                                                                   December 31
                                                                                    -----------------------------------------
                                                                                            1998                 1997
                                                                                    --------------------  -------------------
<S>                                                                                 <C>                   <C>
Assets:
   Cash and cash equivalents                                                        $           128,243   $           105,400
   Investment in the Bank                                                                     9,642,085             8,888,028
   Organizational cost, net                                                                     115,162               157,039
   Deferred tax asset                                                                           126,354                13,370
   Other assets                                                                                     255                   170
                                                                                    --------------------  -------------------

       Total assets                                                                 $        10,012,099   $         9,164,007
                                                                                    ====================  ===================

Liabilities:
   Accounts payable and accrued expenses                                            $            25,495   $            18,785
   Accrued dividends payable                                                                     61,844                    --
                                                                                    --------------------  -------------------
       Total liabilities                                                                         87,339                18,785
                                                                                    --------------------  -------------------
Stockholders' equity:
   Common stock                                                                                  12,370                12,173
   Capital in excess of par value                                                             9,604,001             9,477,405
   Retained earnings (accumulated deficit)                                                      356,600              (341,673)
   Accumulated other comprehensive income, net                                                  (40,987)               (2,683)
                                                                                    --------------------  -------------------
                                                                                              9,931,984             9,145,222
   Treasury stock, at cost                                                                       (7,224)                   --
                                                                                    --------------------  -------------------
       Total stockholders' equity                                                             9,924,760             9,145,222
                                                                                    --------------------  -------------------
Total liabilities and stockholders' equity                                          $        10,012,099   $         9,164,007
                                                                                    ====================  ===================
</TABLE>



                                   (Continued)

                                      F-32
<PAGE>

NOTE 17   PARENT COMPANY CONDENSED FINANCIAL STATEMENTS  (CONTINUED)

                                       
                           STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   ---------------------------------------------------------
                                                                                    Years ended December 31
                                                                   ---------------------------------------------------------
                                                                         1998               1997                 1996
                                                                   -----------------  ------------------  ------------------
<S>                                                                <C>                <C>                 <C>
Equity in income (loss) of the Bank                                $       891,317    $     1,711,649     $      (723,756)
Salaries and employee benefits                                             (98,842)           (27,483)                 --
Other expense                                                             (145,341)          (101,827)             (9,814)
Income tax benefit                                                         112,984             13,370                  --
                                                                   -----------------  ------------------  ------------------

       Net income (loss)                                           $       760,118    $     1,595,709     $      (733,570)
                                                                   =================  ==================  ==================
</TABLE>


                          STATEMENTS OF CASH FLOWS

<TABLE>
<S>                                                                <C>                <C>                 <C>
Cash flows from operating activities:
   Net income (loss)                                               $       760,118    $     1,595,709     $      (733,570)
   Adjustments to reconcile net income (loss) to cash
     used by operating activities:
     used by operating activities:
       Equity in (income) loss of the Bank                                (891,317)        (1,711,649)            723,756
       Deferred income taxes                                              (112,984)           (13,370)                 --
       Amortization of organizational costs                                 41,877             38,241               9,814
       Common stock rights issued in lieu of
         directors compensation                                             18,000             10,500                  --
       Increase in other assets                                                (85)              (169)                 --
       Increase in accounts payable and accrued expenses                     6,709             18,785                  --
                                                                   -----------------  ------------------  ------------------

       Net cash used by operating activities                              (177,682)           (61,953)                 --
                                                                   -----------------  ------------------  ------------------

Cash flows from investing activities:
   Purchase of common stock of the Bank                                         --                 --              (1,000)
   Capital contribution to the Bank                                             --         (1,883,531)                 --
   Dividend from the Bank                                                   98,956                 --                  --
                                                                   -----------------  ------------------  ------------------

       Net cash provided (used) in investing activities                     98,956         (1,883,531)             (1,000)
                                                                   -----------------  ------------------  ------------------

Cash flows from financing activities:
   Organizational costs incurred                                                --            (31,907)           (173,187)
   Rights offering costs incurred                                               --            (69,254)            (95,165)
   (Increase) decrease in payable to Bank                                       --           (269,357)            269,357
   Purchase of treasury stock                                               (7,224)                --                  --
   Proceeds from issuance of common stock                                  108,793          2,422,601                  --
   Cash dividend (fractional share payments)                                    --             (1,204)                 --
                                                                   -----------------  ------------------  ------------------

       Net cash provided by financing activities                           101,569          2,050,879               1,005
                                                                   -----------------  ------------------  ------------------

Increase in cash and cash equivalents                                       22,843            105,395                   5
Cash and cash equivalents at beginning of period                           105,400                  5                  --
                                                                   -----------------  ------------------  ------------------
Cash and cash equivalents at end of period                         $       128,243    $       105,400     $             5
                                                                   =================  ==================  ==================
</TABLE>


                                   (Continued)

                                      F-33
<PAGE>

NOTE 18   SUBSEQUENT EVENTS

In February 1999, the Company sold an investment security held by the Bank and
realized a net gain of approximately $488,000, net of income tax.

The Company adopted Statement of Position ("SOP") No. 98-5, REPORTING ON THE
COSTS OF START-UP ACTIVITIES, issued by the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants in the first
quarter of 1999.  The effect was an expense of approximately $76,000, net of
income tax.  



                                      F-34
<PAGE>

                            GLOSSARY OF CERTAIN TERMS


The following are definitions of certain terms used in this report on Form 
10-KSB.

<TABLE>
<S>                                          <C>
ARM. . . . . . . . . . . . . . . . . . .     Adjustable Rate Mortgage
BIF. . . . . . . . . . . . . . . . . . .     Bank Insurance Fund
CAMELS . . . . . . . . . . . . . . . . .     Capital Adequacy, Asset Quality,
                                             Management/Administration,
                                             Earnings, Liquidity-Asset/Liability
                                             Management, Sensitivity
CD . . . . . . . . . . . . . . . . . . .     Certificate of Deposit
CRA. . . . . . . . . . . . . . . . . . .     Community Reinvestment Act
DOT. . . . . . . . . . . . . . . . . . .     Department of Treasury
FDIC . . . . . . . . . . . . . . . . . .     Federal Deposit Insurance
                                             Corporation
FFIEC. . . . . . . . . . . . . . . . . .     Federal Financial Institution
                                             Examination Council
FHA. . . . . . . . . . . . . . . . . . .     Federal Housing Administration
FHLB . . . . . . . . . . . . . . . . . .     Federal Home Loan Bank
FHLBB. . . . . . . . . . . . . . . . . .     Federal Home Loan Bank Board
FHLMC. . . . . . . . . . . . . . . . . .     Federal Home Loan Mortgage
                                             Corporation
FICO . . . . . . . . . . . . . . . . . .     Financing Corporation Funding
FNMA . . . . . . . . . . . . . . . . . .     Federal National Mortgage
                                             Association
FRB. . . . . . . . . . . . . . . . . . .     Federal Reserve Bank
GNMA . . . . . . . . . . . . . . . . . .     Government National Mortgage
                                             Association
HOLA . . . . . . . . . . . . . . . . . .     Home Owners' Loan Act
IRR. . . . . . . . . . . . . . . . . . .     Interest Rate Risk
NOW. . . . . . . . . . . . . . . . . . .     Negotiable Order of Withdrawal
NPV. . . . . . . . . . . . . . . . . . .     Net Present Value
OTS. . . . . . . . . . . . . . . . . . .     Office of Thrift Supervision
QTL. . . . . . . . . . . . . . . . . . .     Qualified Thrift Lender
SAIF . . . . . . . . . . . . . . . . . .     Savings Association Insurance Fund
SBA. . . . . . . . . . . . . . . . . . .     Small Business Administration
VA . . . . . . . . . . . . . . . . . . .     Veterans Administration
</TABLE>


                                      G-1
<PAGE>

                               INDEX OF EXHIBITS


<TABLE>
<CAPTION>
  EXHIBIT NO.                             DESCRIPTION
-------------- -----------------------------------------------------------------
<S>            <C>
      **3.1    Certificate of Amendment of Certificate of Incorporation and
               Certificate of Incorporation of the Company (incorporated by
               reference from the Company's Quarterly Report on Form 10-QSB for
               the quarter ended June 30, 1997, SEC File No. 0-28894)

      **3.2    Amended Bylaws of the Company (incorporated by reference from
               the Company's Registration Statement on Form S-8, filed June
               2,1997, SEC File No. 333-28215)

     **10.1    Agreement and Plan of Reorganization and Plan of Merger
               (incorporated by reference from the Company's Registration
               Statement on Form 8-A, filed October 11, 1996, SEC File No. 001-
               12309)

     **10.3    Profit Sharing and Employee Stock Ownership Plan of First
               Savings Bank, F.S.B. (incorporated by reference from the
               Company's Registration Statement on Form 8-A, filed October 11,
               1996, SEC File No. 001-12309)

     **10.3.1  Amendment Number One to Profit Sharing and Employee Stock
               Ownership Plan of 
               First Savings Bank, F.S.B. (refiled) (incorporated by reference
               from the Company's Registration Statement on Form 8-A, filed
               October 11, 1996, SEC File No. 001-12309)

     **10.4    Agreement for Standby Letter of Credit Advances/Confirmation,
               Collateral Pledge and Security Agreement with FHLB of Dallas
               (incorporated by reference from the Company's Registration
               Statement on Form 8-A, filed October 11, 1996, SEC File No. 001-
               12309)

 **/***10.6    Employment Agreement with Kenneth J. Huey, Jr. (incorporated by
               reference from the Company's Registration Statement on Form 8-A,
               filed October 11, 1996, SEC File No. 001-12309)

 **/***10.6.1  Extension of Employment Agreement with Kenneth J. Huey, Jr.
               dated November 20, 1997

 **/***10.7    Employment Agreement with Norman R. Corzine (incorporated by
               reference from the Company's 1996 10-KSB)

 **/***10.7.1  Extension of Employment Agreement with Norman R. Corzine dated
               November 20, 1997

 **/***10.10   Non-Employee Director Retainer Plan (incorporated by reference
               from the Company's Registration Statement on Form S-8, filed
               June 2, 1997, SEC File No. 333-28217)

 **/***10.11   1997 Stock Option and Incentive Plan (incorporated by reference
               from the Company's Registration Statement on Form S-8, filed
               June 2, 1997, SEC File No. 333-28215)

  */***10.12   Nonqualified 401(K) Rabbi Trust for an Executive Savings Plan
               dated June 1, 1998 

      *21      Subsidiaries of the Small Business Issuer

      *23      Consent of Independent Accountants

      *27      Financial Data Schedule


  *  Filed herewith
 **  Previously filed
***  Designates each management contract or compensatory plan or arrangement
     required to be identified pursuant to Item 13(a) of Form 10-KSB.

</TABLE>